Singapore has introduced a new round of property curbs for its private and public residential markets, a bid to cool a surge in home prices over the past year.

The city state is raising additional stamp duties for second-home buyers and foreigners purchasing private units as well as tightening loan limits for public housing apartments starting Thursday. It will also increase the supply of public and private housing, according to a joint statement by the Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore late Wednesday.

Buyers have been capitalising on low interest rates and expectations that prices will climb further as the economy recovers. That’s led to rising property prices even as Singapore implemented start-stop coronavirus-related restrictions for several months, which limited viewings of new homes and deterred developers from launching developments.

Private home prices have risen by about nine per cent since the first quarter of last year, the statement said. The secondary market for public housing is also recovering sharply after a six-year decline, rising about 15 per cent over that period. There were S$32.9 billion (US$24 billion) in sales in the first half of 2021, double what was recorded in Manhattan, driven by demand from the ultra-rich flocking to the business hub.

“If left unchecked, prices could run ahead of economic fundamentals, and raise the risk of a destabilizing correction later on,” the statement said. “Borrowers would also be vulnerable to a possible rise in interest rates in the coming years.”

Government officials have long cautioned that low rates can distort asset prices and the property market shouldn’t run ahead of economic fundamentals. In 2018, the government imposed property curbs after prices increased by more than nine per cent to prevent a bubble from forming, which could result in “larger and painful” costs, it said.

The latest announcement may come as a surprise to the industry given that Singapore’s central bank previously said in June the market isn’t overheating.

Key changes:

For citizens: Additional stamp duties for purchasing their second home raised from 12 per cent to 17 per cent; for the third and subsequent property, duties raised from 15 per cent to 25 per cent

For permanent residents: The rate for buying their second home raised from 15 per cent to 25 per cent and for the third and subsequent property, their stamp duties have been raised from 15 per cent to 30 per cent

For foreigners: Stamp duties raised from 20 per cent to 30 per cent

For entities: Stamp duties increased from 25 per cent to 35 per cent

The government will also tighten the total debt servicing ratio threshold to 55 per cent from 60 per cent, which takes effect from December 16. This means that a person’s total monthly loan payments, including mortgages, cannot exceed 55 per cent of the individual’s total gross income.

Borrowers with existing property loans granted before that date won’t be affected. The limit for loans to purchase public housing units will also be tightened to 85 per cent from 90 per cent on applications made after December 16.

There will also be an increase in the supply of both public and private housing, with further details to be provided Thursday.

“The measures undertaken in this cooling package will help promote a stable and sustainable property market,” the statement said. “The government remains vigilant to the risk of a sustained increase in prices relative to income trends.” – Bloomberg

Source: NewStraitsTime, Blooomberg/December 16, 2021

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