ST : New measures to curb property speculation

13 Jan 2011,
new property curbs

New measures to curb property speculation

Govt steps in for fourth time in two years, catching many by surprise

By Esther Teo

A CHILL is set to descend on Singapore's property market after the Government unveiled tough new measures yesterday that analysts say will effectively kill off short-term speculation and make most property investors look before they leap.

They include hiking seller's stamp duty to a new maximum of 16 per cent, up from 3 per cent previously, and making it payable for up to four years from the date of purchase of a property.

Anyone with an existing home loan looking to buy a second property for investment will also now need to fork out more cash and Central Provident Fund savings.

That is because the loan limit for such properties is now 60 per cent of the property's value, down from 70 per cent previously.

The measures take effect today.

Yesterday's announcement marked the fourth time in less than two years that the Government has stepped in to cool the property market here.

It caught many by surprise, since it comes barely five months after tighter financing and ownership rules were announced on Aug 30 last year.

In its statement, the Government said that while these previous measures had to some extent moderated the market, sentiment remained buoyant.

'Low interest rates plus excessive liquidity in the financial system - both in Singapore and globally - could cause prices to rise beyond sustainable levels based on economic fundamentals,' it added.

'Moreover, when interest rates eventually rise, it could strain purchasers who have over-extended themselves financially.'

Even as the Government moved to temper exuberance in the market, homes were flying off the shelf.

Local developer Oxley Holdings separately announced yesterday that its 41-unit Loft@Holland condominium was sold out within two hours of its soft launch at prices from $1,630 per sq ft to $2,166 per sq ft.

'Demand was strong enough to require balloting to be conducted for all but two units,' it added. 'On average, there were about three interested buyers per unit.'

The seller's stamp duty was first introduced in February last year. Its impact is especially significant because it is payable regardless of whether the property is sold at a gain or loss.

The Government also introduced a new rule that will see institutions such as corporations, trusts and collective investment schemes face tighter financing rules.

The loan limit will be lowered to 50 per cent on housing loans granted to property purchasers of such types who are 'not individuals or natural persons'. There was no rule specific to this class of investors previously.

But these tighter rules will not apply to loans granted to property developers for en bloc sales or land zoned for residential purposes, the Monetary Authority of Singapore said.

Although the new measures have been introduced to cool the market in general and encourage greater financial prudence among home buyers, some property buyers will remain unaffected.

First-time buyers, as well as property owners without outstanding home loans, continue to be able to borrow up to 80 per cent of the value of the property.

Private home prices climbed 17.6 per cent last year as a record 15,025 new homes were sold in the first 11 months of the year.

A surfeit of liquidity and low borrowing rates have also fuelled concerns that asset bubbles are forming not just in Singapore but in regional economies like Hong Kong and China.

In November, Hong Kong announced some of its toughest-ever measures to cool the property market, applying a stamp duty of as high as 15 per cent on apartments sold within six months of purchase.

Downpayments for homes costing HK$12 million (S$2 million) or more also rose to 50 per cent, from 40 per cent previously.

Sounding shell-shocked, industry players said the market will probably react in a knee-jerk manner.

Buying interest will dry up initially and new property launches will slow down as the market digests the news.

Ms Tay Huey Ying, director of research and consultancy at Colliers International, expects home buyers to be on their guard, leading to a fall in sales volume in the short term before possibly recovering later.

She has revised her price growth forecast for this year down from 10 per cent to between 5 and 8 per cent.

The Real Estate Developers' Association of Singapore (Redas) said that the measures will discourage speculative demand and will encourage longer-term holding of properties, contributing to the stability of the market.

'It is in the interest of the market to see a more gradual trend in growth and value for genuine home owners and investors,' it said.

Ms Valerie Lee, 24, a first-time buyer looking for a private home, welcomed the new measures, saying that property prices have remained out of her reach even after the Aug 30 measures were introduced.

'As a genuine buyer, I think it's a good move,' said the executive in a utility and energy company. 'The property price index is still going up, so hopefully these new measures will work and be substantial enough to keep speculators away. I'm hoping that prices will come down.'

esthert@sph.com.sg

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Sounding shell-shocked, industry players said the market will probably react in a knee-jerk manner. Buying interest will dry up initially and new property launches will slow down as the market digests the news.