(SINGAPORE) After two recent warnings that it was keeping a close eye on things heating up in the private housing sector, the government yesterday announced cooling measures to 'temper the exuberance in the market and pre-empt any speculative bubble from forming'.
The Confirmed List land sales will be reintroduced from the first half of next year. The interest absorption scheme (IAS) that helped revive home sales earlier this year after the global financial crash has been scrapped with immediate effect.
While some of the measures had already been anticipated by major developers, property veterans were still a bit taken aback by the speed of the response. In particular, the demand-side measures - disallowing the IAS and the similar interest-only housing loans (IOL) with immediate effect - were expected only later. In addition, the property business has visibly quietened down at showflats over the past two weekends - indicating that buyer fatigue was setting in.
The Ministry of National Development (MND) said that 'the government has introduced these measures now, because there are signs of increased speculative activity and private housing prices have also increased significantly since June 2009'.
MND added that a sample survey of recently launched projects showed that the take-up rate of the IAS was about 20-25 per cent.
Announcing the measures in Parliament yesterday, National Development Minister Mah Bow Tan warned that the government would continue to monitor the property market closely and would introduce additional measures if required.
The government will also do away with five assistance measures extended to developers in Budget 2009 earlier this year when they expire, mainly in January 2010. The measures include allowing developers more time to complete their housing projects, permitting re-assignment of government sale sites and giving up to two years of property tax deferral for land under development.
Collectively, the measures are expected to reduce home sales and dampen prices. Mr Mah noted that developers sold about 10,000 private homes in the first seven months of this year - more than double the 4,300 units sold in the whole of 2008.
'The measures will generally bring more supply quickly to the market and that will dampen the buying frenzy,' said Wheelock Properties (Singapore) CEO David Lawrence. 'It will be slightly depressing on home prices.'
Market watchers also expect the measures to help weed out speculators.
'People will pause and review their home-buying decisions,' said Ho Bee executive director Ong Chong Hua. 'It will also provide a reality check for developers that have raised prices too aggressively.'
Mr Mah observed in Parliament: 'We are currently seeing signs of heightened speculative activity, although the level of speculation is not yet extreme.'
His ministry will resume selling land under the confirmed list in H1 2010. Such land sales - which were suspended in October last year - mean selling land parcels on scheduled dates, which could translate to more residential property launches.
Mr Mah said the government will also offer sites for executive condos (a hybrid between public and private housing) in the H1 2010 confirmed list to provide more housing choices. The government will also increase supply on the reserve list - where sites are launched only upon successful application - for H1 2010 to meet possible increase in demand.
'With reinstatement of the confirmed list and more sites on the reserve list, the public can be assured that there will continue to be a steady supply of private housing,' said Mr Mah.
Ho Bee's Mr Ong said: 'To some extent, developers will look forward to government releasing land as it will relieve pressure on high land prices seen lately at tenders for reserve list sites.'
The IAS and IOL are being disallowed as 'these schemes could encourage property speculation in a buoyant market where prices are rising rapidly, as they are forms of housing loans that entirely eliminate or substantially lower regular instalment payments for property purchasers in the first few years before the properties are completed', noted a government statement.
The exception is for uncompleted private residential projects where units had already been offered for sale under IAS before yesterday.
The Real Estate Developers Association of Singapore (Redas) said that the need for IAS and IOL has diminished given the relatively firmer market now. IAS was offered when the property market was facing challenging economic conditions during the global financial meltdown.
'This change is unlikely to have any significant impact on developers' future launches,' Redas said.
Property counters retreated yesterday on the news. CapitaLand fell 3.9 per cent, City Developments shed 7.6 per cent and Keppel Land ended the day 6 per cent lower.
Source: Business Times, 15 Sep 2009
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