Tough action to cool property market

Tough action to cool property market

NEW property cooling measures were announced yesterday - the seventh in recent years - as the Government moves yet again to rein in the red hot market.

The steps include higher stamp duties and rules limiting buyers on how much they can borrow, in some cases as little as 20 per cent of the purchase price.

The hard-hitting measures, most of which take effect today, cover the private and public residential markets, executive condominiums (ECs) and the industrial property sector.

The aim is to curb investor demand, reduce speculation in industrial property, be stricter on foreign buyers and increase lending limits to fend off over-borrowing amid rock-bottom interest rates.

Deputy Prime Minister Tharman Shanmugaratnam told a briefing last night: "The reality we face is that interest rates are extraordinarily low, globally and in Singapore, and continue to add fuel to our property market.

"We have to take this further round of measures now, to check recent market trends and avoid a more serious correction in prices down the road."

Most Singaporeans buying their first home will not be affected.

The steps include raising the Additional Buyer's Stamp Duty (ABSD) by between 5 and 7 percentage points across the board.

The duty will also now apply to more people, such as permanent residents (PRs) buying their first home and Singaporeans investing in their second residential property. For example, a Singaporean buying a second property will now have to pay 7 per cent ABSD - that's $70,000 on a $1 million home. Previously no ABSD would have been payable.

Mr Tharman also noted that some of the measures are temporary and will be reviewed "once markets cool and prices soften".

He said the heightened ABSD and the tighter loan-to-valuation limits are "exceptional measures, imposed for cyclical reasons, they are not permanent". On the other hand, measures affecting the PR owner-occupation of HDB flats and ECs are structural and for the long term.

The changes for HDB flats are aimed at moderating demand and ensuring buyers do not over-commit. Stricter loan eligibility such as capping a mortgage service ratio at 30 per cent for loans from banks is one example. Another rule bars PRs from sub-letting their entire HDB flat.

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