Last year, Singapore had weathered the worst recession since their independence 45 years ago. It is then understandable why its government is currently implementing tighter measures in the property market. The government recently released a statement announcing stricter measures that are meant to curb speculation, as home prices in the second quarter climbed by 38%.
Effective immediately, down payments of 10% in cash – previously only at 5% – are now required for mortgages on more than one property. Also, only 70% of a property’s value can be borrowed if a buyer already has an existing mortgage – this is 10% lower than the previous guidelines. Stamp duty is now also imposed for residential properties and land that was bought and then sold for less than three years as opposed to the previous one year.
Singapore, though, is not the first to implement these stricter measures. Hong Kong and China both executed rules that were meant to ‘cool property markets’. Hong Kong has tightened rules on mortgage lending and increased land supply. China, on the other hand, increased down payments and mortgage rates for those buying more than one home.
Managing director Donald Han of the real estate adviser Cushman & Wakefield Inc. says the government is just ensuring that prices do not go out of hand by tightening its belt on repeat buyers and speculators.
Though the benchmark Straits Times Index rose 0.6% at the 5PM closing of the Singapore trading, Southeast Asia’s biggest developer – CapitaLand Ltd. – fell 0.5% to S$3.98. Singapore’s second-largest developer, City Developments Ltd., declined by 4.2% to S$11.46 – this is the biggest drop since February and the lowest closing in six weeks.
Singapore executed other measures earlier this year. In February, the government levied a seller’s stamp duty for properties being sold from one year of purchase and decreased the loan-to-value limit from 90% to 80% for those loans provided by financial institutions regulated by Monetary Authority of Singapore. Prime Minister Lee Hsien Loong admits both measures have failed.
Vis-a-vis 2009, this year’s private residential prices climbed by 38% in second quarter, reports Urban Redevelopment Authority. Leading 36 property markets worldwide, Singapore’s price levels exceeded those of the historical peak seen in the second quarter of 1996.
Singapore’s property market is currently unpredictable and the government hopes to stabilize it and make it sustainable.
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