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Pre-emptive measures to further cool property market

Posted on 21 Sep 2009 | Comments Off

THE measures taken by the Government to cool the residential real estate market are laudable. It is hoped that cool and level heads will prevail.

However, the interest absorption scheme (IAS) and interest-only loans are arguably offshoots of the disallowed deferred payment scheme (DPS). Buoyant trading and investment in property are also due to the current low interest rate environment, coupled with a dearth of attractive investment avenues over which we have little control.

Given the creativity and astuteness of property developers in Singapore (substituting IAS for DPS is a case in point), measures should also be adopted on a pre-emptive basis.

– Increase down payment ratio to 10 per cent

To nip the problem in the bud, there is one measure that is truly intuitive, and wholly within the Government’s control, which is to increase the cash down payment ratio to 10 per cent from the current 5 per cent of purchase price.

An increase in down payment ratio makes sense and is prudent. If a buyer wants to buy a property for $1 million but is unable to fork out $100,000 (or rather an incremental $50,000) in cash, he is not in a position to take on a leverage of $800,000. Continue reading →

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Posted in Property Market / Real Estate

Tagged Deferred Payment Scheme, DPS, IAS, Interest Absorption Scheme, Property Investment, Singapore Property Market

Property: Govt has learnt from history

Posted on 21 Sep 2009 | Comments Off

THE last thing the Government expected to do in this recession year was tackle a budding housing bubble, the second to appear in three years. But on Tuesday, four state bodies – the Ministries of National Development, Finance and Law, as well as the Monetary Authority of Singapore – came together to do just that.

They unveiled measures to cool the downturn-defying ‘exuberance’ of the property market, revealing in the process how much the Government has learned about pricking property bubbles since the epic housing bubble of 1996.

What stood out about Tuesday’s announcement was that it was timely and generally light-handed. Some measures were even widely anticipated, such as the reinstatement of regular, scheduled sales of state land through the confirmed list.

Back in 1996, the Government acted only after home prices had been rising for 10 straight years, including the surges of 1993 and 1994. And just two years ago, when the Government removed the deferred payment scheme in October 2007 to deter speculation, the move came only after private home prices had jumped 23per cent in first nine months of 2007, on top of a 10per cent rise in 2006.

This time, the anti-speculation steps were announced just as the bubble was forming. Indeed, National Development Minister Mah Bow Tan said the measures were designed to ‘pre-empt any speculative bubble’. Continue reading →