How Concerned are Singaporeans About Housing Affordability?

Against the backdrop of ongoing COVID-19 uncertainties and the worst economic contraction on record in Singapore, the H1 2021 PropertyGuru Consumer Sentiment Study found that fewer Singaporeans consider themselves able to afford a property.

This is unsurprising, given that property prices are inching upwards despite the pandemic recession. Our PropertyGuru Property Market Index Q1 2021 saw a 0.98% increase to 113.5 points. Statistics from the Urban Redevelopment Authority (URA) and HDB also back this up, with private residential property prices increasing 2.2% and resale HDB prices rising around 5% in 2020.

 

Singaporeans Still Want to Buy Their Own Homes

While those who participated in the study expected property prices to increase in the first half of 2021, many still hoped to be homeowners. This was underscored by an increase in the Overall Property Sentiment Index in H1 2021, compared to H2 2020 – indicating more people wanted to buy homes.

This positive sentiment is perhaps due to a combination of improving sentiments on property prices as well as the current low interest rate environment, which will make ownership cheaper. As a result, 60% of respondents said they were intending to buy property within the next two years.

The requirement for personal space, amid the ongoing shift towards work-from-home trends in the workplace, continues to be a priority with 24% indicating that it was a factor in purchasing a new home. 25% said that they needed more space for their children/parents – which may also be attributed to a greater priority placed on having more personal space. 39% said they were intending to buy an investment property to rent out. 

In addition, many new Build-To-Order (BTO) launches in 2020 and 2021 have a completion date that is about four to five years away, driving potential homeowners who do not want to wait that long into the resale and private property market. 

All these, along with the improving sentiments in the property market, as highlighted in the latest statistics by URA and HDB, has already translated into an uptick in both private property and resale HDB prices.

However, with rising prices, both risk and affordability become bigger questions.

 

Homebuyers Are Uncertain About Property Prices

The study also indicated that Property Affordability Rating dipped 5 points in H1 2021 – which is a fair reflection of the higher prices homebuyers have to pay.

Despite wanting to buy their own homes, only 60% consider themselves as being able to afford their own homes in H1 2021. 

According to the respondents, the biggest barriers to being able to own a home in Singapore today is:

  • Property prices (67%)
  • High downpayment (36%)
  • Loss of income due to COVID-19 (18%)

As such, 65% of respondents felt that the government needs to do more to make housing more affordable. This is likely due to large swathes of the population being impacted by COVID-19 in some forms, but discovering that property prices here were rising instead of becoming more affordable.

As property prices are inching up, median wages in Singapore has come under pressure. In 2020, the median wage in Singapore fell for the first time in more than 15 years, while real household income fell for the first time in more than 10 years. 

If property prices continue to inch up in 2021 and beyond, and wages continue to remain stagnant, more people may find themselves priced out of the property market.

 

Buyers Are Hoping for The Government to Relax Property Curbs

Property cooling measures have been regularly reviewed to ensure that property prices remain affordable in Singapore. However, to lower property prices, some respondents are hoping for the government to relax certain property curbs.

Respondents in the study indicated that the top two ways to make property prices more affordable for them were to ease the Buyer’s Stamp Duty (BSD) and lower upfront downpayment costs.

64% hope that the government will remove the Buyer’s Stamp Duty (BSD). BSD is usually paid for homebuyers who have just one property, and an adjustment may make it more affordable for those who need to buy a home or upgrade their home (not for investment purposes).

While 61% hoped the government would remove the Additional Buyer’s Stamp Duty (ABSD), they were mainly investors and likely purchasing multiple properties.

Another major concern was downpayment for homes. 49% of respondents hope that the government would reduce the downpayment required for home purchases. These were mainly from younger Singaporeans from 22 to 29 years old who may not have accumulated sufficient savings as they just started working. 

However, this would also be in direct opposition to one of the most recent property cooling measures in 2018, when the government tightened the Loan-to-Value (LTV) ratio from 80% to 75% –  which means banks can only lend a maximum of 75% of a property purchase price or valuation, whichever is lower, thus requiring buyers to fork out a higher downpayment.

Futhermore, with the recent uptick in property prices, more cooling measures may be introduced in 2021. In fact, the government has already hinted that they will intervene after stating that they “are keeping a close watch on the market” during the recent pick up in interest and prices in the property market.

 

Balancing Between Affordability and Growth

Those who own multiple properties (including investment properties) would naturally want to see capital appreciation for their homes while those who do not currently own any properties would wish for prices to be more affordable. Left to market forces, property prices may spike and dip sharply – which may not benefit either property buyers or property owners.

While hopes for lowering the BSD and downpayment for first-time homebuyers and upgraders have merits, it needs to be clearly defined to not create bigger demand from investors looking to buy multiple properties.

At the same time, more property cooling measures may not be a bad thing for homebuyers who are looking to purchase their first property or upgrade to a larger property. This is because majority of property cooling measures are meant to curb speculative demand and make it more expensive to invest in multiple properties.

 

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