http://www.businesstimes.com.sg/sub/...26026,00.html?

Published February 15, 2011

YESTERDAY IN PARLIAMENT

Targeting short-term speculators

Govt's property cooling measures aimed at pre-empting bubble from forming: Mah

By CHUANG PECK MING


SHORT-TERM speculators are the targets of the latest property cooling measures, not real buyers, National Development Minister Mah Bow Tan told Parliament yesterday.

And he said the measures, which caught many by surprise, were taken because 'the government was particularly concerned that low interest rates plus excessive liquidity in the financial system, both in Singapore and globally, could drive up demand for private housing' - and produce a property bubble.

The measures were introduced last month and came barely three months after the government unveiled steps, including lower bank loan limits for second properties and tighter ownership rules for HDB flats, to rein in record-high prices in the housing market.

Among the latest measures were an increase in the seller's stamp duty to a hefty maximum of 16 per cent of the purchase price and a lowering of bank loan for a second property to 60 per cent of the property's value.

'Our measures in January are pre-emptive measures because we wanted to act before the bubble forms,' Mr Mah said yesterday in reply to a query from Ang Mo Kio GRC MP Lee Bee Wah. 'It was calibrated so as to cool the market and it was very targeted at the short-term speculators, not at genuine buyers.'

He said the intention of the latest measures is not to crash but cool the property market.

Given the current strong economic growth, low interest rates and lots of money in the market, it is not unnatural to expect property prices to stay strong.

But Mr Mah said the government has no wish to see prices overshoot economic fundamentals. Neither does it want to see too many short-term speculation.

He said the government is also concerned that interest rates would eventually rise - and hit buyers.

'Purchasers who over- extended themselves financially may be caught when interest rates eventually rise, and they may be forced to sell their properties at an inopportune time,' Mr Mah said.

The minister recalled that market sentiment had remained bullish 'with signs of renewed exuberance in the market' at the end of last year, despite the government's move to increase land supply to meet strong demand.

And the situation, fanned by low interest rates and excessive liquidity, was in danger of getting out of hand.

'Therefore the government introduced additional measures in January to pre-empt a property bubble from forming,' Mr Mah said. 'These measures aimed to temper demand and encourage greater financial prudence among property purchasers.'

He said the government would continue to monitor the property market closely and 'take further steps, if necessary, to promote a stable and sustainable property market'.