Compared to last year, the real estate market is still unknown: the economic outlook is gloomy, inflation is at its highest level in over a decade and the excellent interest rate environment seems to be a thing of the past.
The government has introduced a series of measures to cool down the real estate market and introduced policies to encourage prudent lending, bringing the market closer to an inflection point.
Should potential buyers get their hands on their desired units now or wait for price adjustments?
The real estate cooling measures introduced at the end of last year had little impact on the real estate market.
The cooling measures introduced late last year raised the Additional Buyer's Stamp Duty (ABSD) and tightened the terms of loans.
Everyone seemed to be waiting for an avalanche of headwinds.
What followed was a significantly more restrained real estate market activity - developers delayed the launch of major new real estate projects, overall real estate sales fell by a third in the first quarter of 2022, and overall residential activity slowed significantly.
However, by the second quarter, private residential sales began to rebound. Other new projects in the Central Region (RCR), such as Piccadilly Grand and Liv@MB, launched with strong momentum, reigniting market fervor and driving accelerating home price gains in the second quarter of 2022.
The launch of AMO residences in July this year and the recent launches of Sky Eden@Bedok and Lentor Modern have also received a positive response from the market.
The latest new measures to tighten lending were introduced in September 2022.
The latest measures include an increase in the interest rate used to calculate loan eligibility from 3.5% to 4% for all housing loans.
As for applications for loans to purchase buildings, the maximum loan to property value (LTV) ratio was also reduced from 85% to 80% and a 3% interest rate was introduced to calculate loan eligibility.
As loan interest rates have exceeded 3% in recent months, it is necessary to increase the stress test rate to ensure borrowers' solvency in an environment of rising interest rates.
The affordability of buying a home in the future will undoubtedly be affected.
It is assumed that a household earning around S$12,200 a month will only be eligible for a loan of up to S$1.41 million to support the purchase of a S$1.88 million property, whereas previously a S$2 million property could only be purchased with a loan of S$1.5 million. Some buyers will have to adjust their budgets accordingly.
Clearly, the authorities are concerned about the boom in the open resale market, which is the main target of the latest round of measures.
Across the property market, rising condo resale prices could also have a ripple effect on the private property sector.
Therefore, the government is seeking to enhance the sustainability of the public housing market by raising interest stress test rates and limiting the mortgage ratio (MSR) to a prudent level of 30%.
Ultimately, a healthy and sustainable overall market is the government's goal.
In the long term, market fundamentals are intact.
The success of various recent real estate projects has benefited from specific factors, such as suppressed local demand and proximity to popular schools. But there are some fundamental factors driving the broader market.
On the one hand, the labor market remains exceptionally tight despite slowing economic growth; economists predict that the unemployment rate will fall to 2% by the end of the year from an already low 2.1%.
Together with strong wage growth, this has boosted real estate demand. Another important driving indicator is the continued growth in household net worth, which reached a record S$2.46 billion in the second quarter of 2022.
