S’pore govt acts to cool property market

Source : Business Times – 14 Sep 2009

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.