(SINGAPORE) Starting today, speculators in the Singapore property market will find their ardour cooled by a severe new regime. The seller's stamp duty for private homes will rise to as high as 16 per cent, from up to 3 per cent previously, while tighter mortgage restrictions will be put in place.
The government yesterday unveiled a new and stronger round of demand-side cooling measures - the third set in less than 12 months.
The killer move, according to analysts, is a sharp hike in the seller's stamp duty to 16 per cent, 12 per cent, 8 per cent and 4 per cent respectively for properties that are bought on or after Jan 14 this year and are sold in the first, second, third and fourth year after purchase.
Previously, owners who sold houses and apartments less than three years after buying them had to pay a seller's stamp duty of only up to 3 per cent.
Singapore also further slashed the Loan-To-Value (LTV) limit on housing loans for both individual and corporate buyers.
Its move follows Hong Kong's, which in late November 2010 announced some of its toughest-ever measures to cool the property market - including a stamp duty of as high as 15 per cent on apartments sold within six months of purchase. Hong Kong also tightened mortgage restrictions.
Analysts expect the higher seller's stamp duty will wipe out most speculators' gains and keep them out of Singapore's property market.
'For those buyers who intend to flip their properties within one or two years, the increased seller's stamp duty erases their potential gains,' said Merrill Lynch economist Chua Hak Bin. 'So this measure is pretty targeted and will take away a big chunk of these potential investors.'
But most analysts found the unexpected sharp hike in the seller's stamp duty to be harsh. In addition to hindering short and medium-term investors, it could also hurt genuine owner-occupiers looking to change homes.
International Property Advisor chief executive Ku Swee Yong said that a staggered-down capital gains tax - one that could perhaps be imposed only on capital gains from real estate - might have been more advisable. This would spare those who sell their properties at a loss.
'The government's intention of forcing people to treat real estate as a long-term investment is admirable,' said Mr Ku. 'But this (the higher seller's stamp duty) will force people to hold, including some genuine cases where there might be a real need to sell off a property.'
In addition, Singapore lowered the LTV limit on housing loans from 70 per cent to 60 per cent for individual buyers with one or more outstanding housing loans at the time of the new home purchase.
And for corporate purchasers (such as firms, trusts and collective investment schemes), the LTV limit has been cut to an even lower 50 per cent - regardless of the number of outstanding housing loans at the time of the new home purchase.
In August 2010, the government reduced the LTV ratio from 80 per cent to 70 per cent.
Yesterday's measures follow three gentler sets in September 2009, and February and August 2010.
'Previous government measures have to some extent moderated the market, but sentiment remains buoyant,' said the National Development and Finance Ministries in a joint statement with Singapore's central bank, the Monetary Authority of Singapore.
'Low interest rates plus excessive liquidity in the financial system, both in Singapore and globally, could cause prices to rise beyond sustainable levels based on economic fundamentals.'
Private home prices rose 17.6 per cent last year, according to flash estimates. A record 15,500-16,500 new private homes are also estimated to have been sold in 2010.
In a statement, the Real Estate Developers' Association of Singapore (Redas) said it has 'taken note' of the latest measures.
The measures will discourage speculative demand and will encourage longer-term holding of properties which will contribute to the stability of the market, Redas said: 'It is in the interest of the market to see a more gradual trend in growth and value for genuine home owners and investors.'
Merrill Lynch's Dr Chua also said that in addition to curbing speculators, the government could be concerned by aggressive mortgage lending by banks.
Analysts expect the volume of new home sales to fall in 2011 but were spilt on whether the new measures will cause private home prices to decline.
'There will be a sense of uncertainty in the market leading to hesitation among buyers and sellers and we can expect to see transactions easing in the short term,' said Credo Real Estate executive director Ong Teck Hui.
But the measures may not lead to an immediate price decline in Q1 2011, he said. This round of measures is still not as severe as the anti-speculation measures announced in May 1996, which resulted in a 1.9 per cent drop in prices in Q3 1996. But any upside in prices in Q1 2011 will be 'minimal', Mr Ong added.
But in any case, analysts said that the 5-10 per cent growth in private home prices for the whole of 2011, which they predicted just one week ago, now looks highly unlikely. They also expect property stocks to fall today in reaction.