Singapore Signals Potential for Further Cooling Measures After Q4 Market Rebound

After Singapore home prices rebounded sharply in the fourth quarter, the government is signaling the potential for a fresh round of cooling measures to restrain the city-state’s property hunger.

Minister for National Development Desmond Lee, in a media interview cited by The Straits Times, said that while the government is waiting for previous measures to work their way in the market, it is ready to implement further cooling measures for both public and private housing if necessary to maintain affordability.

“Let the supply and demand-side measures work their way through. We are not averse to putting in new measures if necessary, because we need to ultimately make sure that there’s no property bubble, whether it’s on the private side or on the public housing sector,” Lee said. On rolling back previous measures, the minister stated, “it was not yet time” to do so.

Talk of cooling measures has been circulating since last year, following a surge in home-buying activity in November. Two weeks ago, the Urban Redevelopment Authority (URA) reported a 2.3 percent rise in private home prices for the fourth quarter of 2024, marking the strongest quarterly growth of the year. This increase has further fueled speculation that the pace of the housing market could prompt new cooling measures, with Morgan Stanley noting just last week that rising prices could lead to such actions.

Market Worries

While ruling out any potential for easing existing cooling measures, the minister said in the interview that the government remains cautious about intervening in the property market, acknowledging that over-correction could lead to a sharper market downturn than intended.

In April 2023, Singapore implemented its strictest property cooling measures to date, including doubling the Additional Buyer’s Stamp Duty (ABSD) for non-resident foreigners to 60 percent from 30 percent, and raised the tax on home purchases through entities and trusts to 65 percent from 35 percent.

These curbs brought quarterly growth in private home prices down from 3.3 percent in the first three months of 2023 to a 0.4 percent decline in the April through June period.

Knight Frank pointed to potential downsides to the market from fresh cooling measures, after private home prices rose 3.9 percent for the full year of 2024, from 6.8 percent in 2023 and 8.6 percent in 2022.

Sales of private homes also moderated last year, falling by about 14 percent compared to the annual average volume from 2021 through 2023.

“While the intent of cooling measures is to further stabilise the property market, the question remains how such over-correction could risk smothering demand more than intended. Nicholas Keong, head of residential and private office of Knight Frank Singapore said.

Cooling Timing

A key metric that could trigger the consideration of new cooling measures would be consecutive quarter-on-quarter accelerations in home prices, Wong Xian Yang, head of research for Singapore and Southeast Asia at Cushman & Wakefield, told Mingtiandi.

Except for the fourth quarter of 2023, quarterly home price growth had remained below 2 percent since the latest round of cooling measures were rolled out in April of that year, until the latest URA numbers were released.

“It might be prudent to monitor price trends for a few quarters as uncertainties such as a slowing pace of interest rate cuts and geopolitical uncertainty in a multipolar world,” Wong said.