Prices for luxury homes in Singapore haven’t been this low since the 2009 economic crisis. The probable culprit? Last year’s cooling measures:
Prices for private residences fell 0.6 per cent as of last month, sharper than the 0.1 per cent observed over the previous quarter. Luxury homes plunged further than others, falling 2.9 per cent; the lowest since property prices plunged 14.1 per cent in end of June 2009.
The cooling measures were imposed mid-last year, including: a hike on Additional Buyers Stamp Duty (ABSD) and Buyers Stamp Duty (BSD), as well as stricter Loan To Value (LTV) rules.
Luxury properties suffer more from cooling measures
Many luxury properties, such as units in Districts 9 or 10, or purchased by investors rather than home owners. Higher stamp duties eat into capital gains, and aggravate worries about already low rental yields (around 2.3 per cent).
Additional Buyers Stamp Duty (ABSD) rates rose ten per cent for real estate entities, with an additional five per cent for developers. There’s also a five per cent increase for foreigners buying any type of property and the third and subsequent homes of Singaporeans.
Meanwhile, the Buyers Stamp Duty (BSD) rates for residential properties exceeding one million rose to four per cent.
The government also tightened the Loan To Value (LTV) limit by five per cent across the board. And while it’s not, in itself, a huge disincentive to investors, it does mean a bigger cash outlay. Coupled with higher stamp duties, it will drive some investors to alternatives such as commercial property.
In addition, most mass market properties could shrug off higher BSD, whereas high end properties cannot – most mass market properties do not reach the $1 million limit. As such, the cooling measures offered a greater disincentive to luxury properties than the regular housing market.
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