The Singapore property market is bracing for a slowdown, with experts predicting a steep drop in transaction volume and prices over the next few months.
This comes after tougher residential property measures kicked in on Thursday, hours after they were announced on Wednesday night.
Under the new measures, foreigners and companies must pay an additional stamp duty of 10 percent of the value of residential property purchases in Singapore.
Permanent residents who buy a second property and citizens who buy three or more properties will pay an extra 3 percent.
The new stamp duty is on top of the prevailing fees of between one and three per cent.
Property buyers hit hardest by the new measure would be foreigners like Norman Lu.
The 34-year-old healthcare consultant arrived in Singapore a year ago to work in a multinational company.
Mr Lu is renting a place, but in the last three months he has been looking to buy a condominium in Paya Lebar or Braddell. However the new rules have put a stop to such plans.
He said: “We are very disappointed. Even though we are foreigners, we have been working in Singapore for a year, we also contribute to this country. So as a foreigner, we feel that the government does not welcome us.”
Mr Lu said he was on the verge of closing a deal, but will need to evaluate his options now.
He said: “(There is) 80 per cent (chance that) I will not buy now. I will wait for one year, then I can get PR (permanent resident status) then I will buy a private condo or buy an HDB flat.”
His other options include leaving Singapore, “because I can easily find another job opportunity in another country” and “if property owners drop the price by 10 to 15 per cent, then I will buy a condo immediately because I want to stay in my own property.”
Market watchers expect transaction volumes in the core region like Orchard Road and Bukit Timah to slump by 40 per cent, because of the significant number of foreign buyers for such properties.
Prices will also be hit, with a possible correction of up to 20 per cent.
Mohamed Ismail, CEO of PropNex, said: “It takes a very bullish decision from a foreigner to come and invest in Singapore in today’s market, having to pay a 13 per cent stamp duty upfront, and (being) subjected to the Seller’s Stamp Duty in the next four years, of 16 per cent, 12 per cent, 8 per cent, and 4 per cent.
“And even if he sells after four years, if he buys a property today, he must expect at least a 25 to 30 per cent increase in the property price to break even, taking into consideration other costs and interests and all other elements.”
Mr Mohamed said there were a few foreigners who had already expressed interest in buying properties and were planning to sign the option papers on Wednesday, but pulled out after the announcement of the new rules.
He added that even though these buyers will not be affected by the higher stamp duty, they felt their returns will be severely impacted.
The mass market segment – which has seen more foreign buyers moving in – is also expected to dip, which may be a boon for Singaporeans.
Mr Mohamed said: “When more foreigners enter the mass market, they are competing with Singaporeans and Singaporeans’ aspirations are challenged mainly because the prices keep increasing. Overall, the buyers are now going to wait and see….with such a policy, where is the correction before entering the market.”
He added: “I do expect, in the next six months, the mass market properties are likely to see a correction of 10 to 15 per cent.”
New developments are springing up all over Singapore, but may soon have difficulties finding buyers. Property watchers expect the market to be fairly quiet over the next one to two months.
December and January normally see fewer transactions due to the school holidays and New Year celebrations. And with the latest round of cooling measures, buyers are expected to adopt a wait-and-see approach, hoping that prices will drop, before dipping their toes into the market again.