Yesterday, the government of Singapore announced cooling measures to prevent any speculative bubble from forming and temper the exuberance in the market after the two recent warnings about the rising intensity in the private housing sector.
From the first half of next year, the Confirmed List land sales will be introduced again. The Interest Absorption Scheme (IAS), which aided to revive earlier this year the home sales after the financial crash that the entire world had experienced, was immediately scrapped.
While major developers had already expected some of the measures, the speed of the response surprised the property veterans. Over the past two weeks, the property business had apparently silenced down at showflats, which indicated that buyer fatigue was already setting in.
Based on the Ministry of National Development (MND), due to the signs of increasing speculative activity and the significant growth in private housing prices since June 2009, the government began to introduce the cooling measures. The MND also explained that the recently launched projects’ sample survey showed that the IAS take-up rate was approximately 20–25 percent.
Yesterday, Mah Bow Tan, the National Development Minister, announced the measures in the Parliament, warning the government to closely monitor the property market, and if necessary, introduce additional measures.
The measures will include providing the developers with enough time to fulfil their housing projects, giving land under development until two years of property tax deferral and allowing re-assignment of government sale sites.
Collectively, it is the goal of the measures to dampen prices and reduce home sales. Mr Mah noted that in the first seven months of 2009, developers had sold around 10,000 private homes, higher than the 4,300 units that had been sold in the whole year of 2008.
According to David Lawrence, the CEO in Wheelock Properties (Singapore), the measures will generally dampen the buying frenzy and quickly bring more supply to the market. The market watchers are also expecting that the measures will help remove speculators.
Ong Chong Hua, executive director of Ho Bee, said, "People will pause and review their home-buying decisions".
”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,” Mr. Ong added.
Based on the statement of the government, the IOL and IAS are being disallowed because in a buoyant market where prices are rapidly rising, such schemes can encourage property speculations.
According to the Real Estate Developers Association of Singapore (REDAS), given the present relatively firmer market, the need for IOL and IAS had already begun to diminish. ”This change is unlikely to have any significant impact on developers’ future launches,” said REDAS.
Yesterday, the property counters retreated on the news. Keppel Land ended the day 6 percent lower; City Developments dropped 7.6 percent and CapitaLand fell 3.9 percent.