Tough action to cool property market

So will hot money shift from property to stock market?

The Straits Times
www.straitstimes.com
Published on Jan 12, 2013
Tough action to cool property market
Steps include higher stamp duties, rules limiting buyers' borrowing

By Lee Su Shyan Money Editor

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.

The size of each EC unit can now be no larger than 160 sq m. This will address concerns raised recently over whether the sale of mega penthouses and other luxurious units are in line with the policy of keeping them as an affordable option for middle- income Singaporeans.

A seller's stamp duty has been introduced on industrial property for the first time, at rates ranging from 5 per cent to 15 per cent.

Mr Tharman was also asked if the measures had been timed to coincide with the by-election.

He said: "We've been studying this for a few months now as we were concerned about the way the market was moving over the course of the year. We had a package ready several weeks ago, but waited for the last quarter's numbers to come out. Once the numbers came out last week, we felt we had to move.

"We were quite concerned about the re-acceleration in prices that we've seen in both the private market and the HDB resale market."

The latest flash estimates from the Urban Redevelopment Authority showed private home prices rose 1.8 per cent in the fourth quarter, the fastest rise in six quarters, while HDB flat prices surged 2.5 per cent.

The Real Estate Developers' Association of Singapore said it will "evaluate the impact. It is in the interest of the market to have a gradual trend in growth and value for home owners and investors in the long term".

Mr Jason Lee, 29, a management associate eyeing to invest in property, said: "I'll just hold on to my cash... the prices won't go up that much any more."

sushyan@sph.com.sg

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The Straits Times
www.straitstimes.com
Published on Jan 12, 2013
Scramble to beat the clock

BUYERS rushed to showflats that either opened early or kept running late into the night to allow people to beat the deadline for new cooling measures that kicked in at midnight.

The hottest ticket in town seemed to be the showflat of La Fiesta, a development that was not due to launch until Tuesday.

Hundreds of potential buyers - and jostling agents - flocked to the flat in Sengkang last night, queuing to get inside to beat the midnight deadline.

Sales manager Julia Lee was spotted outside the showflat discussing her options with her husband, while her agent was queuing for them to get in.

The couple are looking at buying a second property for investment.

There were also many agents on the phone talking about potential price appreciation, appearing to convince more clients to come down while groups of people stood around outside, apparently trying to make a decision.

Other developers, including Far East Organization and MCC Land, kept their showflats open till late while agents tried to convince prospective buyers to close deals.

Haha interesting! People can change their minds on deciding to buy a property within a few hours!

(12-01-2013, 11:24 AM)mrEngineer Wrote: Haha interesting! People can change their minds on deciding to buy a property within a few hours!

Yeah, just rework your sums and re-decide what is "affordable". Quite easily done! (This is said with a sarcastic tone)......

(12-01-2013, 09:29 AM)Musicwhiz Wrote: So will hot money shift from property to stock market?

IMO, it seems likely in next few years.

Why so many late 20s/early 30-ers looking to invest in property?

(12-01-2013, 07:52 PM)kazukirai Wrote: Why so many late 20s/early 30-ers looking to invest in property?

Many getting seduced by the easy money callings.
Think about the number of years property keep going up.
The word for this scenario is backward biaseness.
My friends, uncle, neighbours, 3rd aunt's daughter's hairstylist bought properties n reap millions. If they can do it so can I!

Same goes for stock market, rembr the S-chips hoohaa in 06-07?

The second reason I can think of is the need to do so since stock market is risky for so long and bonds yields are ever getting lower. The next common asset class would be properties. Gold doesn't give one return, wine, art pieces, landbanking have been given bad names locally.

Thus youngsters are forced to go property since its hard to beat the 4.5% inflation yoy.

Lastly the low interest rate plays an impt factor. youngsters being youngsters think the world will be forever good to them. Few experienced retrenchment or high I/r so the personal knowledge of it doesn't resonate.

Value investment doesn't stretch to properties it seems. Margin of safety doesn't exist in local property. While its is defintely true property goes up in long run, it depends on the economic strengths of the nation as well as ability to continue paying loans during recession.

truism of property is that it is the cash cow of our gov coffer. Gov dish out land tender and does not admit that it has base value. In good and bad time, they control the tender game. Just look at Capital land a GLC that is also a public company behaving as if it is in the same game plan of hiking property value by tendering much higher than the second highest bidder? We get the feeling whatever cooling measure, Gov is still the main culprit of churning ever increasing property values.

Whilst drastic fall in value is highly unlikely, it policy is becoming ever more erratic (suspect in part due to desperation after sustaining heavy losses on investment). Even this tightening, I suspect it intention is to sized the opportunity to increase the burden of property buyer. We are going to see huge imbalance if buyers shrink and property overhang stay and developer face penalty.

Essentially, Gov did a poor job in managing the property cycle. SC is right, Gov has no place in micro managing property market. If you're SC, you will know, Capital land with its huge financial muscle and backing behave 1 way without fear, whilst SC has to put up with all the challenge of managing issues all round. High end condo, what has it got to do with all the policy and it seem contrary to the interest of attracting high net worth, or ppl interested in a better life style with the ability to pay.

By across the board policy, it has not study the segment clearly. In fact I suspect hidden agenda!!

Do you not see a clear pattern? In the late 90s, anybody who invested in listed contractor working for developers, but gone into developer business, all died. A policy that favor listed GLC developer to the detriment of the real co. that do the work. Even we as investor cannot escape in Gov policy on listed contractor/developer Co., they dont have deep pocket with bank and gov vulture like. UOB forced Ban Hin Leong bankrupt and pocketed YongNam on the cheap. Yes, LKY dictum, big fish eat small fish.

Tough time ahead for our listed contractor/developer. Good luck to those who do not remember what I wrote. 1 thing that is not clear is why the penalty of unsold property - it was reported in the papers/analyst report, that SC penalty can run into the 100millions? Isn't this a clear sign that Gov policy is dangerously skewed towards killing fair play in the biggest game in town!! Going to miss SC, better gave the high premium to faithful shldrs than to pay the ridiculous 100million penalty! Not sure if high end property is not moving or policy issue or penalty?

My own guess is that SC knows something, he no longer want a say in public. Sharp indeed, if you could read SC move. Hope he thrive in private!!

(12-01-2013, 07:52 PM)kazukirai Wrote: Why so many late 20s/early 30-ers looking to invest in property?

They did not experience first hand the 1997 crash - only the subsequent dips

1997 asia financial crisis, interest rates were like 10-15%~ damn pain

today will be a painful day too, will be watching cap land kep land and city dev

good luck all

(13-01-2013, 02:12 AM)ValueBeliever Wrote: truism of property is that it is the cash cow of our gov coffer. Gov dish out land tender and does not admit that it has base value. In good and bad time, they control the tender game. Just look at Capital land a GLC that is also a public company behaving as if it is in the same game plan of hiking property value by tendering much higher than the second highest bidder? We get the feeling whatever cooling measure, Gov is still the main culprit of churning ever increasing property values.

Whilst drastic fall in value is highly unlikely, it policy is becoming ever more erratic (suspect in part due to desperation after sustaining heavy losses on investment). Even this tightening, I suspect it intention is to sized the opportunity to increase the burden of property buyer. We are going to see huge imbalance if buyers shrink and property overhang stay and developer face penalty.

Essentially, Gov did a poor job in managing the property cycle. SC is right, Gov has no place in micro managing property market. If you're SC, you will know, Capital land with its huge financial muscle and backing behave 1 way without fear, whilst SC has to put up with all the challenge of managing issues all round. High end condo, what has it got to do with all the policy and it seem contrary to the interest of attracting high net worth, or ppl interested in a better life style with the ability to pay.

By across the board policy, it has not study the segment clearly. In fact I suspect hidden agenda!!

Do you not see a clear pattern? In the late 90s, anybody who invested in listed contractor working for developers, but gone into developer business, all died. A policy that favor listed GLC developer to the detriment of the real co. that do the work. Even we as investor cannot escape in Gov policy on listed contractor/developer Co., they dont have deep pocket with bank and gov vulture like. UOB forced Ban Hin Leong bankrupt and pocketed YongNam on the cheap. Yes, LKY dictum, big fish eat small fish.

Tough time ahead for our listed contractor/developer. Good luck to those who do not remember what I wrote. 1 thing that is not clear is why the penalty of unsold property - it was reported in the papers/analyst report, that SC penalty can run into the 100millions? Isn't this a clear sign that Gov policy is dangerously skewed towards killing fair play in the biggest game in town!! Going to miss SC, better gave the high premium to faithful shldrs than to pay the ridiculous 100million penalty! Not sure if high end property is not moving or policy issue or penalty?

My own guess is that SC knows something, he no longer want a say in public. Sharp indeed, if you could read SC move. Hope he thrive in private!!

what is SC?