Skip to main content

Advertisement

Advertisement

Longer-term positive impact of Budget 2016 for property

Despite brushing off calls for the lifting of cooling measures, saying it would be premature to do so, Finance Minister Heng Swee Keat made announcements in Budget 2016 that could have a positive effect on the property market in Singapore over the longer term.

Despite brushing off calls for the lifting of cooling measures, saying it would be premature to do so, Finance Minister Heng Swee Keat made announcements in Budget 2016 that could have a positive effect on the property market in Singapore over the longer term.

JURONG INNOVATION DISTRICT IS GOOD NEWS FOR THE AREA

We already know that the authorities see Jurong as a “second Central Business District.” The Jurong Gateway Project bodes well for rental yields and capital gains in the area in the long term. The Jurong Innovation District, envisioned as the “Industrial Park of the Future,” adds more good news to the mix, with Mr Heng saying: “This has the potential to transform how we live, work, play and create.”

The development, the first phase of which is expected to be completed in Jurong West by 2022, is still some time away. But think about what it means: Jurong will house the hottest new industrial park, the High Speed Rail, as well as benefit from the massive investment into the Jurong Gateway project. Anyone living there might look out their window some years from now and suddenly realise he is living along the new Shenton Way. This news makes Jurong West a goldmine for investors, who will be drawn by the potential for high rental yields.

SUPPORT FOR PMETS WILL HELP HOUSING MARKET

In 2015, Singapore experienced the biggest number of layoffs since the global financial crisis of 2008/09. Professionals, Managers, Executives and Technicians (PMETs) bore the brunt of the layoffs, with the older, highly-trained PMETs having a harder time finding employment and with little prospects of a new job with an income comparable to the previous one.

This does not bode well for the flailing housing market. The older, highly-trained PMETs are the Singaporeans most likely to buy private property. Those who find they cannot service their home loans due to retrenchment might also downsize and put their current homes on the market. This adds further housing supply in an environment of declining prices. Cooling measures remain the main cause of declining property prices but this job situation aggravates the problem.

The “Adapt and Grow” initiative therefore indirectly supports the private housing market by ensuring that a key demographic retains – or regains – the ability to buy property. Under this scheme, wage support is given to companies willing to hire retrenched workers. The Government will also step up professional conversion programmes for mid-career job seekers, including retrenched professionals. While it’s not going to make everyone rush out and buy homes, it does ensure more PMETs are still able to afford them.

CONTINUED SUPPORT FOR THE PRINCIPLES OF HOME OWNERSHIP

Singapore has the fourth highest rate of home ownership in the world. And the long-standing mentality of Singaporeans that the home is the primary asset helps to drive the housing market here. It fuels the aspiration to own homes and to upgrade to bigger and better homes. The Fresh Start Housing Scheme provides a grant of up to S$35,000 to families with young children living in rental flats. This will allow them to own a two-room flat, provided the parents stay employed and the children get to go to school. This does not help developers who want to offload their units right now, but looking at the bigger picture, as long as Singaporeans see that home ownership is within their grasp, the desire to do so will remain strong.

REVITALISATION OF HEARTLAND SHOPS

The Government will set aside S$15 million a year to revitalise heartland shops. Part of the advantage of HDB living is having access to these small shops, which add more than just convenience. They are a key part of neighbourhood life and contribute to the vibrancy of the community. Restoring some of these run-down shops or making them more interesting could potentially help surrounding property values. Consider how in old areas such as Tiong Bahru, the re-purposing of old heartland shops into artisanal cafes and craft stores have boosted property values. The revitalisation may not necessarily be as grand, but it’s not unreasonable to see it as a kind of upgrade to the neighbourhood as a whole.

ABOUT THE AUTHOR: Darius Cheung is CEO of 99.co, a property portal he founded in January 2014 together with Dominic Ee, Conor McLaughlin and Anuj Bheda. 99.co has raised funds from investors including Sequoia Capital and Facebook co-founder Eduardo Saverin.

Read more of the latest in

Advertisement

Advertisement

Stay in the know. Anytime. Anywhere.

Subscribe to get daily news updates, insights and must reads delivered straight to your inbox.

By clicking subscribe, I agree for my personal data to be used to send me TODAY newsletters, promotional offers and for research and analysis.