Government keen to burst bubbles

PUBLISHED : Thursday, 20 May, 2010, 12:00am
UPDATED : Thursday, 20 May, 2010, 12:00am

Some 85 per cent of Singaporeans live in public housing, built by the Housing Development Board, so it's always important to consider what the government is doing and what kinds of policies it is shaping. The city often adopts a paternalistic attitude to governance and isn't afraid of market intervention when necessary.

Singapore is ramping up its commitment to build public housing, promising to release more than 12,000 units this year, although construction doesn't start until enough qualified Singaporeans have applied to take ownership of one of the units.

In the private market, Singapore is keen to deflate any bubble before it explodes. In February, the government imposed a stamp duty of up to 3 per cent on homes sold within a year of purchase, and capped property loans at 80 per cent of the total sale value.

Last September, Singapore started requiring progressive payments on all off-plan property purchases, instead of allowing buyers to put down a deposit and defer further payments until the project was completed. The Monetary Authority also said it was scrapping an 'interest absorption scheme' for loans on new properties.

Buyers in Singapore were previously able to put down 10 to 20 per cent of the purchase price on a new, off-plan apartment and defer any interest or further payments until completion - a system ripe for 'flipping' apartments for a short-term gain.

The government now requires off-plan buyers to use a system of progressive payments that was once standard in Singapore. Buyers put down a small booking fee and the normal 20 per cent of the purchase price on signing the sales and purchase agreement. Then they must make regular payments during the development of a project: 10 per cent when the foundation work goes in, 5 per cent when the electrical wiring goes in, and so on.

Though the interest-absorption scheme had waned in popularity over the course of this year, the government hopes a return to gradual payments will ensure sales go to end-users instead of speculators. The step to stop deferred payments is more symbolic than anything, showing the government is ready to step in if it feels property prices are beyond the means of the average Singaporean.