From iTODAY: Govt announces slew of new property cooling measures

Neo Chai Chin | 12 Jan, 2013 6:00 AM

Combination of temporary and structural measures to halt ‘prices running away from fundamentals’

SINGAPORE – Three months after the last round of property cooling measures, the Government yesterday announced its most sweeping measures to date to halt “prices running away from fundamentals”.

A combination of temporary and structural measures, they apply mainly to the residential market, but also include an intervention to tamp short-term speculation in the industrial market.

The temporary measures apply to residential property buyers from today. Additional Buyers’ Stamp Duty rates will be raised between 5 and 7 percentage points across the board, and will now be imposed on foreigners, permanent residents buying their first property and Singaporeans buying their second and beyond.

The revised rates range from 7 to 10 per cent for Singaporeans buying their second property and beyond, 5 to 10 per cent for permanent residents, and 15 per cent for foreigners.

First-time buyers who are citizens, as well as Singaporean buyers of HDB flats, will not pay the ABSD.

Also temporary are loan-to-value limits on housing loans granted by banks to companies and those who already have one or more outstanding loans.

From today, the limit for individuals obtaining a second housing loan will be 50 per cent, down from 60 per cent. For those whose loan tenures exceed 30 years or whose loan periods extend beyond the borrower’s retirement age of 65, the limit for the second housing loan is now 30 per cent, down from 40 per cent.

The minimum cash downpayment for individuals applying for second or subsequent housing loans will also be raised from 10 per cent, to 25 per cent of the valuation limit.

The package of measures announced yesterday evening is the seventh round of property cooling measures introduced since 2009. It also sparked long queues at one showroom in Sengkang, as the development brought forward its launch date after the measures were announced.

Asked how much the Government would like to see prices soften before the measures are reviewed, Deputy Prime Minister Tharman Shanmugaratnam said he would not want to be drawn into providing a number. “This is not a science. I think we’ve assessed that prices have run too far and some softening will not be a bad idea. We don’t intend to engineer a market crash,” he said.

In a press conference co-chaired with National Development Minister Khaw Boon Wan yesterday, Mr Tharman, who is also Finance Minister, said underlying demand remains strong and has increased in the last year, due to “extraordinarily” low interest rates globally.

“This is not speculative demand; this is real investment demand,” he said, adding that previous cooling measures have “squeezed” speculative demand out of the residential market.

“The more prices run away from fundamentals, the more the distance they have to come down later on. So we’ve got to put in these road barriers now to slow the market and avoid a crash later on.”

Asked if the timing of the announcement had anything to do with the coming Punggol East by-election, Mr Tharman said the authorities had been studying the issue for a few months and had measures ready a few weeks ago. When the numbers for the final quarter of last year kept their upward trend, the Government made its move.

Flash estimates released last week showed prices of HDB resale flats rising at their fastest pace for the year, while private home prices grew 1.8 per cent in the last quarter, boosted by strong demand for mass-market condominiums.

Structural measures rolled out from today include new regulations for Executive Condominium (EC) developers, as well as tighter eligibility for loans to buy HDB flats, and new restrictions on Permanent Residents (PRs) who own HDB flats. PRs will no longer be allowed to sublet their entire flat once existing tenancies expire – a move that affects the 2,300 households that now do so – and those who purchase private residential properties must sell their HDB flat within six months.

In the industrial property sector, where speculation has increased and prices have doubled over the last three years, a Sellers’ Stamp Duty – ranging from 5 to 15 per cent – will now be imposed on industrial properties and land bought and sold within three years of the date of purchase.

Property analysts noted the extent of yesterday’s announcement, with PropNex chief executive Mohamed Ismail calling it the “tsunami of all cooling measures” so far, tackling the “full spectrum of public housing, EC, private market, as well as industrial property”.

Said PropertyGuru Group chief executive Steve Melhuish: “In the context of a flagging global economy and Singapore economy, plus the large supply which will come onto the market in the next 24 months, this could be the tipping point for a property market correction.”

The Real Estate Developers Association of Singapore said it would evaluate the impact of these measures on the sustainability of the property market, adding that it remains confident that Singapore’s property market will continue to be underpinned by sound economic fundamentals and a favourable business environment. – Additional reporting by Wong Wei Han