SINGAPORE’S MOVE to introduce property cooling measures may slow down demand and prices in the next six months. But this may just be a short-term fix in a market with an insatiable appetite for homes.

Home sales and values are likely to pick up once the market gets used to the latest curbs — just like they did after the last round in 2018, analysts said on Thursday after the government raised levies and tightened some lending limits.

Like other countries around the world, Singapore’s residential property market has remained resilient during the pandemic. Low interest rates and a rebounding economy have fueled demand for homes in the city-state, prompting policy makers to take steps to maintain affordability.

The latest curbs focus on buyers of second homes for investment and foreigners purchasing private property, rather than residents seeking to purchase a place to live. As a result, they’re unlikely to have a long-term impact given that locals make up the majority of buyers, said Alan Cheong, executive director of research at Savills Plc.

“The measures are something akin to pointing the gun to the sea when the enemy comes from the back,” Mr. Cheong said.

The steps may have a bigger impact on the mid to high-end market, which has a larger portion of investors and foreign buyers, said Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie.

Private home prices climbed 5.3% in the first nine months of the year. New home sales in November jumped to a four-month high after the city-state gradually eased social restrictions. The public housing market has also been buoyant, with resale prices surging a record 9.1% through September.

Like in the aftermath of the 2018 curbs, Singapore home prices may dip 1% to 2% over the next two quarters before resuming growth that more closely keeps pace with rising incomes, Morgan Stanley analysts wrote in a note on Thursday.

Citigroup, Inc. said home sales may fall between 25% to 35% in the near term, mainly due to a reduction in demand from investors as well as a decreased desire among permanent residents and foreigners given the substantial stamp duties imposed.

But sales volume may return to normal after three to six months as buyers “acclimatize to the measures amid still-strong fundamentals of the residential market and soft interest rates,” Citigroup analyst Brandon Lee wrote in a note.

The higher additional stamp duties will remove buyers at the margin who would be most vulnerable to any interest-rate increase, said Christine Li, head of research for Asia Pacific at Knight Frank in Singapore.

“But given that most of the transactions are backed by wealth rather than income, property prices are unlikely to come back down in a sustainable manner,” she said.

 LOW SUPPLY

Developers may think twice about buying existing residential sites to be redeveloped as they assess the risks that come with the new measures, Li said. That may help to cause prices to rebound as early as the second half of next year, she said.

An increase in land taxes to 35% from 25% will place “immense additional pressure” on developers trying to recover from the pandemic, the Real Estate Developers’ Association of Singapore said.

The number of unsold units in the supply pipeline has been on a steady decline since the third quarter of 2019 as sales outpaced new additions of homes, the Monetary Authority of Singapore said in a report this month. As of September, there were about 17,100 unsold units, 35% lower than such inventory a year ago and close to the historical low of about 15,100 units in 2017.

The cooling measures also come as Singapore opens up more vaccinated travel lanes, which could lead to foreigners coming in to snap up homes. While the new property curbs may dampen demand among foreigners following the higher stamp duties — raised to 30% from 20% — it may not deter both local and foreign ultra-rich buyers who have partly driven sales in the past year.

“These are unlikely to curb the well-heeled and deep pocketed,” said Justin Tang, head of Asian research at United First Partners. “They can afford it and will factor it into their costs.” — Bloomberg