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Sept. 14 (Bloomberg) -- Singapore is introducing new measures to prevent excessive price swings in the property market following signs that speculative home buying may be on the rise, National Development Minister Mah Bow Tan said.
The government will push for more sites to be sold and will bar interest-only mortgages for uncompleted housing projects, Mah said in parliament today. It will also stop allowing developers to absorb interest payments for apartments that are still being built, he added.
Singapore’s home sales reached 10,000 homes in the first seven months, more than the 4,300 units sold for the whole of 2008, Mah said. The so-called take-up rate for these projects may exceed the historical high of 14,800 units in 2007, while home prices have started to increase “significantly” since June, he added.
“We are currently seeing signs of heightened speculative activity, though the level of speculation is not that extreme,” Mah said. “Given the current market conditions, the government has decided to adopt several measures to temper the exuberance in the market and preempt
any speculative bubble from forming.”
CapitaLand Ltd., Singapore’s largest developer, fell 4.7 percent to S$3.69 as of 4.09 p.m. local time. City Developments Ltd., the second-biggest property company, lost 6.5 percent to S$10.36, while Allgreen Properties Ltd. dropped 7.9 percent to S$1.16. The benchmark Straits Times Index slipped 1.4 percent to 2,643.25.
Land Sales
“The measures should temper people’s expectations in the property market in the near term,” said Wilson Liew, an analyst at Kim Eng Holdings Ltd. in Singapore. “Over the longer-term, there shouldn’t be a huge impact. Most of the housing demand is coming from owner-occupiers.”
The government will reinstate the so-called confirmed list of land sales in the first half of 2010, Mah said. It will also “replenish” the supply of land on the so-called reserved list, he added. These are sites that will only be offered for sale when the government receives a triggering
bid.
The Monetary Authority of Singapore will also disallow the interest-absorption plan and interest-only loans currently offered to buyers of uncompleted private homes, Mah said. These are housing loans that either eliminate or lower the interest installment payments before the
completion of the property.
This will take immediate effect for all private residential projects, Mah said. Still, the interest- absorption plan will be permitted for developments that are already on sale and that had previously offered the program, the minister added.
The government also won’t extend assistance measures that were introduced in the 2009 budget when they lapse in January 2010, Mah said. These include allowing developers more time to complete their projects and allowing the reassignment of government sale sites.
The measures “will help to preempt excessive price swings,” Mah said. “It is in everyone’s interest to have a steady property market where prices move steadily in line with economic fundamentals.”
--Editors: Sean Collins, Alan Soughley
To contact the reporter on this story:
Shiyin Chen in Singapore at +65-6212-1170 or
schen37@bloomberg.net
To contact the editor responsible for this story:
Linus Chua at +65-6212-1530 or
lchua@bloomberg.net
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While I would say that the move is long overdue, I wonder if anything would be done for the local HDB housing market. If the move succeed in cooling the private property market, will it spill over to the HDB sector or will it in fact bring up HDB prices as more people might choose to buy HDB instead due to probable ease of loan approval?
I'm also uneasy that Mah views that "level of speculation is not that extreme". I think its a known fact especially in the banking sector that there are a ridiculous number of foreign speculators buying properties in Singapore. I call them speculators because many of them do not live in Singapore, a good number of them not even living in Asia, and have no intention of living in the properties they purchased. A real estate agent friend was just relating to me that he had this BIG customer from the USA, came in over the last weekend and simply bought 3 properties worth approximately 2mil each, and flew back after giving instructions to my friend on his preferred selling prices. My friend of cos was thrilled, given that he earns a cool 1% each time he does a transaction. Good money for all involved, except maybe the last buying before market crash. My friend calls it musical chair, I call it russian roulette.
Personally, when I was still in the bank, I remembered helping this customer did up a loan for his property in Sentosa Cove. The land itself cost about 2mil if I remember correctly in 2006, added with a construction cost of approximately 2.2mil completed in late 2007 when market is still at its peak. The valuation for the property then was about 14mil. During the downturn early feb this year, the customer needed to increase his cashflow and came to me to mortgage his property for an overdraft facility. Bank valuation at that time was 8.5mil for that property. Now, just 7 mths later, the same customer had already sold off his property to a hongkong couple for a cool 20mil. Not excessive? I beg to differ...
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