Singapore Adds New Regulations To Discourage Property Flipping

Singapore’s government hopes to combat speculation and volatility in the real estate market through a series of market cooling measures. Penalties for flipping, lending restrictions and larger down …

Singapore’s government hopes to combat speculation and volatility in the real estate market through a series of market cooling measures. Penalties for flipping, lending restrictions and larger down payment requirements are all aimed at protecting home buyers and promoting sound property investment. See the following article from Property Wire for more on this.

New anti-speculation measures aimed at cooling the real estate market in Singapore have been announced as the government fears double digit price increases are unsustainable.

Owners who sell houses and apartments less than three years after buying them will have to pay a duty of 3% of the resale value, a measure previously applicable only on transactions within one year of the purchase.

And for buyers with at least one outstanding loan, the minimum cash down payment has been increased from 5% to 10% of valuation, while the maximum amount a bank can lend is capped at 70%, down from 80%.

The measures, which take immediate effect, are designed to discourage flipping where investors buy properties on easy credit with low cash down payments, and then resell them quickly for a profit.

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They were announced as a traditional lull in the property market in August was about to come to an end. ‘The government’s objective is to ensure a stable and sustainable property market where prices move in line with economic fundamentals,’ said a joint statement from the central bank and ministries of finance and national development.

‘The property market is currently very buoyant,’ it said, adding that the new measures were designed to ‘temper sentiment and encourage greater financial prudence among property purchasers’.

Properties in land scarce Singapore are now among the most expensive in Asia, boosted in large part by the building of two massive casino complexes that opened this year. A typical three-bedroom suburban apartment of around 100 square meters that will be ready for occupancy in only two or three years now costs at least a million US dollars.

The latest available government data showed property prices rose 5.3% quarter on quarter in the second three months of the year and 5.6% in the first three.

Even during the recession last year, private property prices rose 1.8% despite government measures to dampen the market. Analysts expect the property market to stay strong in light of the economy’s projected expansion of 13 to 15% for 2010.

Lending rates on home loans are below 1% in some cases and analysts say that the measures are needed to avert a potential property meltdown.

‘Moreover, the current low global interest rate environment will not continue indefinitely, and higher interest rates could have severe implications for buyers who have overextended themselves,’ said one.

‘The measures safeguard the interest of genuine home buyers, those who are owner occupiers. I don’t think prices will fall but I think these will help to keep price growth in check,’ said Tay Huey Ying, director for research and advisory with Colliers International real estate consultancy.

Chua Yang Liang, head of regional research with Jones Lang LaSalle, expects property prices to continue rising but at a more modest pace of 2 to 3%.

This article has been republished from Property Wire. You can also view this article at
Property Wire, an international real estate news site.

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