Singapore announces surprise property curbs to cool market

Singapore’s renewed clampdown on speculative property demand sent real estate stocks reeling yesterday, as analysts predicted the end of a nascent home price rebound and the deflation of a buoyant market for collective sales.

The tightened rules, rolled out a day after the central bank noted “euphoria” in the property market, sharply increase buyers’ stamp duties for entities such as developers. Singapore’s benchmark Straits Times Index dropped 2 percent Friday as property developers and banks led declines, with City Developments Ltd. and UOL Group Ltd. sliding more than 13 percent each.

As major property markets from New York to Sydney show signs of cooling, Singapore and Hong Kong prices are on a tear, causing unease among local policy makers. In Singapore, a sudden rebound in speculative demand, stoked by record land bids and redevelopment deals, threatened to undo years of carefully implemented curbs that had given the city-state an edge over Hong Kong in quality of living.

“This is a preemptive move by the government to cool down the market before it gets too hot,” Irvin Seah, an economist at DBS Group Holdings Ltd., said in an interview.

The en-bloc market, where a group of owners band together to sell a collection of apartments, surged in recent months thanks to demand from developers. Officials had repeatedly warned that such exuberance was unsustainable, and Ravi Menon, managing director of the Monetary Authority of Singapore, sounded a cautious note on en-bloc developments on Wednesday.

With the latest curbs, the en-bloc market is “potentially grinding to a halt,” DBS analysts led by Derek Tan wrote in a report.

Individuals taking up their first housing loan will face tighter borrowing limits under the new rules, meaning they have to put up more cash to buy property. For foreign purchases of residential property, the additional buyer’s stamp duty increases to 20 percent from 15 percent, while for Singapore citizens the extra charges apply only from their second home purchase, the MAS, Ministry of National Development, and Ministry of Finance said in a joint statement Thursday.

For entities buying any residential properties for development, the additional buyer’s stamp duty rises by 10 percentage points to 25 percent, with a further five percentage points imposed for developers.

“Given the extent of the new cooling measures, we expect the home loans demand to be subdued,” said Koh Ching Ching, head of group corporate communications for Oversea-Chinese Banking Corp.

“The policy measures are far-reaching rather than surgical in nature,” Citigroup Inc. analyst Si Xian Goh wrote in a note. “That first-time home buyers were included in the policy dragnet, however, does suggest that the regulators are concerned that some first-time buyers are buying out of a fear of missing out and contributing to the overall spate of exuberance.” Bloomberg

Developers attack cooling measures

A LEADING developers’ group in Singapore has challenged the government’s latest round of property-cooling measures, saying that there’s no rationale for the steps as the market is only in the early stages of a recovery, the Straits Times reported, citing a statement from the group. The market started to pick up only last year, and the volume of transactions is within expectations, the Real Estate Developers’ Association of Singapore said in the statement, according to the report. The group described the measures as tough, and said the market should be allowed time to find its own course.