Singapore's Housing Affordability Crisis

In Singapore, the residential property market has experienced a steady surge in prices despite repeated cooling measures introduced by the government. Property prices, especially in the public housing sector, continue to rise, pushing the boundaries of affordability for middle-income Singaporeans. Government responses, such as loan-to-value (LTV) reductions and increases to CPF Housing Grants, have struggled to address the deeper issues causing the market’s inflation. The government's aim to prevent a housing bubble and maintain stability is critical, but the increasing trend of million-dollar flats and soaring resale prices may suggest that the cooling measures are insufficient in their current form. This article explores the effectiveness of these measures, their implications for the future of the housing market, and the urgent need for a more aggressive intervention.

Singapore's property market, particularly in the HDB resale segment, has seen continued growth in both demand and pricing, defying expectations. HDB resale prices surged by 9.6% in 2024, more than double the 4.9% increase observed in 2023. The rapid rise in prices has been exacerbated by constrained supply and pent-up demand from first-time buyers and those upgrading to bigger flats. Despite the government's implementation of cooling measures, including reducing the LTV limit for HDB loans to 75%, the reality on the ground is that demand remains overwhelmingly strong, pushing prices higher.

The government's cooling measures, while well-intentioned, appear to be ineffective in curbing the rise in property prices. The reduction in the LTV ratio for HDB loans and the introduction of more generous CPF Housing Grants are attempts to control demand, yet they have not had the desired effect of cooling the market. The underlying problem lies in the mismatch between housing supply and demand. The increased grants may temporarily ease affordability concerns for first-time buyers, but they also serve to inflate the market by enabling higher bids for available flats.

Housing affordability has become one of the most pressing issues in Singapore's property market. For many Singaporeans, purchasing a home is increasingly out of reach. The rise of million-dollar flats is a stark example of this affordability crisis. As more flats are sold at these elevated prices, first-time homebuyers are squeezed out of the market, as they cannot compete with wealthier buyers willing to pay top dollar for resale flats.

Given the continued rise in property prices, it is clear that the current set of cooling measures is insufficient. The government must consider more aggressive interventions, such as:

- Increasing Supply and Controlling Speculation: The government should ramp up efforts to increase the supply of new flats and ensure that these flats remain affordable for average Singaporeans. Measures such as restricting the resale of newly built flats for a certain number of years could prevent speculative activity and ensure that housing remains accessible.

- Capital Gains Tax on Property Resale: Introducing a capital gains tax on the resale of properties above a certain threshold could help cool down speculation, particularly in the high-end segments of the market. Such a tax could discourage buyers from treating public housing as an investment vehicle and encourage them to focus on long-term homeownership.

If the government fails to take more decisive action, the Singapore property market may face even more severe affordability challenges in the near future. The growing number of million-dollar flats is already reshaping the landscape of public housing, and without stronger cooling measures, the market may become increasingly dominated by wealthier individuals who view housing as an investment rather than a place to live.

In conclusion, while the Singapore government has made commendable efforts to cool the housing market, the continued surge in property prices and the rise of million-dollar flats indicate that these measures are not enough. The government must act decisively to tackle the root causes of housing inflation by tightening lending practices, increasing the supply of affordable flats, and introducing policies to curb speculation. Only with a more aggressive intervention can Singapore ensure that its property market remains accessible to all its citizens and prevent a future housing crisis.