Singapore raised down payment requirements for second mortgages and boosted sales taxes to curb property speculation, sending shares of the city’s biggest developers down the most in 11 months.
Individuals with more than one mortgage can borrow up to 60% of a property’s value, down from 70%, while the stamp duty on homes and land sold within one year will rise more than fivefold, the government said in a statement yesterday.
CapitaLand and City Developments fell more than 3% on concern the government’s intensified efforts to cool record home prices will dent sales. Singapore follows Hong Kong in raising sales taxes and loan restrictions as economies across Asia seek to damp the threat of asset bubbles caused by capital inflows and low interest rates.
“The government is erring on the side of caution,” said Donald Han, Singapore-based managing director at Cushman & Wakefield, the world’s largest closely held real estate services company. “We need to monitor this because history has shown that some of these measures lasted only two to three months, and the market comes right back to full life again.”
Singapore private home prices climbed to a record as the nation’s fastest economic growth since independence in 1965 overwhelmed government measures to cool the market. Attempts to rein in prices started in 2009 when interest-only loans for some housing projects were barred and developers were barred from covering interest payments for apartments still being built.
STOCKS SLIDE
Singapore’s Straits Times Real Estate Index fell 0.3% at the close, with three stocks falling for every two that gained. CapitaLand, Southeast Asia’s biggest developer, declined 3.4% to S$3.71, and City Developments, the second largest, lost 4.6% to S$12.16, both retreating by the most since Feb. 22.
Singapore joins markets across Asia that added measures to curb property speculation driven by low interest rates. Singapore’s three-month interbank rate fell to 0.43751% on Jan. 3, the lowest since Bloomberg began compiling the data in 1999. It was at 0.43779% today.
Hong Kong imposed additional taxes and higher down payments in November after home prices climbed more than 50% since the beginning of 2009. China, battling 18 months of price increases, suspended third mortgages and raised interest rates for the first time in three years.
HIGHER TAX
Singapore’s homeowners who sell a property within a year of purchase will now have to pay a tax of 16%, from 3% before. That drops to 12% in the second year, 8% in the third, and 4% in the final year. The government also said it will take further steps if necessary.
On loans to entities other than individuals, the loan cap will be reduced to 50% from 60%.
While Singapore’s private home prices climbed 2.7% to a record in the fourth quarter from the previous three months, the increase was the smallest in six quarters, government data showed. Han said he expects the gain in home prices to cap at 5% this year with the latest curbs, from an earlier estimate of as much as 12%.
“Previous government measures have to some extent moderated the market, but sentiments remain buoyant,” according to the statement yesterday. “The seller’s stamp duty rates will be increased sharply so as to provide a strong disincentive for investors looking to make short term gains,” the government said. The seller’s stamp duty is payable regardless whether the property is sold at a gain or loss, it added.
MORE HOME SALES
CapitaLand said in a stock exchange statement the measures will hurt sentiment in the “near term,” and transactions and home prices may “moderate.” The developer also said it plans to proceed with its home sales, and expects to start selling 1,700 residential units in the city-state this year.
Singapore in February last year said it will levy a seller’s stamp duty on all residential properties and land that are sold within one year from the date of purchase. That was increased to three years in August, when the government also raised down payments for second mortgages.
“This new round of cooling measures will adversely affect sentiment in the property market in the coming months,” said Nicholas Mak, an executive director at SLP International Property Consultants in Singapore. “They could also catch many investors who had bought residential properties in the last two years by surprise. Some of the buyers could be investors who are banking on rising property prices to make a quick profit.”
Private residential sales in November rose the most in seven months. Property transactions reached an unprecedented level in the first 11 months of 2010 as developers sold 15,025 properties, according to preliminary data from the government. That exceeded the high of 14,811 homes in 2007.
“December sales would be as aggressive as the November numbers,” Han said. “The tide is coming onto the shores of places like Singapore, China and Hong Kong, and it’s hard to stop the tide with low interest rates. The only way is to pump in regular measures like what we’ve seen.”
Source : The Edge – 14 Jan 2011
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