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Budget 2019: 3 possible impacts on Singapore's property market

2/27/2019

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Good news for senior citizens living in HDB flats and SMEs but bad news for landlords

By Khalil Adis
Picture
An HDB estate in Toa Payoh. The elderly living in old estates will benefit the most from the budget. Photo: Khalil Adis Consultancy.
Finance Minister Heng Swee Keat delivered his Budget 2019 speech on 18 February with a slew of goodies ranging from start-ups to the older generation.

We dissect the budget and analyse its impact on the property market.

#1:  Merdeka Generation Package will help prop up the HDB market
Picture
An elderly man seen at an HDB mature estate at Toa Payoh Lorong 4. The Merdeka Generation Package will mean they do not have to sell off their HDB flat in their silver years. Photo: Khalil Adis Consultancy.
The package worth some S$8 billion is for Singaporeans born in the 1950s to thank them for their contributions to Singapore.

The package includes the following:
  • A S$100 top-up to Merdeka Generation seniors' PAssion Silver cards
  • Medisave top-ups of S$200 for five years
  • Community Health Assist Scheme (CHAS) subsidies and discounts at polyclinics, public specialist outpatient clinics
  • MediShield Life premium subsidies
  • A S$1,500 incentive to join CareShield Life

These additional incentives will go a long way to help the elderly.

This is because medical treatment can take up a significant portion of one's life savings resulting in some elderly having to sell their HDB flat.

Thus, the package will indirectly prop up the HDB market.

This is good news as the HDB resale market has softened considerably since the first quarter of 2013.

Singaporeans who qualify will receive their Merdeka Generation cards from June 2019.

#2: Various incentives for SMEs will boost the commercial property market
Picture
Office buildings in downtown Singapore which are popular among start-ups as they offer a registered office address. Photo: Khalil Adis Consultancy.
The government has announced an SME Co-Investment Fund III that will witness it investing S$100 million in small and medium-sized enterprises (SMEs) that are ready to scale up to catalyse private sector funding.

In addition, the Enterprise Financing Scheme will offer better support for SMEs to access bank financing and provide enhanced support for companies incorporated for less than five years.

Collectively, these measures will indirectly lead to demand for office space among start-ups.

Commercial properties that specialise in co-working space will benefit the most as they are conducive for start-ups.

One such property is The JTC LaunchPad @ one-north.

The budget will not have any significant impact on Grade A office spaces as such market tend to be dominated by multinational companies.

#3: Lower Dependency Ratio Ceilings (DRCs) will impact the rental market
Picture
HDB flats in Punggol. Photo: Khalil Adis Consultancy.
​A lower DRCs in the service sectors will reduce Singapore's dependency on foreign workers from the current 40 per cent to 38 per cent from 1 Jan 2020 3 and 5 per cent from 1 Jan 2021.

In addition, the ratio of S Pass workers will be reduced from the current 15 per cent to 13 per cent from 1 Jan 2020 and 10 per cent from 1 Jan 2021.

This will have a significant impact on the HDB rental market and mass market condominiums due to the shrinking tenant pool.

As such, landlords will likely need to reduce their rent to continue attracting tenants.

Vacancy rates in the heartlands may also rise leading up to 2020 and 2021.

Thus, it will be a tenant's market.
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