5 Singapore Property Market Forecasts and Predictions for 2022.
The Singapore property market is going through a revolution at extreme speed. The pandemic led it to adopt new ways to encourage sales and keep up with the demanding market. While 2020 went on to understand the pandemic, 2021 was more about accepting it and living in the new normal.
Private home prices have increased consecutively, from Q2 2020 to Q3 2021, their price increasing by a significant 9%. In the third quarter of 2021, the housing prices of city fringe condominium units in the Rest of Central Region (RCR) hit a new high. While those in the Outside of Central Region (OCR) experienced a record price in quarter two.
Here are the 5 Trends and Forecast for the Singapore property market in 2022 aimed to pave a path for current and future investors.
1. Second home buyer activity will be affected
Due to high property prices, the Singapore Government imposed new cooling measures on Dec 15, 2021, to ensure property prices remain affordable to genuine buyers. This has caused a direct impact on second home buyers in terms of Additional Buyer’s Stamp Duty (ABSD) and Total Debt Servicing Ratio (TDSR).
Citizens wishing to buy a second home will have to pay 17% ABSD, which was previously only 12%. For Permanent Residents (PRs), ABSD rose from 15% to 25%, and for foreigners, it has increased from 20% to 30%.
On top of it, the TDSR for bank loans has also been tightened. Previously, total monthly loan repayments of borrowers were capped at 55% of their monthly income. Now, it has increased to 60%.
Following these impacts, the property market is more likely to see ultra high net worths and wealthy investors entering the market who have enough money to buy properties with the increased ABSD.
2. Commercial realty prices and demand will increase.
The pandemic ensued with a number of lockdowns and strict SOPs which has led many businesses to open online shops. As a result, warehouse and shophouse demands have rapidly increased in 2021 and will see even a further rise in the coming year.
These types of commercial properties provide ample storage areas for business owners. They can stock up for their online orders while maintaining their retail shops simultaneously.
On the other hand, Grade A Offices in Core Central Region (CCR) will also surge in 2022. After the circuit breaker in 2020, the restrictions have been considerably flexed in 2021 to welcome foreigners into the country.
The Government’s efficiency in keeping a stable economy along with the reopening of borders have attracted many multinational companies and tech giants to set up their regional offices here. So, 2022 will see a rising demand for offices in the Central Business District (CBD) area to cater to these companies.
3. Enbloc market will slow down especially for the bid for land site
The new set of cooling measures introduced on Dec 15, 2021 directly impacts the developers. Previously, they had to pay 30% ABSD, 25% remissible and 5% non-remissible, on developing a property. If they could sell the properties within 5 years, the Government refunded a 25% remissible portion of the ABSD to them.
But now, the developer’s ABSD has increased from 30% to 40%, increasing the remissible portion of the ABSD to 35%. This means developers are at risk of losing 10% more in ABSD if they cannot sell their developed properties within 5 years.
As a result, enbloc projects, especially comprising bigger lands in Core Central Region (CCR) , have significantly slowed down. Such properties are often bought by foreigners and have bigger units to sell since the land size is larger. From bidding to selling the property units, multiple parties have to be involved which involves a longer time period than usual.
As such, the developers’ profit margin has shrunk but risks have increased. So, developers will be more cautious to bid on enbloc projects as they have more to lose but less to gain.
4. Work from Home (WFH) is giving rise to bigger housing
Work from Home (WFH) is the new working style in the new normal. Now, many companies including global tech giants, banks and motor companies allow staff to work from home or adapt to a hybrid working environment. Hence, people don’t need to crowd in big cities and towns for jobs anymore.
This has led to decentralization with fewer people focusing on the Central Business District (CBD). They are selling off their central area housing and moving to the suburbs. They need bigger, more spacious units to work at the comfort of their home which has increased demand for bigger residential units in the Outside Central Region (OCR) and Rest of Central Region (RCR).
5. Commercial retail rental is looking at an upward trend.
The property industry is gaining confidence since the beginning of 2021 as the Government is more efficient in handling the pandemic this year. It has begun to inject positive vibes in the communities leading to positive consumer sentiment.
Besides, Vaccinated Travel Lanes (VTL) and border openings have ensured the public that things are slowly settling back to normal. So, more people are coming out and attempting to resume their life as was before the pandemic. This has kickstarted the operation of many businesses, creating demand for their products and services.
This will follow up at a much faster pace in 2022 which will lead to more businesses looking for the right space to operate. Hence, rent will pick up and move at an upward trend.
Where will be the hotspot of opportunity in 2022?
Outside Central Region (OCR) and Rest of Central Region (RCR) will be the main attraction for property buyers in 2022. The mass market segment for locals, HDB upgraders and first time home buyers will be the main target market. Decentralization in the country and bigger and more luxurious houses at reasonable prices will make these areas more attractive to them.
As for the Core Central Region (CCR), luxury segments will be most in demand. Foreign buyers coming to Singapore will be its prime market. They will look for undervalued properties, many of which are still present in the Sentosa area. In fact, some luxury condos such as Marina Collection and Turquoise in Sentosa are selling at 30% to 50% discount, with prices lower than the last peak.