Singapore has introduced residential property curbs for the first time since 2018 to cool a surge in home prices over the past year.
The steps include raising additional stamp duties for second-home buyers and foreigners purchasing private property, as well as tightening loan limits for public housing apartments.
Developers would also have to pay higher stamp duties of 35 percent, up from 25 percent, when purchasing residential projects. They can claw back this amount if they sell all units within five years of purchasing the site, but there is an extra 5 percent that cannot be refunded under a requirement introduced in the last round of cooling measures in 2018.
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The Singaporean government would also increase the supply of public and private housing, the Singaporean ministries of finance and national development, and the Monetary Authority of Singapore said in a joint statement late on Wednesday.
Buyers have been capitalizing on low interest rates and expectations that prices would climb further as the economy recovers.
That has led to rising property prices even as Singapore implemented stop-start COVID-19 restrictions for several months, which limited viewings of new homes and deterred developers from launching projects.
The government has decided to act now to “reduce the risk of a self-reinforcing cycle of price increases” that would affect affordability in the private and public housing markets, Singaporean Minister for National Development Desmond Lee (李智陞) told a briefing with local media as reported by the Straits Times.
“Left unchecked, prices are likely to run ahead of economic fundamentals,” Lee was quoted as saying. “This will increase the risk of a destabilizing correction later on that will hurt many households.”
Borrowers would be vulnerable to a likely rise in interest rates next year and beyond given that major central banks are looking to tighten monetary policy, Lee said.
The central bank issued a similar warning earlier this month, saying that household debt is higher than pre-COVID-19 levels, driven by property loans.
As such, leverage risk has grown, the central bank said.
Private home prices have risen by about 9 percent since the first quarter of last year, the statement said.
The secondary market for public housing is also recovering sharply after a six-year decline, rising about 15 percent over that period.
There were S$32.9 billion (US$24.1 billion) in sales in the first half of this year, double what was recorded in Manhattan, New York, driven by demand from the ultra-rich flocking to the business hub.
Government officials have long cautioned that low rates can distort asset prices and the property market should not run ahead of economic fundamentals.
Still, the latest announcement came as a surprise given that the central bank in June said that the market is not overheating.
“The measures undertaken in this cooling package will help promote a stable and sustainable property market,” the statement said. “The government remains vigilant to the risk of a sustained increase in prices relative to income trends.”
The new property curbs, especially higher land taxes, would place “immense additional pressure” on developers trying to recover from the COVID-19 pandemic, an industry group said.
“The recalibrated tough measures are rather unexpected in view that the property market is just beginning to emerge from the challenging COVID-19 situation,” the Real Estate Developers’ Association of Singapore said yesterday in an e-mailed statement. “Significant uncertainties still persist.”
As a result, the group is pleading for some leeway.
“The property market should be allowed a bit more time to recover and reach a sustained equilibrium,” it said.
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