What the recent residential policy tweaks say about the Singapore government

It could be a meaningful signal that authorities are being cautious.

The recent tweaks on seller's stamp duties and total debt servicing ratio could be a meaningful signal that authorities are being cautious against excessive declines, according to a report from OCBC Investment Research.

"We see these reversals as a meaningful signal that the authorities stand ready to further review legislation if housing prices accelerate to the downside or if the economic outlook deteriorates rapidly," said the OCBC report.

Historically, authorities had reversed policy when prices dip 8%-17% from the peak, particularly when economic distresses were anticipated.

In October 1997, the government reversed its policy stance after prices dipped 16.4%. In August 2001, the authorities reversed the policy stance after prices slumped 12.7% from the peak by restricting HDB supply below 8k.

In 2008, the government reversed its policy stance after prices declined 8.3% by suspending the confirmed GLS list. Currently, prices are down 11.3% from the peak.

"In our view, the timing of these reversals was not a complete surprise. We have been highlighting to our clients over the last few months that the Singapore government has over the last three cycles a near unbroken record of actively reviewing property legislations against its goals of price stability, and had historically began reversing curbs after homes prices had dipped between 8%-17% from the peak," noted OCBC.

The changes could marginally be supportive of the still-declining home prices. However, it should be noted that the by leaving the ABSD intact and introducing the additional conveyance duty (ACD), the authorities have carefully calibrated these tweaks to not kick up excessive animal spirits in the market.

"The ACD, in particular, will close one critical door for developers aiming to offload unsold units through share sales of PHEs so as not to incur penalties under the ABSD or Qualifying Certificate (QC) charges," said the report.