A third round of cooling measures

The first two rounds of “cooling” measures did not do the trick. Yesterday, the Government moved for the third time in less than 12 months to take the sizzle out of a red-hot property market, with the promise of more curbs if the situation demands.

While the measures – which include making second home buyers pay more cash and allowing them to borrow less from banks – are “not unfamiliar”, as real estate consultancy Jones Lang LaSalle put it, the timing caught some market observers off guard.

The announcements saw shares of property heavyweight City Developments fall 4.2 per cent to $11.46 while CapitaLand slipped 0.5 per cent to end the day at $3.98.

As the Government noted in its announcement, “the rate of price increase of private residential properties has moderated in the last three quarters”. But it added: “Prices have still increased significantly by 11 per cent in the first half of (this year), and price levels have now exceeded the historical peak in the second quarter of 1996.”

At a press conference, National Development Minister Mah Bow Tan made clear the Government’s objective: “Obviously the intention is not to crash the market, but at the same time, if we don’t rein in the market, and the bubble bursts then it will be even worse for everyone concerned, the economy as well as for individual buyers,”

Last September, the Government removed the Interest Absorption Scheme and the Interest-Only Loan which allowed for lower instalment payments. Early this year, it decreased the loan-to-value limit from 90 to 80 per cent and imposed a stamp duty on those who buy residential properties and sell them within a year of purchase.

Apart from deterring speculative activity, the initiatives sought to encourage financial prudence among property buyers, Mr Mah said. The Minister pointed out that global interest rates were unlikely to stay low and higher rates would have severe implications on buyers who overextended themselves.

DEMAND, PRICES TO MODERATE: ANALYSTS

Dr Chua Yang Liang, Jones Lang LaSalle’s Head of Research for Singapore and South-east Asia, said the impact “is more targeted at reducing speculative buying and not affecting occupier demand”.

Said Dr Chua: “These pre-emptive measures are introduced a tad later than we had expected.”

Cushman and Wakefield managing director Donald Han added: “The combined measures will help to taper excessive property demand and put a lid on rapidly-rising prices.”

While it tightens the noose on speculation, the Government has ensured it will push out adequate land supply under the Government Land Sales Programme for private homes, should demand continue to be strong.

The Real Estate Developers’ Association of Singapore reiterated in a statement that the measures “will not impact genuine home buyers”.

Analysts, though, note that developers may also delay their launches, and may be less bullish in bidding development sites.

International Property Advisor director Ku Swee Yong was concerned about genuine upgraders. The Government should have imposed restrictions on buyers undertaking more than two mortgages, instead of those who have already taken just one housing loan, he felt. Said Mr Ku: “In fact, for the families who are planning for new babies, many of them purchase new launches from developers and wait for the Temporary Occupation Permit before they sell their existing home.”

Colliers International estaimate average home sales to taper off at between 800 and 1,000 units per month for the fourth quarter.

Dr Chua said that increases in private home prices and HDB resale prices were likely to moderate to “a more sustainable level” of 2 to 3 per cent and 1 to 2 per cent respectively per quarter.

The Government said it will continue to monitor market developments and impose additional cooling measures should the need arises.

And should speculative activities persist, Barclays Capital senior regional economist Mr Leong Wai Ho said in a report that further reductions in the loan-to-value ratio, increase in stamp duty rates and stringent requirements for property agents could be on the cards.

Source : Today – 31 Aug 2010

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