Measures to cool market

THE Government has announced what it called two ‘calibrated’ measures to cool the exuberance in the private residential market and prevent a property bubble from forming.

From Saturday, it will introduce a seller’s stamp duty on all residential properties and lands that are bought after today and sold within one year from the date of purchase, and lower the housing limit to 80 per cent of the total purchase price.

These new steps came less than six months after the Government introduced a set of measures to temper the exuberance in the private residential market last September.

‘While the September 2009 measures helped to cool the property market, there are recent signs that it is starting to heat up again,’ said a joint statement from the Ministry of National Development, Finance Ministry and the Monetary of Singapore.

Demand for private housing units spiked sharply in January, with the the number of units sold by developers tripling that in December, and making it the highest monthly total since last September. Prices have also risen sharply in the second half of 2009, at a faster rate compared to previous rebounds from the troughs of property cycles.

There was no let up in the January price increases. Mortgage lending also soared by around 12 per cent year-on-year through 2009, said the statement.

‘While the current level of speculative activity in the market is still lower than what it was at the height of the property market boom, and overall price levels are below the previous peak, there is a risk that the market could overheat in the next few months, fuelled by low global interest rates and positive sentiments associated with the economic recovery.

‘Any excessive exuberance will make the property market vulnerable to the continuing risks in the global economy. Should growth turn out weaker than expected, property buyers and speculators could face capital losses as the market corrects. Conversely, if the recovery stays on course, interest rates will eventually rise and drive up financing costs with severe implications for those who have overextended themselves.

‘Therefore, the Government has decided to introduce calibrated measures now to temper sentiments and pre-empt a property bubble from forming.

‘We will tighten the supply of credit to the housing market to encourage greater financial prudence among property purchasers. The Government prefers to take small steps early, rather than be forced to impose more drastic measures after a bubble has formed.’

Source: Straits Times, 19 Feb 2010