Summary
Hong Kong government removes all property curbs effective from 28 February 2024. Differences between the Singapore and Hong Kong markets and political systems reduce the chance that the Singapore government would follow suit. However, the Singapore government has more room to ease the curbs if necessary.
Introduction
In its Budget announcement on 28 February, the Hong Kong government will scrap all restrictions on property transactions in an attempt to revive the property market and the economy. Before the pandemic, both the Hong Kong and Singapore residential property markets attracted significant foreign investments that contributed to property price inflation. A main source of the foreign demand in both economies is Chinese property buyers. To stabilise the property markets, the governments of both economies implemented various rounds of property cooling measures, such as higher stamp duties and tighter loan restrictions. This has led to some comparison between the two property markets.
Analysis and Comments
Differences in market direction and policies
Firstly, the property markets in these two economies have moved in different directions in the past two years. Basically, Singapore housing prices have continued to increase, while the Hong Kong property prices have weakened. The Singapore government is concerned about preventing the housing market from overheating, while its counterpart in Hong Kong are seeking ways to rejuvenate the sluggish property market.
Secondly, the Singapore government will have to hold a General Election (G.E) by November 2025. There would also be a change in the leadership of the ruling party, the P.A.P. Based on the measures and policies that the government that implemented in the past few years, it does not want housing affordability to be a hot political topic leading up to the election. The P.A.P has not forgotten the lession from the 2011 G.E.
The Hong Kong government, which has crushed the local democratic movement, does not have to hold any election that offers the Hong Kong people universal suffrage. Although housing in Hong Kong is still counted among the least affordable in Asia, the question of housing affordability does not appear to be the top priority of the Hong Kong government with its removal of property cooling measures.
Thirdly, when the Singapore government hiked the Additional Buyer's Stamp duty (ABSD) for foreign buyers of local residential properties in Aprial 2023 from 30% to 60%; the move is to strongly discourage foreign homebuyers from buying residential properties in Singapore.
Additional Buyer's Stamp Duty (ABSD) in Singapore
Source: Ministry of National Development
This market curb is bearing fruit. In the twelve months leading up to latest cooling measures in April 2023, non-resident foreign buyers pruchased 4.4% of transacted private housing units in Singapore. This proportion has dropped steadily to 0.9% in the first two months of 2024.
The Singapore authorities pride itself for its effective governance and loathe policy U-turns. It would not want to appear reactionary by loosening the property curbs just because the Hong Kong government has scrapped theirs.
Rapid Reaction
The Singapore government would react quickly to match any significant measures by Hong Kong to attract businesses in industries that Singapore wants to attract and expand, such as cutting-edge technology, financial and wealth management services.
Singapore has an export-oriented economy and residential properties are immoveable assests that are consumed mainly by the local population, it cannot be exported. The Singapore government does not appear to be interested to attract foreign developers to build and expand in Singapore. Therefore, this is another reason why the Singapore authorities are not in a hurry to ease the current property cooling measures.
Room to Manoeuvre
On the other hand, the removal of Hong Kong property market curbs has given the Singapore government more room to manoeuvre. The Singapore economy and job market are facing headwind. News of retrenchment and corporate downsizing are becoming more common. The uncertainties about job security and income could curb housing demand among Singaporeans, including the desire to upgrade to mroe expensive properties.
In the event that the Singapore property market were to cool excessively, the government could roll back some of the property curbs. However, they are likely to act cautiously and take baby steps, such as lowering the ABSD for for foreigners from 60% to 45% or even 50%. In addition, any easing of the property cooling measures may only happen after the General Elections.
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