CNA : Government to introduce new tax, lower loan limit to cool private property market

Government to introduce new tax, lower loan limit to cool private property market
By Mustafa Shafawi, Channel NewsAsia | Posted: 19 February 2010 1752 hrs

SINGAPORE: The Government has introduced two new measures that will take effect Saturday to temper sentiments and pre-empt a property bubble from forming in the private residential market.

It said they will help to ensure a stable and sustainable property market.

The first is a Seller's Stamp Duty on all residential properties and residential lands that are bought after Friday and sold within one year from the date of purchase. The stamp duty will be applied at the standard ad valorem stamp duty rates for the conveyance, assignment or transfer of property.

Housing and Development Board (HDB) flats will not be subjected to the stamp duty as they are already subject to a minimum occupation period of at least one year.

The Ministry of National Development (MND) said the objective of this new tax measure is to discourage short-term speculative activity that could distort underlying prices. It stressed that it is not targeted at the purchase of properties for owner occupation or longer term investment.

The housing loan limit will also be capped at 80 per cent of the private property's value, instead of the current 90 per cent. Loans granted by the HDB for flats - including those under the Design, Build and Sell Scheme - will still have a cap of 90 per cent.

MND said this is because HDB flats are already subject to other criteria to prevent speculation and encourage financial prudence, such as minimum owner occupation period and restriction on ownership to one flat per household.

Explaining the rationale for the measures, MND said there is a risk that the market could overheat in the next few months, given the optimism fuelled by the economic recovery and low global interest rates.

However, it noted that the current level of speculative activity is still lower than what it was at the height of the property market boom. Overall price levels are below the previous peak.

MND warned that any excessive exuberance will make the property market vulnerable to the continuing risks in the global economy.

The Government described the new measures as "calibrated", saying it prefers to take small steps early, rather than be forced to impose more drastic measures after a bubble has formed.

It will continue to ensure that there is adequate supply of housing to meet demand. Sites that can yield 10,550 private housing units have already made available in the Confirmed and Reserve List of the Government Land Sales (GLS) Programme in the first half of 2010.

This is the highest supply quantum in the history of the GLS Programme.

- CNA/sc