Singapore house prices continue to fall
Last Updated: August 25, 2015
During the latest quarter (i.e. q-o-q in Q1 2015), residential prices fell by 1.02% (-0.89%% inflation-adjusted).
- In Core Central Region, prices of non-landed private residential properties fell by 3.52% (-3.14% inflation-adjusted) y-o-y to Q1 2015.
- In the Rest of Central Region, property prices were down by 3.74% (-3.35%% inflation-adjusted) over the same period.
- Outside Central Region, property prices fell by 3.13%(-2.75% inflation-adjusted) during the year to Q1 2015
The slowdown in house prices is the result of deliberate government policy. Before and after the global economic crisis, Singapore's property market surged, and Singapore experienced an amazingly overheated market. The residential property price index rose 38.2% during the space of only one year to Q2 2010 (34% in real terms).
The Singapore government sensibly began to take steps, and when these turned out to be not enough, took further measures.
These market-cooling measures have been effective, as evidenced by the 6% decline in property prices since the peak in 2013. In Core Central Region, prices have however declined at a slower pace over the past four quarters. It seems that some sort of stability is being achieved.
Barring any changes in the Total Debt Servicing Ratio framework, property agent Savills believes that "Core Central" prices have reached a level that could entice buyers back. However prices have yet to fall far enough in "Rest of Central Region" and "Outside Central Region", Savills believe.
You wouldn't own a Singapore condominium for rental yields!
Singapore is a safe haven, it is a liquid market, everyone in Asia knows and trusts its institutions. Low interest rates have played their part in pushing property prices up, despite the efforts of the ever-vigilant Monetary Authority of Singapore and the government. Property in Singapore commands a premium, and conversely returns to owners who rent out their properties are low.
Nobody can say that condos in Singapore are cheap, at around US$14,400 to US15,200 per square metre (sq. m.). That’s because there’s a ‘global city’ premium. Gross rental yields in Singapore remain poor, ranging from around 1.94% to 2.98%. Yields are a little higher on smaller apartments than large ones, as is typical in most property markets. But those yields alone would not be a reason for owning property here.
Prices are slightly down on last year, especially in the core and central region.
Round trip transaction costs are very low in Singapore. See our Property transaction costs analysis for Singapore and Property transaction costs in Japan, compared to the rest of Asia.
Rental income tax in Singapore is high
Rental Income: Net rental income earned by nonresidents is taxed at 20%. Property tax, insurance, maintenance and repairs are all deductible from gross rental income.
Property Tax: Property tax is levied at a flat rate of 10% for rental properties. Foreigners pay a 10% surcharge.
Capital Gains: There is no capital gains tax.
Inheritance: There is no estate duty as of 15 February 2008.
Residents: Residents are taxed on their income at progressive rates, ranging from 2% to 20% for tax years 2015 and 2016.
Roundtrip buying costs in Singapore can reach 37.45%
The total roundtrip costs are about 13.45% to 37.45%. The buyer pays stamp duty at around 1% to 3%. The buyer may pay additional stamp duty of 5% to 15. Because Singapore uses a common database of all property listings, there is no sense in hiring more than one agent. To register the property, there are four procedures, typically done in six days.
Singapore favours landlords
With the passage of the Control of Rent (Abolition) Act in 2001, the law in Singapore became clearly pro-landlord.
Rents: The parties can freely determine the rent and the rate of rent increase. Tenants usually pay a security deposit of one month’s rent for every year of lease.
Dispute Resolution: Most landlord and tenant disputes are resolved through mediation or Alternative Dispute Resolution, usually through groups such as the Consumer Association of Singapore (CASE) and Singapore Mediation Center (SMC).
Singapore's economic growth will be around 3% during 2015Singapore's economy expanded by only 1.7% during the year to Q2 2015 (according to advance estimates by the Ministry of Trade and Industry).
However GDP growth is projected at about 3% in 2015, according to the International Monetary Fund (IMF).
"The global IT industry is expected to benefit from firmer demand in the developed economies in 2015," said MAS.
“Stronger economic activity in Europe and Japan is also expected to provide support for goods and services exports. Some strengthening of global oil prices in the latter half of the year could provide support to the oil-related manufacturing segments, which saw a pullback following the collapse in oil prices late last year," added MAS.
In the first quarter of 2015, unemployment (seasonally-adjusted) fell to 1.8% from a 2010-2014 average unemployment rate of 2%, according to the Ministry of Manpower (MOM).
In May 2015, inflation was -0.4%. Inflation was 1 % in 2014, 2.4 % in 2013, 4.6% in 2012, 5.2% in 2011. It is estimated it will be 0% in 2015, according to the IMF.
The country’s central bank, the Monetary Authority of Singapore, maintained its tight monetary policy in April 2015, allowing a “modest and gradual” appreciation of the Singapore dollar nominal effective exchange rate (S$NEER) policy band.
The exchange rate in June 2015 was USD1 = SGD1.3457.
"The inflation outlook this year will be very much benign and like what the MAS said in their macroeconomic review," said Francis Tan of United Overseas Bank
"inflation may be ticking upwards slightly at the end of this year and going into 2016, because the labour market in Singapore remains tight and there are certainly avenues and opportunities for costs to be passed through from wages to prices."
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