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Hong Kong stamp duty

Singapore home prices tipped to fall amid new cooling measures

Analysts say higher stamp duties, a tax on early resales and restrictions on loans could see a drop in values for the first time in five years

PUBLISHED : Wednesday, 16 January, 2013, 12:00am
UPDATED : Thursday, 07 May, 2015, 12:48pm

The most comprehensive housing measures since Singapore started cooling the market in 2009 may drive prices lower for the first time in five years, say Mizuho Corporate Bank and Barclays.

Since Saturday, homebuyers have to pay 5 to 7 percentage points more in stamp duties. The government also added a levy for sellers of industrial buildings, whose values have doubled over three years, and imposed a tax of as much as 15 per cent if the properties are sold within a year.

The latest measures follow government efforts that started almost four years ago to rein in home prices. Those steps have included barring interest-only loans for some housing projects and barring developers from absorbing interest payments. The new rules may limit gains for the stocks of Singapore's developers, the best performers on the benchmark Straits Times Index last year.

"We will see a further cooling in momentum in property prices and sales," said Vishnu Varathan, a Singapore-based economist at Mizuho. "The message is quite unmistakable that they don't want a speculative price bubble clashing with real needs."

To ease home prices that climbed to a record in the fourth quarter, the government also imposed an added stamp duty for permanent residents when they buy their first home, while Singaporeans will have the levy starting with their second purchase.

"The reaction to this set of comprehensive measures will be the most significant thus far, relative to the earlier six rounds," said Joey Chew, a Singapore-based regional economist at Barclays. "Coupled with the large supply pipeline of public and private housing over the next few years, we think property prices will very likely stabilise, if not fall, this year."

The government will also tighten the loan-to-value limits for buyers seeking a second mortgage, it said on Friday, referring to the amount buyers are allowed to borrow relative to the value of their properties. The cash down payment will also rise to 25 per cent from 10 per cent starting from the second loan, it said.

Deputy Prime Minister Tharman Shanmugaratnam said: "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 further down the road."

Singapore's home prices rose for four straight years, and increased by 2.8 per cent last year, government data shows.

Prices may fall 5 to 7 per cent as a result of the latest curbs, according to Mohamed Ismail, chief executive officer at PropNex Realty, a Singapore-based real estate brokerage with about 4,000 agents.

The added stamp duty "will have a drastic impact on the sales volume of private properties in the coming months", he said.

"Sales volume is expected to drop by more than 50 per cent as buyers and investors choose to wait and see on the effects of the dramatic cooling measures."

Singapore will also cap bank loan repayments for public housing at 30 per cent of the buyer's monthly income, and restrict permanent residents from subletting their flats, it said.

The size of so-called executive condominiums will be limited to 1,720 square feet.