More 'small steps' to cool property market in the new year?

by Joanne Chan
05:55 AM Dec 21, 2010

SINGAPORE - The rising property prices have shown few signs of slowing since Singapore's recovery from the global economic downturn.

This year, a strong economy, low unemployment rate and ample liquidity pushed private property prices past the previous peak in 1996.

In the public housing sector, prices in the resale market hit new highs.

The cash premium buyers pay upfront - also known as cash-over-valuation (COV) - climbed to $30,000.

Faced with the possibility of a property bubble, the Government introduced cooling measures in September last year and February this year. The slew of measures ranged from raising housing supply to clamping down on speculation by tightening existing rules.

However, demand continued unabated.

Mr Nicholas Mak, the executive director of Research and Consultancy at SLP International, said: "The market seemed to take it into its stride and continued to expand; sales were still climbing and so were prices."

So, another round of measures were implemented in August, including raising the effective period of the seller's stamp duty to three years.

The maximum bank loan amount was also reduced to 70 per cent.

Analysts noted that this approach of taking "small steps" to regulate the property market is unlike the previous property run, when a capital gains tax was introduced prior to the market crash in 1996.

In a recent interview with MediaCorp, National Development Minister Mah Bow Tan reiterated this cautious approach of incremental steps is to bring prices down to a sustainable level but not crash the market.

Said Mr Mah: "We are not taking a big bang approach but taking a very calibrated approach to this."

Noting that the measures introduced in August appear to have had more impact on the public housing market, Mr Mah added: "The big change was when we disallowed dual ownership of public and private property within this minimum occupation period, which is now five years. Previously it was three years."



'Sellers should be more realistic'

COV for resale flats has declined gradually, dropping to $22,000 last month.

Observers say COV levels may eventually drop to $10,000 to $20,000, as more housing becoming available.

The Government plans to release 22,000 new public flats next year, depending on the take-up rate. The HDB will also release land sites for another 4,000 flats under the Design, Build and Sell Scheme and 4,000 executive condominium units.

Dennis Wee Group Director Chris Koh said sellers need to be more realistic about their expectations in the current market.

Said Mr Koh: "This isn't like a year ago, when you could ask for COV as high as possible and people may just grab it. But I think buyers are now a lot more wiser. And those who were really in need and desperate would have bought."

The impact of the measures on the private property market remains to be seen.

September saw a frosty reception from buyers, with the number of private homes sold plummeting below the 1,000 unit level.

However, the market rebounded quickly. Last month, some 1,900 units were sold.

The Government has indicated it will introduce more measures if necessary to temper demand.

But for now, it appears no further action will be taken as it monitors the impact of its latest measures.

SLP International's Mak said the next round of measures, if any, would likely come in the middle of next year.

"One possibility is that they could further tighten the loan-to-value for investors, thus making it more expensive or more risky for investors who already own one or two properties and are buying their third or fourth one," said Mr Mak.

A broad measure, such as a capital gains tax which will affect all homebuyers, should only be a last resort, Mr Mak added.

Source: www.todayonline.com