Following our first post about public and private housing types and second about districts and planning areas in Singapore, this post is the third in our series to help the absolute beginner understand the Singapore property market. We’ll be discussing who the major players in the property market are and how they drive the functioning of the market. How does the government, developers, property agencies and banks shape demand and supply? What impact can their actions have on property prices? Read on to find out.
The property market in Singapore is driven by four major groups of players – the government agencies, developers, property agencies and banks.
1) Government ministries and agencies
The government ministries and agencies in Singapore shape policy changes that can significantly affect sentiment in the property market and hence real estate prices.
The ministries coordinate policies to control or support property prices depending on their view of the level of speculation and asset price stability. For example, a broad round of property measures that affected the new and resale HDB market, taxes and bank lending was jointly announced by the Ministry of Finance (MOF), Ministry of National Development (MND) and Monetary Authority of Singapore (the MAS is Singapore’s central bank and financial regulator) on August 30 2010.
While the ministries come up with the big picture policies, the statutory boards under the ministries are generally responsible for issuing the detailed guidelines and implementing policies.
The key statutory boards include:
Building and Construction Authority (BCA)
The BCA is a statutory board under the MND whose role is to provide guidelines for buildings, structures and infrastructure so as to “shape a safe, high quality, sustainable and friendly built environment.”
Housing Development Board (HDB)
The HDB is a statutory board under the MND and the public housing authority. Its mission is to provide affordable quality homes for Singaporeans by planning and developing vibrant public housing towns with great amenities and cohesive communities. It also publishes statistics on the public housing market including a quarterly Resale Price Index.
Singapore Land Authority (SLA)
The SLA is a statutory board under the Ministry of Law focused on land resource optimization. In its developmental role, it oversees government land sales, leases, management of state land and buildings, acquisitions and allocation, developing and marketing land-related information and maintaining the national land information database. In its regulatory role, it acts as the national land registration authority and manages and maintains the national land survey system.
Urban Redevelopment Authority (URA)
The URA is a statutory board under the MND, and the national land use planning authority. It prepares medium and long term strategic and local plans for land use in Singapore, and helps to implement them. At the macro level, the URA controls residential development in Singapore via use of the plot ratio and building height. At the micro level, it develops guidelines on housing type and form. It also publishes updates on the private property market including price indices and individual transactions.
The basic role of the real estate developer is to convert raw land into a completed property and lease or sell it. To do so they have to orchestrate a range of activities: buy land, finance the deal, work with architects to design the project, obtain approvals from the government, engage a construction company to build, work with agencies to market and sell the property etc.
You’ll often hear news of developers bidding for land that the government has put up for tender. Developers need to constantly buy land to maintain their landbank, the pipeline of projects that they have under development. The price they pay for land is also a good indicator of their view on the market further down the line, and will give you a rough idea of the price they have to launch the project for sale in order to make money.
Prominent property developers in Singapore include Capitaland, Centrepoint, Far East Organization, City Development Limited, GuocoLand, Keppel Land, Wheelock Properties, Allgreen Properties, Ho Bee and SC Global.
3) Property agencies and agents
Property agencies and agents are businesses or people that arrange the selling, renting or management of property. They act as the intermediary (“middleman”) between the buyer and seller – they try and match sellers who wish to sell with buyers who wish to buy, and take a commission for any successful matches.
Typically in Singapore property agents will charge a commission of 1-2% to the seller of a private property, and 1% to the buyer and 1-2% to the seller for HDB flat transactions.
As of mid-2010, there are an estimated 25,000 property agents and 1,700 agencies in Singapore. Some property agents are full-time professionals while others are just moonlighting as part-timers. The large agencies include Propnex, ERA, HSR, DTZ, Knight Frank and Dennis Wee. Many of the agencies are one or two man operations.
For a long time the reputation of the industry was tarnished by the actions of a small group of unprofessional real estate agents, with many calling for greater government regulation. Thus on September 15th 2010, the government introduced the Estate Agent Act and set up a new statutory board called the Council for Estate Agencies (CEA) that will regulate agents and the agencies. There are also new entry criteria and a mandatory exam that all agents must pass by the end of 2011. These requirements are expected to reduce the number of agents and agencies by 30%.
Bank provide the “petrol” that drives the whole real estate machine – money. They fund the property projects of real estate developers, and extend mortgages to qualified buyers so they can purchase a property. Their aim is to make a “spread” (the difference between the interest rates they charge to lend money, and the rates they pay for your deposits), and minimize the risk of any losses (e.g. from people defaulting on their loans).
The top local banks in Singapore include DBS, UOB and OCBC. The active foreign banks include HSBC, Citibank and Maybank, amongst many others.
Together these four players drive the functioning of the property market. The government sets guidelines and provides land for development. Developers buy land and transform it into property. Agencies and their agents help to market and sell this property, and banks provide the funding that makes it all happen.
Phew, this is a long article, but I hope it provides you with a high level perspective of how the market works! If you’ve any thoughts or questions, please leave them below in the comments section. Coming up in the final installment of this series, Part 4 – Commonly used jargon and what they mean…
I had attended Robert Kiyosaki seminar for the last 3 years and 3x he had emphasize about the size of our intelligence in investing in private properties in Singapore as the ROI is very very long? However every launch even when it is overbought the market seems to ignore it and kept snapping up studios faster then the open house. Can an executive becomes a property tycoon in Singapore? Had recently attended Azea Coaching on Property Course. Had also went for Dickson and Douglas and they have one thing in common to purchase properties. Numbers and the lot the better. They are selling experience and they are leveraging on our pink ICs and CPF to buy hot location and flipping them for a quick profit or spreading the risk.
Was wondering if you can do a review on courses By Dickson, Douglas and ERC or Wendy Kwok? Azea Coaching I can tell you. She sucked! Apparently we have been traveling for the past 4 years and had spoken to 20+ property agents (local and overseas) and the founder of Azea Coaching had said the same thing but she is charging me $2.5k for it.
I was wondering if it is my commitment to commit to a property to kickstart my portfolio or fear to take action that is worth pondering.
Cheers keep up.
Hi David, thanks for your comment. Indeed when deciding whether to attend a course you should be very careful and consider how experienced the teachers are and how much they can teach you before committing.
I have not attended the courses of those people you mentioned so I am unable to review.
Perhaps other readers who have attended those courses can comment?
In paragraph 2 under Property agencies and agents, you mentioned that estate agents charges 1% each to the buyer and seller for HDB flat transactions.
It should be 1% to the buyer and 2% to the seller for HDB flat transactions.
Thanks for your comment Vincent! Neither the HDB nor the IEA stipulates the commission to be paid, so it depends on the market and there are a range of commission levels being paid out depending on the individual transaction. I’ve changed the text to say 1-2% to the seller for HDB.
Yes I understand that there is no rule or stipulation regarding the amount of commission to be paid but currently that commission rate that I stated is what’s being commonly practiced in the market currently.
Thank you for the understanding and amendment Propwise!