This is the first time Singapore house prices have fallen since the first quarter of 2020, indicating that the market is cooling under the impact of the latest property restrictions.

To curb rising home prices, the Singapore government doubled the stamp duty levied on foreign buyers to 60 percent on April 27 this year, the highest rate among major markets.

At the same time, Singapore also raised the levy on second home buyers. In addition, prior to the April regulation, the Singapore government had already introduced two cooling policies for the property market in December 2021 and September 2022.

The trend of rising property prices in Singapore is also visible in the public housing market. According to Singapore's United Morning Post, the estimated data released by the Housing Development Board of Singapore on the 3rd shows that as of June 29, about 6,409 HDB flats changed hands in the second quarter of this year, 4.6 percent less than the same period last year.

This is also the lowest quarter of resale since the third quarter of 2020. HDB said the Singapore government has introduced several cooling measures since the end of 2021, including a 15-month waiting period for private owners to buy non-subsidized HDB flats and a reduction in the mortgage-to-valuation ratio ceiling from 85 percent to 80 percent. These measures have contributed to a slowdown in the rate of HDB resale price increases.

Ishmael, president of Singapore-based property economics firm Bona Industrial, said, "Given the sluggish economic growth and the possible risk of a technical recession in the economy that some economists have pointed out, the slowdown in house price inflation is good for the market and ensures that prices do not go far beyond economic fundamentals." According to Ishmael, the cooling measures coupled with high mortgage rates have left buyers largely still price-sensitive.

Bona Industrial's transaction data shows that HDB resales in non-established municipalities accounted for 62 percent of the total in the second quarter of 2023. Bona Industrial's Head of Research and Content, Wong Siew Ying, estimates that for the whole year, HDB resale volume is expected to remain around 27,000 to 28,000 units. The resale price of HDB flats may grow by 5% to 6% this year, a significant slowdown from the double-digit growth of the past two years.

Meanwhile, the Singapore government has increased the supply of new private residential lots for the sixth consecutive time to meet market demand, with 26% more units available to be built on the Government Land Sales Programme's positive list lots in the second half of this year than in the first half. The total supply for the year thus increased to 9,250 units, a 10-year high. Analysts believe that the increased supply of private residential lots can shorten the waiting time and help ease the rise in prices.

According to Sun Yanqing, vice president of industrial research and consulting at Singapore real estate agency OrangeEasy, the cooling measures were taken to prevent buyers from becoming over-leveraged. The measures are likely to affect investors more than owner-occupiers, who usually own more than one property and who will be affected by the higher stamp duty.

In the overall property market, the mid- to high-end market tends to have more investors and foreign buyers, so this part of the market may be more affected, while the mass market segment has more first-time buyers and will be minimally affected by the property market policies.

According to Sun Yanqing, the announcement may cause a "knee-jerk" reaction in the market, which may see a slowdown in transaction volume within six months, and prices may stabilize and rise at a slower pace next year.

As a result, OrangeEasy Industries has revised its price growth forecast for the Singapore private residential market next year from 6% to 9% to 0% to 3%. The number of condominiums purchased by permanent residents and non-permanent residents in Singapore has been on the rise over the past year. The number of condominiums purchased by permanent residents in Singapore was 2,818 for the full year 2020, while as of the first half of December 2021, purchases for the year had reached 4,375 units. Purchases by non-permanent residents and foreigners have also jumped 45% in the same period.

With the reopening of the border after the epidemic, OrangeEasy Industries expects more permanent residents and foreigners to return to Singapore, and they may contribute to higher housing demand. At the same time, however, the measures introduced by the government may slow down the demand from these buyers.