By Joanne Chan | Posted: 25
December 2010 1713 hrs
SINGAPORE : The threat of a property bubble forming
in Singapore saw the government intervening in the market twice in
2010.
The slew of measures ranged from raising housing supply to
discouraging speculation.
National Development Minister Mah Bow Tan said this cautious
approach of incremental steps is to bring prices down to a
sustainable level, but not crash the market.
Property prices have shown few signs of slowing down since
rebounding in late 2009, following Singapore's recovery from the
global economic downturn.
A strong economy, low unemployment rate and liquidity from foreign
investors in 2010 pushed private property prices past the previous
peak in 1996.
In the public housing sector, prices in the resale market hit new
records as home buyers were swept away by positive market
sentiment.
The cash premium buyers pay upfront - also known as
cash-over-valuation (COV) - climbed to S$30,000.
To curb speculation, a seller's stamp duty was introduced in
February for property sold within a year of purchase.
The effective period was raised to three years during the second
round of changes in August.
The maximum loan amount buyers can take from financial institutions
was also reduced from 90 per cent to 70 per cent over the two
rounds of changes.
Unlike the previous property run when a capital tax - a tax on
profits made from selling private property - was introduced prior
to the market crash in 1996, this time round, the government is
taking small steps.
"We are not taking a big bang approach, but taking a very
calibrated approach to this. Why? Because we want to make sure the
market can be sustained... We also don't want the market to crash
because there will be other repercussions if that were to happen,"
said Mr Mah.
The cooling measures announced on August 30 appear to have achieved
some of its desired impact.
"Probably on the public housing market, but not so much on the
private side. I think the private side, we have been consistent.
But on the public housing market, I think the big change was when
we disallowed dual ownership of public and private property within
this minimum occupation period, which is now 5 years. Previously it
was 3 years," said Mr Mah.
While prices in the private market are still rising, the rate of
increase has slowed down.
Prices of private residential properties rose 2.9 per cent in the
third quarter, compared with a 5.3 per cent increase in the second
quarter.
The COV has declined gradually, dropping to S$22,000 in
November.
Observers said COV levels may eventually drop to S$10,000 to
S$20,000, as more housing supply come onto the market.
The government plans to release 22,000 new flats in 2011, depending
on the take-up rate.
HDB will also release land sites for another 4,000 flats under the
Design, Build and Sell Scheme (DBSS) and 4,000 Executive
Condominium units.
Chris Koh, director of the Dennis Wee Group said: "Sellers need to
be more realistic; this isn't like a year ago when you could ask
for COV as high as possible and people may grab it. I think buyers
are a lot wiser. And those who were really in need and desperate
would have bought.
"Now we are seeing the genuine buyers... It's no longer just
jumping onto the bandwagon. A lot of financial prudence is
exercised before actually buying.”
The government has indicated it will introduce more measures if
necessary to curb speculation.
But for now, it appears no further action will be taken as it
monitors the impact of the latest round of measures.
The National Development Minister said it will be a few more months
before the full extent of the August changes are felt.
- CNA /ls
