Cooling the property market
Neo ChaiChin
Weekend TODAY
Saturday, 20 February 2010
With the spectre of a property bubble looming after demand for private housing spiked sharply in January this year - following sharp price increases in the second half of last year - the Government moved swiftly on Friday to cool the market.
Although property observers were surprised by the timing of the two new measures announced at the end of the trading day, the Government said it preferred to introduce "calibrated measures now to temper sentiments" rather than be forced "to impose more drastic measures after a bubble has formed."
In its statement on Friday, the National Development Ministry (MND) said
firstly, a
stamp duty will be imposed on sellers for all residential properties and residential lands bought on Feb 20 and after, and
sold within a year of purchase. This is aimed at speculators who flip their properties shortly after purchasing it. Previously, only buyers had to pay stamp duties, which range from 1% to 3% of the purchase price.
Secondly, financial institutions (FIs) may only extend
loans of up to 80% of the value of the property - down from the 90% loan-to-value limit allowed previously. This will apply to all housing loans given by banks and other FIs, but not to those granted by the Housing and Development Board (HDB). But this is unlikely to affect many buyers, as according to MND,
fewer than 1 in 10 buyers are currently granted housing loans exceeding 80% of loan-to-value.
Both measures which take effect on Saturday, come just 5 months after the last round of measures aimed at cooling the overheating property market.
Property analysts said the timing of the announcement signals the flexibility the Government has given itself to roll out more measures in the coming months should the property market keep heating up.
"Here, we're dealing with a creature that evolves with every property upturn. So what the Government could do is ... administer a certain remedy and then they wait and see whether that medicine has taken effect," said property lecturer Nicholas Mak of Ngee Ann Polytechnic.
Deputy chairman of the Government Parliamentary Committee for National Development Lee Bee Wah however felt more could be done, saying she "would like to see a more targeted measures to address the concerns of HDB buyers".
Will They Work?
So, how potent is yesterday's dose of "medicine" likely to be? Analysts like Cushman and Wakefield managing director Donald Han said it could cause
a 10% to 15% drop in new home sales.
In the short run, the measures would weed out speculative buyers, said CBRE Research executive director Li Hiaw Ho. "This is because the two rounds of stamp duty while buying and selling within a year are quite punitive."
However, Mr Mak noted that
sellers who stand to make a huge profit from flipping properties might not be deterred by the 3% stamp duty.
PropNex chief executive Mohamed Ismail felt the effects would be largely psychological. The 80% loan-to-value limit would encourage buyers to exercise financial prudence, for instance.
But some questioned if the new measures tackle adequately the problem of a warming property market. "The first thing we have to ask is whether (speculation) is a rampant problem.
Has the MND any evidence to show that people have been selling properties within a year?" asked Chesterton Suntec International's Colin Tan. The current market situation is
the result of "so much money floating around" and people having to find investment opportunities, he reckons.
Meanwhile, MND has again given the assurance that supply remains adequate. Sites able to yield 10,550 private housing units are already on the Confirmed and Reserve List of the Government Land Sales programme in the first half of this year - the highest supply quantum in programme's history.
"These measures are likely to be ineffectual because MND has not mentioned any evidence of speculation and hence, there may not much be speculation to begin with."
- Mr Colin Tan
. Head, Chesterton Research
Originally Posted by sleek, 12 February 2010 3.06 pm
According to Caspian thread, firesales coming liao.
Reply With Quote
Stand at the common corridor of the HDB flat nearest to 100 trees and you will know what I mean. 
