Why are property prices rising in Singapore despite global unrest?
As we peer into the economic landscape, clouds of uncertainty are seen hanging ominously over the horizon. The once-clear skies of economic stability have given way to a tempest of unpredictability, casting a shadow on global economic outlook. Covid, like an unseen force, continues to influence market sentiment, spending habits, investment decisions, disrupting global supply chains, labor markets and consumer behavior.
Recent global events has created an intricate web of challenges that defy predictions with uncertainty fueled by a myriad of factors. Governments today has to navigate uncharted waters through rising geopolitical tensions, fluctuating commodity prices, lingering effects of inflation and the uncertain shadow of the COVID pandemic.
"So, why are property prices rising in Singapore despite global unrest?" Real estate professional Kiwi Lim believe this may be the burning question among potential home buyers as they see property prices in Singapore continue to climb in spite of the above mentioned.
In September last year, the Urban Redevelopment Authority of Singapore (URA) announced that with effect from 01 June 2023, harmonisation of floor area will apply to all development applications by developers submitted to URA on or after 1 June 2023 and will apply to all Government Land Sale (GLS) and industrial Government Land Sale (iGLS) land parcel sites launched for sale on or after 1 September 2022.
Previously, agencies adopt different floor area measurements for various purposes. For example, URA uses gross floor area (GFA) to measure building intensity, SLA uses strata area to demarcate ownership, BCA uses statistical gross floor area (SGFA) to measure the total floor areas of a building, while SCDF uses accessible floor area (AFA) to determine fire safety requirements.
Moreover, agencies also define their various floor areas differently. For instance, URA’s GFA is measured to include the full thickness of external walls but excludes voids, whereas SLA’s strata area is only measured up to the middle of the wall and may include voids. This results in QPs expending a significant amount of time and effort calculating the various floor areas to fulfil the different agencies’ regulatory requirements.
The different floor area definitions also create confusion for property owners who wish to carry out addition and alteration works within their strata units, but encounter increase in GFA of the development even though there is no increase in strata floor area e.g. slabbing over of internal void space.
In September last year, the Urban Redevelopment Authority of Singapore (URA) announced that with effect from 01 June 2023, harmonisation of floor area will apply to all development applications by developers submitted to URA on or after 1 June 2023 and will apply to all Government Land Sale (GLS) and industrial Government Land Sale (iGLS) land parcel sites launched for sale on or after 1 September 2022.
Previously, agencies adopt different floor area measurements for various purposes. For example, URA uses gross floor area (GFA) to measure building intensity, SLA uses strata area to demarcate ownership, BCA uses statistical gross floor area (SGFA) to measure the total floor areas of a building, while SCDF uses accessible floor area (AFA) to determine fire safety requirements.
Moreover, agencies also define their various floor areas differently. For instance, URA’s GFA is measured to include the full thickness of external walls but excludes voids, whereas SLA’s strata area is only measured up to the middle of the wall and may include voids. This results in QPs expending a significant amount of time and effort calculating the various floor areas to fulfil the different agencies’ regulatory requirements.
The different floor area definitions also create confusion for property owners who wish to carry out addition and alteration works within their strata units, but encounter increase in GFA of the development even though there is no increase in strata floor area e.g. slabbing over of internal void space.
Harmonisation of Floor Area
Therefore, in consultation with industry representatives from the professional institutes, URA, SLA, BCA and SCDF have jointly reviewed the different floor area definitions to harmonise requirements across agencies, which aims to pave the way for coordinated submissions and improved productivity for the built environment profession.
Harmonisation of floor area - key changes are summarised as follows:
a. All agencies’ floor areas will be measured to the middle of the wall
b. All strata areas will be included as GFA
c. All voids will be excluded from strata area
d. BCA and SCDF will adopt an aligned definition for SGFA computation
"With all strata areas now included as GFA, developers will no longer have any 'bonus' space like balconies or aircon ledges to 'spread or off-load' their profit in order to reduce the overall per square foot (psf) prices of each unit of residence. Developers will therefore need to find new ways to enhance their offerings with efficient layouts and passing on the total GFA count as higher costs to homebuyers in the form of higher psf prices." said real estate analyst Kiwi Lim.
Construction Costs Expected To Continue Rising
The Singapore government has been working hard to increase work permit holders to ease the manpower shortages seen in the early days of the Covid-19 pandemic with contractors and developers getting their main source of foreign labor from both China and India.
However, construction costs have risen sharply and are likely to increase further as migrant worker domitory spaces are now more expensive due to acute shortages and higher costs. Prices of construction materials are affected by supply chain disruptions and higher costs of securing building materials amidst global unrest and uncertainty.
Prices of fuel and energy critical for building and construction is also expected to rise as fear of escalating unrest in the Middle East grows, adversely affecting oil supplies. Higher energy prices will raise the cost of manufacturing, operations and transportation of building materials in the construction of properties.
Demand for construction equipment will remain strong with the ongoing and upcoming condo projects, BTOs, healthcare & medical hubs, attractions, MRT construction and infrastructure, etc for the next 5 to 10 years in Singapore's masterplan.
Singapore's Economic Recovery Journey
In the aftermath of global challenges, Singapore emerges as a testament to resilience and adaptability on the economic front. The Lion City, known for its robust economic foundation, has embarked on a recovery journey marked by innovation, strategic planning, and a community-driven approach.
Navigating Challenges with Strategic Precision: Singapore's economic recovery strategy is characterized by a meticulous and data-driven approach. From the onset of the challenges, the government swiftly implemented measures to support businesses, protect jobs, and stimulate economic activity. The commitment to fiscal prudence and strategic investments has created a stable platform for recovery.
Innovation as a Catalyst: At the heart of Singapore's recovery lies a commitment to innovation. The city-state has leveraged its reputation as a hub for technology and research to drive advancements in sectors like digitalization, biotechnology, and sustainable solutions. The emphasis on a Smart Nation agenda positions Singapore at the forefront of global technological innovation.
Reskilling for the Future: Recognizing the evolving nature of industries, Singapore has placed a significant focus on reskilling and upskilling its workforce. Initiatives and partnerships between government, educational institutions, and businesses aim to equip individuals with the skills needed for the jobs of the future, fostering a resilient and adaptable workforce.
Green and Sustainable Initiatives: Environmental sustainability is a cornerstone of Singapore's recovery blueprint. The nation has embraced green initiatives, investing in renewable energy, sustainable urban planning, and eco-friendly infrastructure. These endeavors not only contribute to global environmental goals but also position Singapore as a leader in sustainable development.
International Collaboration and Trade: Singapore's recovery is intricately linked to its role as a global trade and financial hub. The nation has actively pursued international collaborations, fostering strong economic ties and trade partnerships. The establishment of travel corridors and open economic policies demonstrates a commitment to global interconnectedness.
Community-Driven Resilience: The resilience of Singapore's economy is not solely the result of government measures but is deeply rooted in the collaboration of its diverse and dynamic community. The resilience of businesses, the adaptability of individuals, and the collective spirit of the nation have played pivotal roles in navigating challenges and shaping the recovery trajectory.
As Singapore progresses on its recovery journey, the nation stands as a beacon of determination and innovation. The integration of technology, sustainability, and community engagement positions Singapore not just as a survivor of challenges but as a model for sustainable and inclusive economic growth in the post-pandemic world.
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