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Singapore Plans More Housing Curbs as Prices Rise to Record
By Shamim Adam - Jan 13, 2011
Singapore raised down payment requirements for second mortgages and boosted sales taxes to curb property speculation, sending shares of the city’s biggest developers down the most in at least 11 months.
Individuals with more than one mortgage can borrow up to 60 percent of a property’s value, down from 70 percent, while the stamp duty on homes and land sold within one year will rise more than fivefold, the government said in a statement yesterday.
CapitaLand Ltd. and City Developments Ltd. fell more than 3 percent on concern the government’s intensified efforts to cool record home prices will dent sales. Singapore follows Hong Kong in raising sales taxes and loan restrictions as economies across Asia seek to damp the threat of asset bubbles caused by capital inflows and low interest rates.
“The government is erring on the side of caution,” said Donald Han, Singapore-based managing director at Cushman & Wakefield, the world’s largest closely held real estate services company. “We need to monitor this because history has shown that some of these measures lasted only two to three months, and the market comes right back to full life again.”
Singapore private home prices climbed to a record as the nation’s fastest economic growth since independence in 1965 overwhelmed government measures to cool the market. Attempts to rein in prices started in 2009 when interest-only loans for some housing projects were barred and developers were barred from covering interest payments for apartments still being built.
Stocks Slide
Singapore’s Straits Times Real Estate Index fell as much as 1.5 percent, with 27 index members out of 38 falling as of 10:23 a.m. local time. CapitaLand, Southeast Asia’s biggest developer, declined as much as 3.9 percent and was 3.1 percent lower at S$3.72, the biggest decline since February 2010. City Developments declined as much as 5.2 percent and recently fell 4.1 percent lower at S$12.22, the most since October.
Singapore joins markets across Asia that added measures to curb property speculation driven by low interest rates. Singapore’s three-month interbank rate fell to 0.43751 percent on Jan. 3, the lowest since Bloomberg began compiling the data in 1999. It was at 0.43779 percent yesterday.
Hong Kong imposed additional taxes and higher down payments in November after home prices climbed more than 50 percent since the beginning of 2009. China, battling at least 18 months of price increases, suspended third mortgages and raised interest rates for the first time in three years.
Singapore’s homeowners who sell a property within a year of purchase will now have to pay a tax of 16 percent, from 3 percent before. That drops to 12 percent in the second year, 8 percent in the third, and 4 percent in the final year. The government also said it will take further steps if necessary.
Buoyant Sentiment
On loans to entities other than individuals, the loan cap will be reduced to 50 percent from 60 percent.
While Singapore’s private home prices climbed 2.7 percent to a record in the fourth quarter from the previous three months, the increase was the smallest in six quarters, government data showed. Han said he expects the gain in home prices to cap at 5 percent this year with the latest curbs, from an earlier estimate of as much as 12 percent.
“Previous government measures have to some extent moderated the market, but sentiments remain buoyant,” according to the statement yesterday. “The government has decided to introduce additional targeted measures to cool the property market and encourage greater financial prudence.”
“The seller’s stamp duty rates will be increased sharply so as to provide a strong disincentive for investors looking to make short term gains,” the government said. The seller’s stamp duty is payable regardless whether the property is sold at a gain or loss, it added.
Caught by Surprise
Singapore in February last year said it will levy a seller’s stamp duty on all residential properties and land that are sold within one year from the date of purchase. That was increased to three years in August, when the government also raised down payments for second mortgages.
“This new round of cooling measures will adversely affect sentiment in the property market in the coming months,” said Nicholas Mak, an executive director at SLP International Property Consultants in Singapore. “They could also catch many investors who had bought residential properties in the last two years by surprise. Some of the buyers could be investors who are banking on rising property prices to make a quick profit.”
Private residential sales in November rose 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.
“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.”
By Shamim Adam - Jan 13, 2011
Singapore raised down payment requirements for second mortgages and boosted sales taxes to curb property speculation, sending shares of the city’s biggest developers down the most in at least 11 months.
Individuals with more than one mortgage can borrow up to 60 percent of a property’s value, down from 70 percent, while the stamp duty on homes and land sold within one year will rise more than fivefold, the government said in a statement yesterday.
CapitaLand Ltd. and City Developments Ltd. fell more than 3 percent on concern the government’s intensified efforts to cool record home prices will dent sales. Singapore follows Hong Kong in raising sales taxes and loan restrictions as economies across Asia seek to damp the threat of asset bubbles caused by capital inflows and low interest rates.
“The government is erring on the side of caution,” said Donald Han, Singapore-based managing director at Cushman & Wakefield, the world’s largest closely held real estate services company. “We need to monitor this because history has shown that some of these measures lasted only two to three months, and the market comes right back to full life again.”
Singapore private home prices climbed to a record as the nation’s fastest economic growth since independence in 1965 overwhelmed government measures to cool the market. Attempts to rein in prices started in 2009 when interest-only loans for some housing projects were barred and developers were barred from covering interest payments for apartments still being built.
Stocks Slide
Singapore’s Straits Times Real Estate Index fell as much as 1.5 percent, with 27 index members out of 38 falling as of 10:23 a.m. local time. CapitaLand, Southeast Asia’s biggest developer, declined as much as 3.9 percent and was 3.1 percent lower at S$3.72, the biggest decline since February 2010. City Developments declined as much as 5.2 percent and recently fell 4.1 percent lower at S$12.22, the most since October.
Singapore joins markets across Asia that added measures to curb property speculation driven by low interest rates. Singapore’s three-month interbank rate fell to 0.43751 percent on Jan. 3, the lowest since Bloomberg began compiling the data in 1999. It was at 0.43779 percent yesterday.
Hong Kong imposed additional taxes and higher down payments in November after home prices climbed more than 50 percent since the beginning of 2009. China, battling at least 18 months of price increases, suspended third mortgages and raised interest rates for the first time in three years.
Singapore’s homeowners who sell a property within a year of purchase will now have to pay a tax of 16 percent, from 3 percent before. That drops to 12 percent in the second year, 8 percent in the third, and 4 percent in the final year. The government also said it will take further steps if necessary.
Buoyant Sentiment
On loans to entities other than individuals, the loan cap will be reduced to 50 percent from 60 percent.
While Singapore’s private home prices climbed 2.7 percent to a record in the fourth quarter from the previous three months, the increase was the smallest in six quarters, government data showed. Han said he expects the gain in home prices to cap at 5 percent this year with the latest curbs, from an earlier estimate of as much as 12 percent.
“Previous government measures have to some extent moderated the market, but sentiments remain buoyant,” according to the statement yesterday. “The government has decided to introduce additional targeted measures to cool the property market and encourage greater financial prudence.”
“The seller’s stamp duty rates will be increased sharply so as to provide a strong disincentive for investors looking to make short term gains,” the government said. The seller’s stamp duty is payable regardless whether the property is sold at a gain or loss, it added.
Caught by Surprise
Singapore in February last year said it will levy a seller’s stamp duty on all residential properties and land that are sold within one year from the date of purchase. That was increased to three years in August, when the government also raised down payments for second mortgages.
“This new round of cooling measures will adversely affect sentiment in the property market in the coming months,” said Nicholas Mak, an executive director at SLP International Property Consultants in Singapore. “They could also catch many investors who had bought residential properties in the last two years by surprise. Some of the buyers could be investors who are banking on rising property prices to make a quick profit.”
Private residential sales in November rose 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.
“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.”
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