Singapore’s property market has gone through a fair bit of fluctuation over the last six months. The fourth quarter of 2018 saw the country’s private residential price index fall by 0.1%. This was followed by another decrease of 0.7% in Q12019.
Is this slowdown an aberration or the beginning of a new trend? To answer this question, it’s necessary to step back a little and view property prices over a slightly longer timeframe. Consider this chart, which provides the quarterly increase or decrease in private residential property prices for the period from Q32012 to Q12019.
Singapore Residential Property Prices – Quarterly Change
Source – Bloomberg
What does this chart reveal? 2017 saw a reversal of the four-year negative trend in prices. In that year, valuations rose by 1.1%. Subsequently, 2018 witnessed private residential property valuations increasing by 7.7%.
However, this sharp uptick in prices was a cause of concern for government authorities. Mr Lawrence Wong, Minister of National Development, explained the official stand when he said, “The government has been monitoring the property market closely. We are very concerned that prices are running ahead of economic fundamentals. … We want to avoid a severe correction later …. Hence we are acting now to maintain a stable and sustainable property market.”
What did the government do to stabilise prices? It introduced a slew of cooling measures that included higher Additional Buyer’s Stamp Duty (ABSD) rates and more conservative loan-to-value (LTV) limits. These had an almost immediate effect with prices of private residential property declining in the last quarter of 2018.
But does that mean that Singapore’s residential market faces a gloomy future in the short term? On the contrary, prices may soon move upwards. The government has recently released the URA Master Plan 2019. The details provided in this document indicate that the real estate sector in the country will continue to offer an attractive option for both investors and Singaporeans buying homes in which they plan to live.
What is the URA Master Plan 2019 and why does it matter?
Think of the URA Master Plan as a document that describes the government’s land use policy for Singapore for the next ten to 15 years. At the launch of the Master Plan on March 27, 2019, Minister Lawrence Wong described three main focus areas:
⇨ Development of gateways across Eastern, Western, and Northern parts of Singapore – currently, the most developed part of the country is in the South. But the URA Master Plan 2019 intends to change this. Development clusters will come up in several new areas. For example, the North will get a new agri-tech hub.
⇨ Increasing the country’s green cover – over the term of the Plan, the green spaces in the country will see an increase. Currently, nature reserves and other green areas account for a land area of about 7,800 hectares. This will rise to approximately 8,800 hectares over the next 10-15 years.
⇨ Building for the future – although the URA Master Plan is a vision document for the next decade and a half, its impact will be felt for much longer than that. There are long-term plans to develop the Greater Southern Waterfront, which occupies more than 2,000 hectares. That’s six times the area covered by Marina Bay.
This is a screenshot of the area covered by the Master Plan from URA’s website:
URA Master Plan 2019
Source – Urban Redevelopment Authority
It’s possible to zoom in to any area that you are interested in by visiting the relevant page on the URA website.
Why should you study the Master Plan in detail? A quick look at the map can give you a great deal of useful information. The first point to remember is that the map is colour-coded. So, you can find out about land usage in the neighbourhood with a glance. Here’s a brief idea of what the different colours indicate: (the URA website provides additional details about the colour-coding scheme.)
Colour-coding on URA map
Source – Urban Redevelopment Authority
The map can provide you with a significant degree of information about transport facilities, business areas, green spaces, sports and recreation areas, and a lot more.
Impact on CBD
The Central Business District is about to get a major revamp. Minister Wong says, “We want to introduce a broader mix of uses so that the CBD is not only a place to work, but also a vibrant place to live and play.”
Specifically, there will be changes to Anson Road, Cecil Street, Shenton Way, Robinson Road, and Tanjong Pagar. The government will introduce a new CBD Incentive Scheme. This program will allow an increase in gross plot ratio if the existing office development is converted into hotel and residential use.
How much of an increase in the gross plot ratio will the CBD Incentive Scheme permit? The plan is to sanction a rise of between 25% and 30%. That’s a significant percentage, and it should give many property owners the motivation to redevelop their buildings.
New MRT lines could boost home values
If you are planning a property purchase, then there is one crucial factor that you must take into consideration. Will your new home be close to an MRT station?
The authorities have recently finalised the alignment of Phase 1 of the MRT Cross Island Line (CRL). It will be 29 kilometres long, have 12 stations, and pass through Changi, Loyang, Pasir Ris, Hougang, and Ang Mo Kio. Property prices for units close to the new line are bound to get a boost.
Construction activity for CRL Phase 1 will start in 2020 and be completed by 2029.
There will also be a second phase to the CRL. This will be completed a year later in 2030.
Cross Island Line
Source – Land Transport Authority
The bottom line
The URA Master Plan 2019 is going to have a positive impact on Singapore’s property market. Areas that see new development are very likely to see an appreciation in their values. Investors and even buyers who are acquiring a home to live in would be advised to carefully review the Master Plan before making a purchase decision.