Price concern as Singapore ups speculation anteEducation | Kintan Andanari, Abhishek Vishnoi and Klaus Wille 12 Jul 2018
Singapore's renewed clampdown on speculative property demand sent real estate stocks reeling, as analysts predicted the end of a price rebound and the deflation of a buoyant market for collective sales.
The tightened rules, rolled out a day after the central bank noted there was "euphoria" in the property market, sharply increase buyers' stamp duties for entities such as developers.
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 policymakers. 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," said Irvin Seah, an economist at DBS Group Holdings.
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 last week.
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 mortgage 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 Singaporeans 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.
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 demand for home loans to be subdued," said Koh Ching Ching, head of group corporate communications for Oversea-Chinese Banking Corporation.
"The policy measures are far-reaching rather than surgical in nature," Citigroup 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."
An index tracking private residential prices jumped 3.4 percent in the three months ended June 30, according to a flash estimate from the Urban Redevelopment Authority.
That builds on a 3.9 percent gain in the first quarter, which was the biggest since 2010.
The rebound in home prices has prompted aggressive land bids from developers.
The government in February raised taxes on home purchases exceeding S$1 million (HK$5.77 million) as collective apartment sales rose.
Singapore home sales jumped to the highest in nine months in May as developers sold 1,121 units.