Are Singapore home prices about to ease, finally ?

With HDB buyers now likely to cut their budgets, David Neubronner, national director for residential property at Jones Lang LaSalle Property Consultants, expects the hardest hit by the new measures will be sellers of the largest HDB flats.

“Those are the most likely to buy the mass-market private condominiums. The effect will run through the private market,” he said.

But will permanent residents denied the HDB market seek out private housing? It’s unlikely, Neubronner said, noting that private mass-market flats are likely too expensive.

(Read more: Is the heat off Asia’s hottest property market?)

That also means the latest measure is unlikely to affect the high-end segment, he added, as the price differential between HDB and luxury homes is often in the millions of dollars.

Price correction?

Even before Tuesday’s measures, analysts were expecting Singapore’s property prices to take a hit from the government’s previous efforts, which included limiting mortgage sizes to keep borrowers at a total debt servicing ratio of 60 percent of monthly income.

“The last measure that was introduced is a killer” for the private market, Kevin Scully, executive chairman at NRA Capital, said before the new HDB restrictions were announced.

He was referring to the last round of measures announced in June which included increasing down payments for borrowers with more than one mortgage, limiting loan-to-value ratios and imposing additional stamp duties on purchases.

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Scully expects property investors will start looking overseas or seek more “bite-sized” investments rather than enter Singapore’s physical market.

“With the rise in rates globally, their financing cost will go up. It’s going to be hard for them to find buyers. That will lead to a selloff in the secondary market,” he said. He expected a possible 20 percent correction.

Still, not everyone expects the latest measures to have much impact. “These measures are likely to impact marginal buyers with little effect on overall resale transactions,” George Koh, an analyst at OSK-DMG, said in a note.

He expects the restrictions on permanent residents to send demand into the private residential market, either via rentals or purchases. “This bodes well for the private market over the medium term,” he added.

Are Singapore home prices about to ease, finally ?