Property measures spell danger

Singapore’s sweeping package of property cooling measures to curb rising home prices not only applies to foreigners buying properties in the city-state, but has gone one step further to include permanent residents (PRs) and citizens.

Introduced last Friday, this is the government’s seventh round of measures since 2009 and includes a stamp duty hike of between five and seven percent across the board, tighter loan-to-value (LTV) limits on second housing loans – down to 50 percent from 60 percent and an increase in the minimum cash down payment for individuals applying for a second or subsequent housing loan – raised from 10 percent to 25 percent.

Industry watchers are convinced that the new policies will hit the market hard.

“The hefty ABSD of five percent for PRs for the first property, seven percent for Singaporeans’ second property purchase and 15 percent for foreigners will have a drastic impact on the sales volume of private properties in the coming months. Sales volume is expected to drop by more than 50 percent as buyers and investors choose to wait-out and see the effects of the dramatic cooling measures. It is predicted that the private property prices will head towards a slide of five to seven percent,” said Mohamed Ismail, CEO of PropNex Realty.

“Developers had already paid high prices for the recent land bids and will not be able to sell much lower. Thus, developers are likely to be holding on to their project sales until the market recovers.”

He warned that danger lurks if prices spiral downwards. For instance, if private home prices dropped more than 15 percent, investors and first-time home buyers could end up with a negative property asset portfolio, especially those who bought their private properties in recent times with only five to 10 percent cash down payment.

Ismail also noted that HDB upgraders’ will have to pay more for a private house.

“HDB upgraders’ aspirations of owning a private property will face a bigger hurdle with the revised ABSD as one has to fork out additional seven percent cash upfront in the purchase of the new launches, even though they could apply for a refund upon TOP. In addition, the 25 percent down payment will add on to the cash outlay required for the purchase. In order to avoid paying the seven percent ABSD, current owners have to contract to sell their existing apartment before they exercise the option to purchase.”

“More people will end up being homeless during the transition of upgrading to private property. This may also result in most instances where the selling of homes being completed earlier than the buying one with little time left for renovation and shifting in.”

Source : PropertyGuru – 14 Jan 2013

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