As the local economy works to shrug off the scars of the recent financial meltdown and the H1N1 Influenza, Singapore property market has been the darling of the moment.But in the middle of all these optimism, Singapore government has raised the alert in November 2009 that it is worried about a repeat of the’96 boom buzz cycle. In the last two years, property transactions are close to its record peak and market analysts have nothing but nice commentary about real estate market in the coming months.
Older Singaporeans would no doubt remember the mid nineties property craze, perhaps more so for people who got burned by it subsequent and sharp retraction. Now more knowledgeable and more alert, government is not about to get caught again in another similar situation.
Aside from the market driven philosophy, the Singapore property sector can be influenced by quite a few legislations, some of them include land supply, credit control and tax policies.Let’s try to understand each of them and study the possible implications.
Land Supply Strategy - This has always been use to good effect by the government to contain the over zealousness of super bullish developers. As government releases less land for residential and industrial development, this would slow down the supply for new commercial buildings as well as residential projects, hence reducing the speculative play on new launches.
Credit - Another effective control can be the tightening of money supply. There has been news making rounds in the property sector that government is considering to review the lending guidelines for purposes of private housing loan. Current laws allowed for up to 90 percent of purchase value to be disbursed to qualified buyers. The fear is that this amount may be brought back to the 80 percent level, or worse 75% level.
Capital Gain Tax - It has been a powerful tool during the mid nineties to counter excessive speculation in Singapore market.Government may consider enforcing laws to compel buyer who buys properties in this period to hold on for one year before releasing back to the market in order to be exempted from tax.This can be one of the more drastic measures.It was first introduced in mid nineties to curb over speculation but was subsequently abolished.If this is to be re-enforced, surely a lot of players would be hit hard.
Property Tax - Has a selective implementation of the land. For example, buyers who could not satisfy the minimum length of stay in the above statement be subject to the tax higher than the current 10 percent. For owner-occupants, usually less than half that amount.
Two Way Stamp Duty - A two way stamp duty makes buyer and seller pay stamp duty. Currently only buyer needs to pay stamp duty.
The above looks at some of the ways that government can use to cool down a overheated market.If you are active in property speculation, make sure you keep yourself aware of the developments.
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