New Singapore Property Market Cooling Measures

Five months after the last measures, Singapore government announced new property market cooling measures on January 14th 2011. These measures, 4th in the last 16 months, "are tough but they are meant to stabilise home prices and not necessarily intended to cause them to crash" according to the National Development Minister Mah Bow Tan. Mr. Tan also mentioned that "the measures may not be the last but also are not permanent, and once they are no longer necessary, they will be removed". [1]

What are the new property cooling measures in Singapore? Here is the list:

1. Holding period for imposition of Seller's Stamp Duty (SSD) increased from three to four years.
   
2. SSD rates raised to 16 per cent, 12 per cent, 8 per cent and 4 per cent for homes bought today and thereafter and which are sold in the first, second, third and fourth year, respectively.
   
3. Loan-To-Value (LTV) limit lowered to 50% on housing loans for property purchasers who are not individuals.
   
4. LTV limit lowered from 70 per cent to 60 per cent for individual property purchasers with one or more outstanding housing loans.

New measures may be directly targetting flipping, purchasing a property and quickly reselling (or "flipping") it for profit. Of the new measures, one of the harshest was on sellers' stamp duty - which went up to a maximum 16 per cent on property sold within the first year, a jump from 3 per cent previously. Banks will also reduce the maximum loan to those who already have one or more mortgages to 60 per cent of the property value. These measures are a direct hit to the profit margin of flippers.[2]

The aim is obviously to lower the demand that's been driving prices up. But in short term these measures may lead the flippers to hold their properties and lower the supply and drive the prices up.

Loft@Holland - Source: Hot New Property

In TODAYOnline Esther Ng and Cheow Xin Yi point out the timing of the announcement:

"The timing of the announcement - days before December home sale figures will be released - suggests that the Government may be concerned about the property prices seen between September and last month, according to Cushman & Wakefield managing director Donald Han.

While prices seem to have stabilised compared to the first half of last year, a rise in sales volumes, as seen in November, would have an upward effect on prices, said Mr Han, who suspects that there was also an aggressive take-up in December.

Mr Mak said that his firm's research showed that subsales, as a percentage of total residential transactions, have been falling since the second quarter of 2009, from 14 per cent then to 9 per cent most recently.

"Since short-term property speculation is not at a problematic level, the latest round of Government intervention could be prompted by other factors, such as strong demand for residential properties due to high level of liquidity," he said.

For those who are looking to flip property for a quick buck, however, Mr Mak said they may be deterred by the move to increase the duration, from the current three years to four years, in which the Seller's Stamp Duty applies."[3]

Will property prices fall in 2011 in Singapore? Will these measures be effective to cool the property market? Well, it is early to talk. Even after 3 cooling measures (last announced in August 2010) November sales were still strong with 1900 units, the most in seven months. Property transactions reached an unprecedented level in the first 11 months of 2010 as developers sold 15,025 properties, according to preliminary data from the government. That exceeded the high of 14,811 homes in 2007.[4] But on the other hand, it looks like we are at a peak in the property price markets and price rise is slowing (See Singapore property price rise slows) and Singapore Government is aggressively using its power to cool the market.

“December sales would be as aggressive as the November numbers,” Han said. “The tide is coming onto the shores of places like Singapore, China and Hong Kong, and it’s hard to stop the tide with low interest rates. The only way is to pump in regular measures like what we’ve seen.”[4]

According to The Straits Times first-time buyers are smiling now because they are optimistic that prices will now fall enough to allow them to get onto the private property ladder.[5] We think it is too early to smile. Market forces are still strongly pushing sales and prices up. We need to see how the markets, which had no significant reaction to the previous measures, will react to these new measures in the following months.

[1] - Measures tough but meant to stabilise: Mah Bow Tan
[2] - Property cooling measures hit private property market 
[3] - New cooling measures but ...
[4] - Singapore Extends Housing Measures; Developers Drop
[5] - Property measures cool sentiments