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2022 Year End Review Of The Property Market: Upcoming Trends

The Singapore property market started 2022 with uncertainty when the Government announced new measures to cool the property market on 15 December 2021.

The ABSD for Singapore citizens increased from 12% to 17% for those buying a second property, followed by another increase from 15% to 25% for third and subsequent properties.

For Singapore permanent residents (PRs) buying their first property, the BSD remains unchanged at 5%, however, those buying a second property will have to pay an increased rate of 25%, up from the previous 15%. For the purchase of a third and subsequent properties, the ABSD will go up to 30% from the previous 15%.

Foreigners buying any properties in Singapore face an increased ABSD of 30%, up from the previous 20%.

In addition to the increase in ABSD, there is also a tightening the Total Debt Servicing Ratio (TDSR), and lowering the Loan-to-Value (LTV) limit for housing loans taken from HDB.

TDSR is the percentage of a borrower's gross monthly income that goes towards servicing their loans. This threshold will be lowered to 55%, down from the current 60%. This combined with monthly interest rates makes properties much pricier than before.

The adjustment of LTV limits for loans taken for HDBs went down from 85% to 90%. This reduces the maximum loan amount one can take in a property purchase, making it more expensive to buy a unit upfront.

Despite the above measures, the market remained red hot, and on the 30th September, a secondary set of cooling measures were implemented. Private property owners who had sold their units face a 15-month waiting period before they can buy a HDB resale flat with the LTV for HDB loans being lowered further from 85% to 80%.

Easing of Travel restrictions

According to a report by Orange Tee, in the first eight months of 2022, the top 5 foreign buyers of Singapore non-landed properties were from China, Malaysia, India, US and Indonesia. They account for 2,219 units sold. Many of these units were in the luxury category, despite the increase in ABSD.

As the Singapore property market is considered to be one of the most resilient in the world, we can expect more overseas investments moving forward.

Interest Rates

The US Federal Reserve raised interest rates 7 times in 2022 with increases ranging from 0.25% to 0.75%, leading to Singapore banks raising their fixed home loan interest rates to between 4.25% and 4.5%. All eyes will be on the next Federal Reserve meeting in February 2023 and many are expecting another increase.

The ever increasing interest rates in the US has led to some banks temporarily ceasing their fixed-rate home loans. This increase in interest rates has led to buyers having to pay more in monthly installments. For investors renting out their properties, the rental they collect may not be able to cover the monthly installments especially if the tenancy agreement was signed before the rate increase.

In such circumstances, potential homebuyers should ensure they have sufficient funds set aside in the event of more rate increases in the months ahead.

Rentals up

According to data from the URA, rental rates for both private properties and HDB flats went up for the 22nd consecutive month in October 2022. In the first half of 2022, rental increased by 8.5%, partly due to the interest rate hike which led to landlords upping their rates and the delays in the completion of new condos and BTO flats.

In September, the government implemented cooling measures that include a 15-month waiting period for private home owners who sold their property and want to downgrade to a HDB resale flat. This has led to many sellers unable to buy and forced to rent. The easing of travel restrictions leading to the return of many foreign workers has also added to the demand for rentals.

2022 was an eventful one for the property market and as things stand, the trends seem to continue into 2023. The HDB will be increasing their supply of BTO flats in 2023 and beyond to meet the demands of buyers and ease the rental crunch. All eyes will be on the US Federal Reserve to see if the rate hikes continue or will it ease. Only time will tell.


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