SINGAPORE (EDGEPROP) – The big question on a lot of pf people’s minds: “Who are the big gainers and losers after the new property cooling measures announcement?”. The government has acted to cool the residential property market. Additional Buyer’s Stamp Duty (ABSD) rates have been raised for some categories of residential property purchases, and the Loan-to-Value (LTV) limits on residential property purchases have been lowered, all with effect from 6 July 2018.

Responding to the Government announcement, JLL said the new measures are expected to subdue sales volume although home prices could still inch towards 10 per cent for full-year 2018.

JLL said: “The measures should achieve their intended objectives of cooling demand and moderating price growth, as almost all categories of buyers have been affected. This explains the rush to snap their dream homes the night before the measures kick in.”

Barely one hour after the Government announced the new property cooling measures which will kick-in from today (6 July), home buyers thronged several developers’ hastily launched property sales.

Videos uploaded on social media showed prospective buyers’ frenzy at launches like Park Colonial show suites and Riverfront Residences. Thousands continued to swarm the show-suites well past midnight to put down an option fee for units of their choice before the deadline.

Putting down an option fee indicates an Option To Purchase (OTP). This is usually 1 per cent of the purchase price. The OTP allows the prospective home buyer to reserve the unit exclusively for the buyer for a short period of time (usually 2 weeks). The option fee will be forfeited if the buyer does not exercise the OTP before the end of that period.

Property market observers suggest that over 1,000 units must have been snapped with buyers putting up an option fee before the deadline kicked-in. International Property Advisor Ku Swee Yong said it remains to be seen how many of these buyers will exercise or get bank loans approved.

Paul Ho, the chief mortgage consultant at the icompareloan.com, said that the unpredictable nature of if a bank loan would be approved after the announcement of the new property cooling measures is one major reason why buyers must use the services of mortgage consultants.

Ho said: “Mortgage consultants will be able to assess the buyers Mortgage Service Ratio (MSR) and Total Debt Servicing Ratio (TDSR) to gauge the buyers’ financial risk profile and advise on a suitable loan package. This will save them the hassle of running around,  going to a bank that does not offer a loan for their housing type or their personal profile, – not knowing what documents are needed, having to make 5-10 loan application and even  the possibility of impacting the process of your home purchase.”

JLL said: “The rush to purchase units the night before the measures kick-in could still contribute to the URA all-residential private property price index (PPI) inching up in 3Q18 although at a moderated pace from 2Q18 given that sales will likely slow thereafter. For the year as a whole, the growth in the PPI could still inch towards 10% given the more than 7% growth in 1H18.”

It added: “All said, we feel the additional measures have been introduced too hastily coming just after 9.1% growth in PPI over four quarters. The market should have been given a chance to find its own level in response to the expected surge in launches in the coming months.”

JLL further expects sales to stall as soon as the measures become effective as buyers step back to evaluate the financial implications and developers reassess pricing strategies. It said the home market may only start to see some signs of activity in September after the lunar seventh month. Even then, it expects sales volume to stay subdued unless developers adopt competitive marketing strategies.

There is a chance that the collective sales market will be dampened as developers become wary of end-demand and are hurt by the 5 per cent non-remittable ABSD on land purchase. This is expected to have an impact on their offer prices.

The Government’s new property cooling measures are not bad news for all segments of the market. The HDB resale market is expected to get a boost from this measure believes Ku.

In speaking to a local TV channel Ku said: “The Loan-To-Value ratio limit will be dropped by 5 per cent, meaning we have to take out more equity upfront – more cash and more CPF upfront. And therefore buyers…will probably find it difficult to buy the large size unit that they want. They may have to trim down their expectations. In fact for some of these buyers they may then swing over to the HDB resale market, because the curbs are not put on to the HDB market at all.”

Strata-office and shophouse markets could emerge as the other biggest gainers of the new property cooling measures.

JLL said: “The biggest gainers following this set of measures will likely be owners of strata-offices and shophouses approved for commercial use. The government’s swift response to curb home price growth has tampered the prospects of residential properties as attractive investments. Investors looking for alternatives to park their money could divert their attention to the strata office and shophouse markets as they are not subjected to this round of purchase or sales restrictions/encumbrances.”

The residential leasing market which has seen lackluster action so far, might also stand to benefit as some foreign owners of collective sale sites who might now look to rent instead of own their place of residence to avoid the higher ABSDs. Some local owners of collective sale sites could also look to rent as an interim measure while they wait in hope of private home prices to correct.

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