2022 Cooling Measures: 5 Takeaways We Can Infer From These Latest Restrictions

It has been more than a month since the 30 Sept 2022 cooling measures was applied.

As an agent active on the ground, I received numerous enquiries from the readers of Second Property Investors. Many are trying to understand the immediate impact and what options are now open to them.

This is especially since the most significant cooling measure was the “15-month wait-out” period.

Former private property owners looking to buy in the HDB market will have to enter a 15-month waiting period.

This means if they wished to purchase a HDB flat after selling off their private property, they have to find somewhere else to stay for at least 18 months (if we include additional paperwork of 3-4 months) before being allowed to enter the HDB market.

Personally, I felt this wait-out period seemed to be especially targeted to reduce the number of million-dollar HDB transactions that is happening in the resale market.

Being exposed to how property prices has been trending these past few years, I am glad that my clients listened to my instincts.

The first month since the 2022 cooling measures has rolled past.

Here are some of my observations and thoughts.

#1: The HDB market will always need to be affordable

This was the headline in the days after the recent cooling measures.

The government is assuring that the supply of the HDB flats will be ramped up.

By up to 100,000 flats “if needed”.

Source: https://www.teoalida.com/singapore/btolist/

Time and again, we are often reminded about this in various subtle ways.

Public housing is a need that has to be affordable.

For long term planning, going over to private property segment will be better.

Why?

I believe there is greater “freedom” there.

HDB prices will still grow.

But it will always be a big concern for the government if it grows too freely.

#2: Opportunities don’t last forever. Take profits when you can

Back in 2019, before the pandemic – HDB prices was not actually growing every quarter.

In fact, the HDB price index was contracting.

You can see the headlines below – “HDB resale prices drop for sixth straight year”. This was back in January 2019.

In 2019, the debate that was ongoing was about lease decay.

Then, the pandemic happened in March 2020.

As we approach the end of 2022, we noticed HDB prices reversing its trend from the stagnant prices of 2018 – 2019  to the steep increases of 2021 – 2022.

Source: https://www.channelnewsasia.com/singapore/hdb-resale-price-rise-flash-estimate-2600781

You can view it for yourself here: https://data.gov.sg/dataset/hdb-resale-price-index

The pandemic has been both a blessing and a curse.

It is a blessing for owners whose property prices have been stagnant for awhile.

This was especially so for HDB owners with aging flats – these past 2 years has been a great opportunity for them to capture some gains.

Not all of them made money when they sold their unit – especially when we take into account of CPF accrued interest.

But at the very least, it was not as painful as before for these recent HDB sellers.

Their bigger and older HDB units were highly sought after by private property downgraders.

However, this most recent cooling measures did put a stop to that.

For 4-room HDB flat owners, I think they will still benefit – as downgrading retirees still have access to that HDB segment.

However, the pandemic has been a curse for first-time buyers who find themselves facing issues like:

• limited supply of resale units
• delayed completion dates for BTO flats
• being priced out from the resale market by cash-rich buyers

This obviously made the government concerned.

The way the cooling measures was announced at midnight and catching everyone off-guard was a reminder of how the government will step in when needed.

It was also a good reminder that we can’t control the environment around us but we certainly have control over our decisions and action to take.

Readers of Second Property Investors who became my clients by taking action and listening to my advice have certainly benefited.

Those who bought early are happy they entered at a lower price.

Those who sold are happy with their gains.

Those who were decisive have reaped their rewards.

#3: The property market is a cycle

There have been talks of a recession coming in 2023.

Interest rates are also going up and financing your property will become more expensive.

So are we exiting this peak in our property cycle soon?

As sentiments become less positive, I imagine that demand from the market will drop.

These recent cooling measures has also caused a lot of property sellers to pull back their listings.

• Private property owners who are worried about downgrading
• HDB owners who are now rethinking about upgrading
• Rental market is now soaring

The property supply will eventually increase. The property cycle continues.

Source: https://www.iproperty.com.my/guides/what-is-the-18-year-property-cycle-how-will-it-make-you-a-better-investor-ctr-32655

And the market will react accordingly.

It will not happen overnight.

But the most important thing is to make sure you are on the right side of the property cycle.

It is interesting to note that private property owners who are 55 years old and above are exempted from the 15-month wait out period.

This is essentially an acknowledgement that the government recognizes that property is essential for retirement adequacy.

For this group of people, they are allowed to downgrade from their private property to HDB – although it has to be a 4-room HDB flat or smaller.

I have written about this specific topic a few years ago where I outlined about how exiting from private property by downgrading can give you a decent retirement nest egg.

You can read about the article here: https://www.secondpropertyinvestors.com/why-this-couple-upgraded-downgraded/

#5: Revelation on who were the buyers of million-dollar HDB flats

It seems the government might know the demographics of the buyers of million dollar flats.

The very targeted measure of the 15-month wait out period for private property downgraders who are below the age of 55.

PropNex also released this report which seemed to confirm that most of the buyers are indeed private property owners who wish to downgrade to a more spacious HDB flat.

Source: https://www.propnex.com/reports/56/million-dollar-hdb-resale-flats

From Propnex data, it seems that half of the million-dollar HDB resale flat buyers are aged 50 years and above.

That is very telling as it informs us who has the capability to secure these large flats at high prices.

It is interesting to note that once this wait-out period was introduced, the news of million dollar HDB flat transactions have almost disappeared.

Below is an interesting thought about the reasoning behind million-dollar HDB flats.

Conclusion

The sentiment right now is a “wait-and-see” attitude.

This means volume of transactions will go down and hopefully this cools the hot property market.

For sellers of 5-room HDB flats and larger units, your pool of buyers have become that much smaller as private property downgraders are not allowed to buy your unit.

For buyers, it is now a more interesting time as you have less competition.

I did not discuss about the new restrictions on Loan-To-Value ratio because I think it is actually still mild.

I think after years of low interest rates, it is time for interest rates to rise again to tame inflation.

At this point of time, what you can do now is to make decisions that will protect you in the long run.

• When buying a property, make sure that the property choice will have better upside than downside.
• When selling a property, make sure that you capture enough gains to protect you for your next purchase.

For me, I have seen more than enough transactions.

Being exposed to the market like myself – with my level of frequency of transactions and negotiations – I can see the patterns better than most people out there.

That level of exposure has allowed me to predict situations and find solutions more reliably than ever before.

I say this humbly because I meet an average of 120 – 150 families per year. This is multiple times more than the average agent.

If you have questions about your own property options, feel free to drop me a whatsapp message.

All our discussions are no-obligation.