SINGAPORE : The threat of a property bubble forming in Singapore saw the government intervening in the market twice in 2010.
The slew of measures ranged from raising housing supply to discouraging speculation.
National Development Minister Mah Bow Tan said this cautious approach of incremental steps is to bring prices down to a sustainable level, but not crash the market.
Property prices have shown few signs of slowing down since rebounding in late 2009, following Singapore's recovery from the global economic downturn.
A strong economy, low unemployment rate and liquidity from foreign investors in 2010 pushed private property prices past the previous peak in 1996.
In the public housing sector, prices in the resale market hit new records as home buyers were swept away by positive market sentiment.
The cash premium buyers pay upfront – also known as cash-over-valuation (COV) – climbed to S$30,000.
To curb speculation, a seller's stamp duty was introduced in February for property sold within a year of purchase.
The effective period was raised to three years during the second round of changes in August.
The maximum loan amount buyers can take from financial institutions was also reduced from 90 per cent to 70 per cent over the two rounds of changes.
Unlike the previous property run when a capital tax – a tax on profits made from selling private property – was introduced prior to the market crash in 1996, this time round, the government is taking small steps.
“We are not taking a big bang approach, but taking a very calibrated approach to this. Why? Because we want to make sure the market can be sustained… We also don't want the market to crash because there will be other repercussions if that were to happen,” said Mr Mah.
The cooling measures announced on August 30 appear to have achieved some of its desired impact.
“Probably on the public housing market, but not so much on the private side. I think the private side, we have been consistent. But on the public housing market, I think the big change was when we disallowed dual ownership of public and private property within this minimum occupation period, which is now 5 years. Previously it was 3 years,” said Mr Mah.
While prices in the private market are still rising, the rate of increase has slowed down.
Prices of private residential properties rose 2.9 per cent in the third quarter, compared with a 5.3 per cent increase in the second quarter.
The COV has declined gradually, dropping to S$22,000 in November.
Observers said COV levels may eventually drop to S$10,000 to S$20,000, as more housing supply come onto the market.
The government plans to release 22,000 new flats in 2011, depending on the take-up rate.
HDB will also release land sites for another 4,000 flats under the Design, Build and Sell Scheme (DBSS) and 4,000 Executive Condominium units.
Chris Koh, director of the Dennis Wee Group said: “Sellers need to be more realistic; this isn't like a year ago when you could ask for COV as high as possible and people may grab it. I think buyers are a lot wiser. And those who were really in need and desperate would have bought.
“Now we are seeing the genuine buyers… It's no longer just jumping onto the bandwagon. A lot of financial prudence is exercised before actually buying.’
The government has indicated it will introduce more measures if necessary to curb speculation.
But for now, it appears no further action will be taken as it monitors the impact of the latest round of measures.
The National Development Minister said it will be a few more months before the full extent of the August changes are felt.
– CNA /ls
Channel News Asia