SINGAPORE: The government has introduced more measures to cool the private property market.

This comes as a strong economy and low borrowing rates have continued to push prices up, sparking concerns of a property bubble.

“If prices remain at this kind of trajectory, at this kind of momentum, it’s likely that the market itself is going to overshoot economic fundamentals,” National Development Minister Mah Bow Tan said.

“So if you ask me whether a bubble has formed already, I would say that prices are on the high side. But with low interest rates at the moment, I think people are still able to afford,” he said.

The initiatives include raising the holding period of the seller’s stamp duty from one to three years.

Another measure will impact those who have more than one outstanding housing loan.

Property buyers who already have one or more outstanding housing loans at the time of the new housing purchase will have to pay more money upfront.

The government will increase the minimum cash payment from five per cent to 10 per cent of the valuation limit.

Those with more than one outstanding housing loan will also see a decrease in the Loan-to-Value (LTV) limit for housing loans granted by financial institutions regulated by MAS.

The LTV will be lowered from the current 80 per cent to 70 per cent.

The government said the objective of the measures is “to ensure a stable and sustainable property market where prices move in line with economic fundamentals”.

It noted that the property market is currently very buoyant, with prices increasing by 11 per cent in the first half of this year.

It added that while Singapore has enjoyed strong economic growth in the first half, growth is expected to moderate in the second half of the year.

Should economic growth falter and the market correct, the government said property buyers could face capital losses.

It has thus decided to introduce additional measures now to temper sentiments and encourage greater financial prudence among property purchasers.

The measures will take immediate effect on August 30.

Source: Channel News Asia, 30 Aug 2010