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Thread: S'pore govt acts to cool property market

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    Default S'pore govt acts to cool property market,00.html?

    September 14, 2009, 3.07 pm (Singapore time)

    S'pore govt acts to cool property market

    SINGAPORE - Singapore's Minister for National Development Mah Bow Tan has just announced measures for a 'stable and sustainable property market'.

    Among other things, his Ministry will resume selling land under the confirmed list in the first half of next year. Such land sales were suspended in October last year in the aftermath of the global financial crash. The Government will also include sites for executive condos, a hybrid between public and private housing, in the confirmed list to offer more housing choices.

    Secondly, the Government is banning interest absorption scheme (IAS) and interest-only housing loans (IOL) with immediate effect, i.e. Sept 14, 2009. This measure will apply to all private residential projects. The only exception will be uncompleted private residential projects where units had already been offered for sale under IAS before Sept 14.

    Interest-only housing loans will be disallowed with immediate effect. 'These schemes could encourage property speculation in a buoyant market where prices are rising rapidly, as they are forms of housing loans that entirely eliminate or substantially lower regular instalment payments for property purchasers in the first few years before the properties are completed,' a statement by the government said.

    As well, the Government said that measures announced in Budget 2009 in January this year to help stabilise the property market at the time will not be extended when they expire. Most of the measures expire in Jan 2010 while one expires in Jan 2011.

    The measures are allowing a one-year extension of project completion period, allowing reassignment of Government Land Sales site and private land owned by foreign developers, giving developers upto four years to dispose of all private residential units in the development, allowing developers to rent out unsold private residential units for a maximum of four years, and allowing upto two years of property tax deferral for land under development.

    'We are currently seeing signs of heightened speculative activity, although the level of speculation is not yet extreme,' Mr Mah told Parliament on Monday.

    'The current low interest rate environment has also drawn more buyers into the market,' he added.

    'It is in everyone's interest to have a steady property market where prices move stably in line with economic fundamentals. If excessive speculation develops and a property bubble forms, eventually a severe correction must take place,' Mr Mah said in his speech.

    Property counters retreated after Mr Mah's announcement.

    The Government will also increase supply on the reserve list for first half 2010 to meet possible increase in demand. 'With reinstatement of the confirmed list and more sites on the reserve list, the public can be assured that there will continue to be a steady supply of private housing,' Mr Mah said. -- BT NEWSROOM

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    Singapore acts to cool property market speculation

    By Ng Baoying, Channel NewsAsia | Posted: 14 September 2009 1433 hrs

    Singapore: Measures to pre-empt any speculative bubble from forming in the private property market have been outlined in Parliament by the National Development Minister.

    Mr Mah Bow Tan said one of the steps to "temper the exuberance" of the market will be the immediate withdrawal of the interest absorption scheme and interest-only loans being offered for purchases of uncompleted property developments.

    Under the interest absorption scheme, developers pay the interest on home loans instead of buyers until the project receives its Temporary Occupation Permit (TOP).

    For interest-only loans, a borrower only pays the interest and defers repayment of the principal to a later date.

    Mr Mah told Parliament on Monday that both schemes could encourage speculation in a buoyant market as they lower instalment payments in the initial years.

    Pointing out that property purchases are a major long-term financial commitment, the national development minister said the removal of the interest absorption scheme and interest-only loans will help make home buyers make careful decisions.

    The immediate withdrawal of the interest absorption scheme will only affect new projects and not those which had been offering the scheme until the announcement on Monday.

    As for interest-only loans, these will be disallowed with immediate effect.

    Private home sales have seen a strong upswing since February this year when 11 times more homes were sold compared to January's 108 units. Since then, developers have sold more than 10,000 units, more than double the 4,300 sold in the entire 2008.

    Mr Mah said: "We are currently seeing signs of heightened speculative activity, although the level of speculation is not yet extreme. The portion of buyers sub-selling their units has increased. At this take-up rate, the total sales for 2009 may well exceed the historical high of 14,800 units in 2007 at the height of the fever in the market."

    He added that private home prices have been rising significantly since June. Should the situation remain unchecked, Mr Mah said, a rising spiral of demand and prices could occur as more buyers and speculators enter the market.

    "Property prices can potentially build up a strong rising momentum under these conditions. Such a development would make the property market vulnerable to the continuing risks in the global economy," he said.

    "Should growth turn out weaker than expected, property buyers and speculators could face capital losses as the market corrects. Conversely if the recovery stays on course, interest rates will eventually rise and drive up financing costs with severe implications for those who have overextended themselves."

    To avoid this situation, the government is bringing back the confirmed list of the Government Land Sales (GLS) programme in the first half of next year to ensure a steady supply of private housing.

    The number of sites will be decided at a later period when the GLS programme for the first half of 2010 is firmed up.

    Sites under the confirmed list are released for tender at a pre-determined date without the need for the sale to be triggered by a bid. The confirmed list had been suspended since the start of the year due to poor market conditions.

    The government will also replenish the supply of sites on the reserve list to meet developers' needs. But developers will no longer enjoy property-related assistance measures announced in the Budget this year when they expire. The minister said improving market conditions have rendered these measures unnecessary.

    - CNA/sf/ir

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    No IAS would mean that developers would slash prices for future developments? I wonder what sort of carrots future developments will dangle for buyers.

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    Option 1. Keep current pricing and offer more goodies

    Option 2. Lower current pricing

    Option 3. Increase current pricing since it is harder to find real buyers.

    Most probably they will go Option 1 and offer more goodies... maybe stamp duty rebate and renovation loan allowance, etc... some monetary allowance.

    Nobody likes Option 2 if they have a choice.

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    They put a block to new launches and open a gate for resale. Long live MBT!!!!!!!!!!!!

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