Back on 30 September 2022, the most drastic cooling measure was released by the government.
For myself, I’ve been having conversations with various homeowners, investors and fellow agents who are active in the market.
As we approach the 6-month mark since its implementation, let’s explore its significance and impact on the property market in Singapore.
#1: The Path of Downgrading to HDB Is Now Blocked For 15 Months
The most drastic measure I have seen in my real estate career is how private property owners are not allowed to enter the HDB resale market for at least 15 months.
This measure seemed to be focused directly on reducing the number of million-dollar HDB transactions.
I imagine the government should have a lot of data on this – that condo owners are making the move in order to cash out from the gains their private property made.
That’s why this particular cooling measure seems so targeted.
However, it is also interesting to note that private property owners above the age of 55 are allowed to make the downgrade – but they are only allowed to purchase 4-room HDB flats or smaller.
This brings me to my next point.
#2: An acknowledgement that property is a necessary pillar for retirement
In the press release, there is an interesting sentence to note on paragraph 15.
We recognise that some seniors may wish to move from their private residential property to an HDB flat, to strengthen their retirement adequacy.
This acknowledgement means we have to be aware that our residential home plays a role in our retirement plans.
The fact that we are financing our property with our CPF monies is a stark reminder that we should be careful on the property decisions we make as it affects our future in the long term.
It doesn’t matter whether we stay in HDB or private property – what it means that we have to be mindful on how to view our property.
#3: Is your property options becoming more limited?
If you have been making plans to downgrade from condo to HDB in order to cash out, the cooling measures would have been a big blow to your plans.
I see a lot of owners are adopting a wait-and-see approach before making the decision to sell.
If you are such an owner, you would have to consider the rental market – which is now going crazy.
Or the alternative – consider shifting to a smaller condo resale unit or subsale unit.
This year, more property supply will be entering the market as more and more developments hit TOP status.
However, the HDB resale market is now out of the picture if you are below 55 years old.
#4: The HDB market will be subjected to restrictions
Over the years, we have seen how the government manages its housing policies through various cooling measures to moderate property prices.
ABSD has been in place for more than 10 years. It has not been reduced but has always been increased.
In Budget 2023, the Buyer Stamp Duty is now raised and higher-priced properties will be more impacted.
HDB by definition is a form of public housing.
And the government’s goal is to always provide “affordable” housing.
That is why the eligibility conditions to buy a HDB BTO flat remains restrictive and clear boundaries are set to make sure only certain groups of people are allowed to buy.
There are policies ranging from:
- income ceiling
- ethnic ratio
- family nucleus requirements
So if you are looking for more “freedom” to play, the private property market seems to be the next best choice.
#5: CPF contribution ceiling to be raised from $6K to $8K
This was recently announced in Budget 2023 by DPM Lawrence Wong.
This means for those who are earning above $6K, your CPF contributions will be increased. This means more money will enter your CPF account.
(But also means lesser take-home pay)
As someone who monitors CPF usage for my clients when they buy properties, this change was interesting.
The last time the CPF contribution ceiling was raised was back in 2016 from $5K to $6K.
This means there is more monies in your CPF account to support you for your retirement.
It also means there is more monies in your CPF account to support you for your property purchase.
There is a tradeoff you have to consider.
Should you rely on your property choice to ultimately decide on your future retirement plans?
Our CPF monies are illiquid – it can be used only under certain circumstances.
Financing our property is one of them.
Conclusion
With rising interest rates and property prices….
Coupled with the close relationship between our CPF monies and property choice….
It seems we have to be more mindful on our property decisions.
There is news that household incomes have increased.
But we also cannot ignore the impact of inflation and how it has eaten into our own income gains.
Inflation has been an insidious force which I am sure we all noticed these past 12-18 months.
So we have to make sure that our investment gains can outpace inflation.
It becomes even more necessary for us to be aware of our blindspots when we are making big decisions with regards to our property.
As someone who is actively involved in buy/sell transactions in the private property market, I have seen people making big gains as well as big losses.
The property market remains as a place for opportunity to make investment gains.
Have questions on your own property options? I invite you to contact me for a no-obligation consultation session.
