Cooling measures to stabilise prices: Mah Bow Tan

Cooling measures to stabilise prices: Mah Bow Tan

By Alicia Wong – January 14th, 2011




The new property-cooling measures are believed to target short-term speculation. (Photo: Yahoo!)

Minister of National Development Mah Bow Tan clarified on Saturday that the new property market cooling measures announced last Thursday were meant to stabilise home prices, and not to lower them, reported The Sunday Times.

He also hinted that the measures introduced may not be the last, adding that the government will continue to monitor the situation and act if necessary.

Mr Mah admitted that the new sellers’ stamp duty of up to 16 per cent could become a problem if property owners need to urgently sell their property shortly after purchasing it.

However, he was quick to add that if owners had a mitigating reason to sell their home, such as for medical reasons, the Government was prepared to be flexible.

“You cannot formulate policy that satisfies everyone in a group,” said Mr Mah.

“What you can do is to have a general policy and where there are genuine cases, take them offline and consider appeals as and when they come in,” he added.

This is the fourth time in less than two years and barely five months, after tighter financing and ownership rules were announced, that the government has stepped in to cool the property market.

Speaking on the sidelines of a bursary presentation ceremony in Tampines on Saturday, Mr Mah said that the Government felt it had to act pre-emptively after the market showed signs of picking up.

“There are signs that the economy is not going to be as strong as last year. Interest rates are not going to remain at these low levels forever,” he told The Sunday Times.

“So for people who are looking at investment properties or those who are upgrading, the question is if this is the right time for them to buy. Are they able to afford the repayments when interest rates go up?” he added.

According to analysts, these measures, which took effect on Friday, were targeted at short-term speculation.

Some changes include hiking sellers stamp duty to a maximum of 16 per cent, up from 3 per cent, and making it payable for up to four years from the date of purchase of a property.

Those with an existing home loan looking to buy a second property for investment will also have to fork out more cash and Central Provident Fund savings since the loan limit for such properties is now 60 per cent of the property’s value, from the previous 70 per cent.

First-time buyers and property owners without outstanding home loans can still borrow up to 80 per cent of the value of the property.

In a statement, the government said previous measures had moderated the market to some extent but sentiment remained buoyant, reported The Straits Times.

“’Low interest rates plus excessive liquidity in the financial system – both in Singapore and globally – could cause prices to rise beyond sustainable levels based on economic fundamentals,” it said.

“’Moreover, when interest rates eventually rise, it could strain purchasers who have over-extended themselves financially.”

Proof of a buoyant property market could be seen on Thursday with local developer Oxley Holdings announcing that its 41-unit Loft@Holland condominium sold out within two hours of its soft launch.

Prices ranged from $1,630 per sq ft to $2,166 per sq ft.

Institutions will also see tighter financing rules arising from the latest batch of cooling measures, said ST.

The loan limit will be lowered to 50 per cent on housing loans granted to property purchases of such types who are “not individuals or natural persons”. There were no rules specific to this class of investors previously.

Property developers for en bloc sales or land zoned for residential purposes will be exempted from these tighter rules, the Monetary Authority of Singapore said.

Industry players believe buying interest will dry up initially and new property launches will slow down.

Property consultancy International Property Advisor’s (IPA) chief executive Ku Swee Yong described the move as a ‘sledgehammer’ that came as a surprise to the industry.

‘Many of our clients who are genuine investors are now re-assessing their loans situation. The market will be frozen stiff for a while,’ he said.

Developers may also have to reduce their asking price, and may drop them by 1 to 2 per cent to test the market, he added.

He added, the stamp duty will “cripple” sellers who buy private property (from Friday onward) but need to dispose of them in the short-term, such as those who have suffered losses in business or fallen critically ill.

The Sunday Times reported that the cooling measures seemed to have worked, as showflats they visited on Saturday were much quieter and agents reported a fall in buyer interest.

The potential buyers who did turn up said they were looking around, hoping that prices had been lowered.

Marketing executive Jenna Yong, 29, who was at the Cascadia showflat in Bukit Timah on Saturday, told The Sunday Times, “(My fiance and I) are not planning to commit to a purchase any time soon as we think prices an move only one way now — down.”

New Measures:

Increase the holding period for imposition of Seller’s Stamp Duty (SSD) from the current three years to four years.
Raise the SSD rates to 16 per cent, 12 per cent, 8 per cent and 4 per cent for residential properties bought from Friday onward, and which are sold in the first, second, third and fourth year of purchase respectively.
Lower the Loan-To-Value (LTV) limit to 50 per cent on housing loans for property purchasers who are not individuals.
Lower the LTV limit on housing loans from 70 per cent to 60 per cent for property purchasers who are individuals with one or more outstanding housing loans.