No rationale for tough cooling measures: Redas
Property market is in early stages of recovery and the recovery is in line with economic fundamentals
Sat, Jul 07, 2018
THE government's latest measures to cool the private residential market drew a sharp response from the Real Estate Developers Association of Singapore (Redas).
In a statement on Friday, Redas said there is no rationale for the tough measures, including the new non-remittable additional buyer's stamp duty (ABSD) of 5 per cent on developers' purchase of residential properties for development.
The property market is in the early stages of a recovery and the recovery is in line with economic fundamentals, it asserted.
"The property market should be allowed time to find its own course and reach a sustained equilibrium," said Redas.
"Sale transaction volume is not high and within market expectation.
"The existing sizeable ABSD and TDSR (total debt servicing ratio) remain a restraining factor for foreign buyers and Singaporeans. Buyers are still price-sensitive."
When buying sites from the government land sales (GLS) programme or the private collective sales market, developers are already regulated by existing ABSD and Qualifying Certificate (QC) conditions.
Under existing ABSD rules, developers have to cough up 15 per cent stamp duty on land cost, with interest, if they do not sell out a project within five years of land purchase.
Under the QC, a majority of developers that are deemed foreign companies need to complete their projects within five years of acquiring the site, and to sell all the units within two years of completion. Otherwise, they will have to pay extension charges pro-rated based on the proportion of unsold units in the project.
Redas noted that the new ABSD on developers for buying residential properties for development will impose additional pressure on land acquisition. "Developers are concerned about the distortionary effects of such market behaviour over the medium and long term," it said.
The measures by the government, which kicked in on Friday, were aimed at cooling the property market and keeping price escalations in line with economic fundamentals.
Minister for National Development Lawrence Wong said on Thursday that the government was very concerned.
"There is a large supply of units coming on stream and interest rates are going up. We want to avoid a severe correction later, which can have more destabilising consequences."
The ABSD rates for Singaporeans and permanent residents buying their first residential property would remain at 0 per cent and 5 per cent, respectively, but those buying their second or subsequent home would face a 5 percentage point increase in ABSD.
Foreigners buying any property would face a 20 per cent ABSD, up from the current 15 per cent. Entities buying residential property will also be affected by the new rules. Instead of the current 15 per cent, they will now face a 25 per cent ABSD.
Moreover, developers buying residential properties for housing development will face an additional, non-remittable ABSD of 5 per cent to be paid upfront upon purchase.
From Friday, loan-to-value (LTV) limits have also tightened by 5 percentage points for all housing loans granted by financial institutions.
The latest measures follow a series of warnings from the government on the risks of excessive exuberance in the property market, which is seen by officialdom to have fallen on deaf ears.
It took the government eight rounds of cooling measures to bring about an 11.6 per cent decline in private home prices over 15 quarters, but it has taken just four quarters of market recovery to bring prices up by 9.1 per cent from the last trough of Q2 2017.
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