Singapore’s government announced a fresh round of cooling measures for the property market, in a move that came a day after the central bank chief appeared to indicate no steps were immediately planned.
“The sharp increase in prices, if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply,” the Ministry of Finance, the Monetary Authority of Singapore and the Ministry of National Development said in a joint statement on Thursday.
That came a day after MAS chief Ravi Menon said in a speech only that the three bodies were “closely monitoring developments in the residential property market.”
But the action come on the heels of preliminary data earlier this week from the Urban Redevelopment Authority showed Singapore’s private residential property index climbed 3.4 percent on-quarter in the second quarter, following a 3.9 percent rise in the first quarter.
The fresh measures, which take effect on 6 July, targeted the additional buyer’s stamp duty (ABSD) and loan-to-value limits.
Additional buyers’ stamp duty
The government raised the ABSD for individuals who are not citizens and and are not permanent residents and for entities, it said.
For affected individuals, the ABSD will go up by 5 percentage points and for entities, it would rise by 10 percentage points, it said.
An additional ABSD was also introduced for developers which are purchasing residential properties for housing development, it said.
That appeared to be aimed at the nearly record high number of en bloc sales so far this year. En bloc sales tend to push up property prices by raising sellers’ pricing expectations in general, removing housing supply from the market in the near term, and spurring both the tenants and homeowners of en bloc buildings to seek out new units quickly.
So far this year, there have been 34 en bloc deals with a total value of S$10.1 billion, surpassing last year’s S$8.2 billion from 28 sites, but still below the record high of S$11.4 billion in 2017, according to a note from RHB earlier this week.
Additionally, the new measures raised loan-to-value limits by 5 percentage points for all housing loans from financial institutions, it said, but noted this wouldn’t apply to loans from the Housing and Development Board (HDB), which gives loans to buyers of public housing flats.
For example, for a first housing loan, the existing rule is an 80 percent loan-to-value limit, while the new rule would require a 75 percent LTV. For a second housing loan, the LTV was 50 percent under the existing rules, but will now fall to 45 percent.
The new measures are in addition to the previous series of steps by the government to cool the market, many of which are still in force.
The city-state began implementing a series of cooling measures starting from 2011 as low interest rates globally spurred an inflow of funds into the property market. That had sent Singapore’s housing prices surging more than 60 percent between 2009 and 2013, sparking fears a bubble might be forming in a market that has a long memory of the late 1990s Asian Financial Crisis and the resulting property crash.
That resulted in an around 11.6 percent decline in property prices from mid-2013 through mid-2017, when they began to rise again, climbing around 9.1 percent from their trough in the second quarter of 2017.