Singapore Imposes Property Restrictions

Singapore introduced residential property curbs for the first time since 2018 to cool a surge in home prices over the past year. Shares of developers including City Developments Ltd. dropped after the government said it’s raising additional stamp duties for second-home buyers and foreigners purchasing private property. It’s also tightening loan limits for public housing apartments. The government 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. Buyers have been capitalizing 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 stop-start coronavirus-related restrictions for several months, which limited viewings of new homes and deterred developers from launching developments. City Developments led the declines in real estate firms, falling as much 4.1% in Singapore trading. UOL Group Ltd. slid as much as 3%, and Wing Tai Holdings Ltd. lost 2.7%.  The government has decided to act now to “reduce the risk of a self-reinforcing cycle of price increases” that will impact affordability in the private and public housing markets, National Development Minister Desmond Lee said. Borrowers will be vulnerable to the likely rise in interest rates in the next year and beyond given that major central banks are looking to tighten monetary policy, Lee said. It’s a similar warning issued by the central bank earlier this month, with the Monetary Authority of Singapore saying that household debt is higher than pre-pandemic levels, driven by property loans. As such, leverage risk has grown, the central bank said. Private home prices have risen by about 9% 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% over that period. There were S$32.9 billion ($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. Government officials have long cautioned that low rates can distort asset prices and the property market shouldn’t run ahead of economic fundamentals. Still, the latest announcement came as a surprise given that the Monetary Authority of Singapore previously said in June the market isn’t overheating. The latest curbs are unlikely to have a long-term impact given that locals make up the majority of buyers and continued to purchase homes even after the last round of cooling measures in 2018, said Alan Cheong, Executive Director Of Research At Savills Plc.