3 factors that led to the slowdown in the private residential market

Several silver linings, however, will help alleviate the effects of these factors, an expert said.

The private residential market saw a slowdown in the first quarter with prices growing at a slower pace, only by 0.7%, and sales dipping 32.6%; according to property expert, OrangeTee, this may have been caused by three factors. 

The first reason would be the new property cooling measures that were introduced last December 2021, which included the raising of the additional buyers’ stamp duty (ABSD) rates and tightening the total debt servicing ratio (TDSR).

"The price decrease could be attributed to the cooling measures which seem to have a greater impact on investors and foreign buyers," OrangeTee said.

"For instance, Singaporeans buying a third property and PRs purchasing a second property will experience a 10-percentage point increase in ABSD, a steeper rise than the 5-percentage point adjustment during the last round of cooling measures in 2018," the firm added. 

The Chinese New Year lull may have also caused slower activities in the private residential market, according to OrangeTee.

Lastly, the expert said supply chain disruptions caused by geopolitical uncertainties and sanctions from the Russia-Ukraine war also impacted the market.

OrangeTee said the war led to the surge in global inflation rates, which then pushed the US Federal Reserve to impose an interest hike from near zero to a range of between 0.25% and 0.5%, representing a hike of 25 basis points.

"Singapore’s domestic interest rates are influenced by global market movements, especially by the US. Mortgage rates here could be raised 3 times this year by 25 basis points each time, according to a poll conducted among mortgage advisers," OrangeTee explained.

Global uncertainties had led to investors taking a temporary backseat " to assess the likely the outcome of these challenges and reviewed their investment strategies," 

The effects of these factors, however, may be alleviated by "some silver lining on the horizon," according to OrangeTee.

These silver linings are Singapore's high employment rate, and its growing economy, which both bode well for the real estate market "as borrowers defaulting on mortgages will be low despite the volatile market conditions."

Group size limits have likewise been lifted, which may allow for more show flat and house visits said the expert. "The resale and rental markets will also benefit from the easing of restrictions since employment will be expanding across many sectors and more workers return in the coming months," OrangeTee added.

Read more: Private residential property index up by 0.4% in Q1 2022