THE latest round of measures to cool Singapore's property market, introduced on Thursday, have to be viewed together with all the government interventions in the market over the last two years.
Analysts believe that this last blow could kill off any positive sentiment left in the property market.
The last three rounds of demand-side cooling measures were introduced in September 2009, February 2010 and August 2010. These caused short-lived declines in volumes but had no visible impact on pricing - similar to what happened in Hong Kong.
But this time, it will be different. A significant fall in transaction volume is expected almost immediately. Analysts also expect private home prices to correct by 5-10 per cent in 2011 as the government's two-pronged strategy of releasing more land and controlling demand makes its impact.
Market watchers will remember that together with measures to curb demand, the government has boosted supply significantly over the last two years. It released record supplies of land for residential development in both H2 2010 and H1 2011. This, together with the latest measures, may prompt some investors to exit the market.
'We think owners are more likely to sell their units given the persistent measures and large upcoming supply due for completion in 2013 of 11,600 private and 18,300 HDB units,' said Morgan Stanley analysts Brian Wee and Wilson Ng.
The pool of available buyers will also shrink. Noted Citigroup analyst Wendy Koh: 'Except for genuine home buyers and long-term investors, potential buyers are likely to think twice before committing to a property now.'
It now appears that two sets of buyers are in a sweet spot: first-time home buyers, and buyers with deep pockets (a large number of whom are foreigners). They can now wait for prices to fall before choosing homes from the boosted supply.
Buyers looking to buy their first property remain untouched by the new rules. The government's move to slash the loan-to-value (LTV) limit on housing loans from 70 per cent to 60 per cent for individual buyers only affects those with one or more outstanding housing loans.
Buyers with deep pockets will also benefit. Analysts say that the most severe measure 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 sold in the first, second, third and fourth year after purchase.
This is a sharp increase from previously when sellers were subject to a stamp duty of only up to 3 per cent if they sold within the first three years. The new rule applies for properties that are bought on or after Jan 14.
Buyers with deep pockets can now take advantage of falling prices to hunt for luxury homes and trophy assets, and wait out the four years before re-selling their properties. They are also unlikely to be deterred by having to fork out 40 per cent in cash upfront.
Cash-rich foreign buyers fall into this category. The government has not introduced any specific measures to control property purchases by foreigners.
Looking forward, three segments of the market may prove to be interesting:
The new measures could put off property investors at recent launches. It remains to be seen how many will let their options lapse.
Those who exercised their options before Jan 14 will not be affected by the new LTV and seller's stamp duty changes. Those who didn't will now be subject to the harsher regime. One view is that buying decisions could be put off for up to one year as investors wait for the market to settle.
Units in the secondary market as well as newly-completed properties with Temporary Occupation Permits (TOPs) may prove to be somewhat more resilient than new launches.
If a buyer is genuinely looking to upgrade, he can sell his existing property and apply for a new loan for his new home.
The new loan will then be classified as the buyer's first loan, allowing him to borrow up to 80 per cent of the property's value. In this scenario, completed properties have an edge over new launches as units will be ready to move into.
Collective sales market
The latest round of measures could kill off the fledgling collective sales market.
Developers BT spoke to said that owners' asking prices are already too high. With these measures, home prices are likely to come down, making it even harder for a developer to break even after paying a high price for land.
'Reports of en bloc activity for smaller land plots at rising prices have intensified of late,' said CIMB analyst Donald Chua. '(This) could now ease as developers adjust pricing and demand expectations of final products.'
Corporate buyers looking for bulk purchases in residential properties will also be discouraged. The government has reduced LTV limits for corporate buyers to just 50 per cent.
'This will curb price growth for en bloc transactions and prime property bulk deals by private funds may dwindle,' said Royal Bank of Scotland (RBS) in a note.
All said, the latest measures will shake up the local property sector and expose the weak players.
In short, it will separate the men from the boys.