20 July 2018
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Property players reel from sudden measures

Straits Times
06 Jul 2018

Developers scramble to launch projects; experts say move needed to curb rising prices

Many in the real estate industry were shocked by the sudden announcement yesterday of new property cooling measures that will take effect today.

Developers were scrambling to launch new projects last night ahead of the measures taking effect, even as property buyers and sellers tried to understand the implications for their loans and purchases.

Several industry experts generally concur that the new measures are necessary to put the brakes on escalating private property prices.

It took 15 quarters of market corrections to bring private residential prices down by 11.6 per cent in the second quarter of last year, but flash estimates from the Urban Redevelopment Authority (URA) on Monday showed that private home prices rose for the fourth straight quarter, up 3.4 per cent in the second quarter, after a 3.9 per cent increase in the first quarter.

This left the URA's overall private residential price index at just 3.6 per cent below its last peak in the third quarter of 2013 and 9.1 per cent above the last trough in the second quarter of last year.

"It is like administering antibiotics to the nation's real estate sector. If you take time to implement the measures, then you will see the developers rushing to put out their launches before the measures take effect," CBRE head of research for Singapore and South-east Asia Desmond Sim noted.

The measures appear to target those who buy for investment purposes, Mr Sim said.

The additional buyer's stamp duty (ABSD) rates for Singapore citizens and Singapore permanent residents purchasing their first residential property will remain at zero and 5 per cent, respectively.

But the ABSD rates for all other transactions will be raised by five percentage points and 10 percentage points for entities.

But Mr Sim noted that the measures are ultimately aimed at curbing excessively high land bids by developers.

An extra ABSD of 5 per cent will be introduced for developers buying residential properties for housing development. This amount is non-remittable, which means that even if the developers sell all the units within the specified timeframe, they will not get the 5 per cent back.

"It will also likely discourage developers from building too large a project or too many units that they cannot sell. Those who have already accumulated some land bank may reconsider whether to buy more land in the light of these measures.

"Instead of just cooling demand for homes or the finished product, the Government is now targeting land costs or costs of the raw material," Mr Sim said.

Dr Lee Nai Jia, senior director and head of research at Knight Frank Singapore, sees sales volume of new and resale private property dropping by about 40 per cent in the coming months because of the latest move to raise the ABSD and tighten loan-to-value (LTV) limits on residential property purchases.

Some analysts say the tightening of the loan-to-value (LTV) limits on residential property purchases could affect the market's fledgling recovery.

For LTV limits, they will be tightened by five percentage points for all housing loans granted by financial institutions. These revised LTV limits will apply to loans for residential property purchases where the option to purchase is granted on or after July 6. But they do not apply to loans granted by the Housing Board (HDB).

What this means is buyers will have to cough up more cash or use more of their Central Provident Fund savings to pay for their property, analysts say.

"All this is happening a bit too fast. The HDB market just started to recover, and even though private property prices are higher, transaction volumes aren't that great yet. If you slam the private property market, what is going to happen to the HDB resale market?" an analyst said.

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.