The government increased stamp duty rates and toughened loan-to-value limits for buyers to keep price increases in line with economic fundamentals, the Monetary Authority of Singapore, Ministry of National Development, and Ministry of Finance said in a joint statement.
“There’s a large supply of units coming on stream and interest rates are going up,” said Lawrence Wong, Minister for National Development. “We want to avoid a severe correction later, which can have more destabilizing consequences.”
An index tracking private residential prices jumped 3.4% in the three months to June 30, according to a flash estimate from the Urban Redevelopment Authority. That builds on a 3.9% gain in the first quarter, which was the most since the second quarter of 2010. The MAS had already warned on Wednesday of the dangers of a market correction.
“No, it was not entirely expected,” said Jason Low, senior investment strategist at DBS Bank Holdings Ltd. The “MAS comments on ‘euphoria’ gave some sort of a hint. Some developers were pricing in rather optimistic prices in their new launches. (I) believe the MAS wants to stay ahead of the curve.”
For foreign purchases of residential property, the additional buyers stamp duty increases to 20% from 15%, while for Singapore citizens the rate increases apply only from their second purchase onward.
En Bloc Sales
The rebound in home prices has prompted aggressive land bids from developers. The government in February raised taxes on home purchases exceeding S$1 million (US$730,000) as collective apartment sales reached levels the central bank described as exuberant.
Much of the gains are being driven by so-called en-bloc sales, where a group of owners band together to sell entire apartment buildings, according to Cushman & Wakefield Inc. Singapore home sales jumped to the highest in nine months in May as developers sold 1,121 units.
For entities buying any residential properties for development, the additional buyers stamp duty rises by 10 percentage points to 25%, with a further five percentage points imposed for developers.