Cool the property market, flexibly

THE government has acted swiftly and decisively in introducing rules to dampen property speculation – the third time in a year that the authorities have acted to cool an overheating market.

The new rules require for HDB resale flat buyers to sell off any existing private property they own – including property overseas – within six months of the flat purchase. Also, those who want to buy a second property while still paying for an existing mortgage must pay more upfront.

Many Singaporeans, mainly those looking to buy their first HDB flat, cheered the new rules. But with the economy now expected to slow down in the second half of this year after stellar growth in the first six months, a calibrated approach is needed to ensure that the moves will help stabilize the property market and prevent a bubble from forming. The priorities must be to weed out speculators and provide as many deserving people as possible the chance to own an affordable home.

As with any ruling, there will be some who will become victims of unintended consequences. For instance, permanent residents (PRs) who are looking to buy a resale flat will now have to sell their private property in their home countries.

How this will be enforced effectively and the relevant penalties on offenders remains unclear, for it would be easy for someone to simply transfer deeds to family members who are not Singapore citizens or PRs. Another ‘loophole’ would be for the PR to buy the resale flat by proxy.

The new rules will also affect private property sellers, in particular those who sell within three years of the purchase as they must now fork out stamp duty of up to 3 per cent of the sale price. Previously, the seller’s stamp duty applied only to resale within the first year of purchase.

Some would-be sellers might now think twice before putting their properties up for sale. But this would only be the case for sellers at the margin. So worries in some quarters that the ruling would contribute to a shortfall in private property supply and in the process induce an escalation in prices and defeat the very purpose of the new measures are largely unfounded.

While it’s important to introduce measures to curb speculation and prevent a property bubble, there is also need for some flexibility to ensure that genuine home buyers are not denied the option to do so.

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