Recent measures aimed at cooling speculation were intended to prevent a risk of property bubble formation that the Singapore government believe may emerge in the market.
National Development Minister Mah Bow Tan said the property market has become “a little exuberant of late”. The government recently imposed stamp duty on properties held for below three years and raised downpayments for second mortgages.
Singapore joins China and Hong Kong in trying to cool its property market after its $182-billion economy recovered from the global downturn last year. Private residential prices in the country have increased for four consecutive quarters, with the index measuring them hitting a record in Q2.
“There is a danger of a property bubble forming given the strong momentum of the market and a likely slowdown in the pace of economic growth as well as the economic uncertainties ahead,” said Mr. Mah. “The measures are aimed at reducing the level of speculative demand in the market and encouraging financial prudence.”
Singapore has been trying to curb home prices since 2009 when the government prevented developers from absorbing interest payments for apartments that are still being constructed and prohibited interest-only loans for some housing projects.
According to the URA, 14,688 homes were sold in 2009, slightly lower than the 14,811 homes sold in 2007. Transactions totalled to 1,248 units in August from 1,549 units a month earlier, after over 8,400 units sold in the first half of the year.
Buyers with more than one mortgage can borrow up to 70 percent of the value of the property, down from 80 percent, as well as pay 10 percent in cash, up from the previous 5 percent. A seller’s stamp duty will also apply to all residential land and units sold within three years of acquisition, up from the earlier one-year period.
“There will be upgraders or investors who may be deterred from buying at this point because of the new measures,” said Mr. Mah. “However, given the current state of the market, where there is ample public and private housing supply in the pipeline and the prevailing momentum of prices, these measures are timely.”