For the second time this year, Singapore has moved to try and cool a rapidly overheating housing sector by taking a policy leaf from the current Chinese playbook, while in complete contrast, South Korea has moved to trying boost its sagging housing sector.
The Singapore government said yesterday that it will levy a seller’s stamp duty on all residential units and land sold within three years from the date of purchase, compared with the current one year term, and make it tougher for buyers with an existing mortgage to take out a second mortgage.
The Ministry of National Development said in a statement yesterday that buyers who already have more than one mortgage can now only borrow up to 70% of a purchase and must pay 10% of the property’s value in cash, up from 5% previously.
The moves are among a range of measures to address local worries that an influx of foreign workers and immigrants will create more competition for housing, education and jobs.
Hong Kong said earlier this month that it will tighten mortgage lending rules and increase the supply of land to try and suppress strong rises in home prices.
“The property market is currently very buoyant,” the Singaporean government said yesterday.
“The government’s objective is to ensure a stable and sustainable property market where prices move in line with economic fundamentals.”
Prime Minister Lee Hsien Loong said on Sunday in a National Day speech that previous measures to cool the property market failed to keep prices from rising.
“We twice attempted to cool the property market, once last year and once in February this year, but the prices are still rising,” Lee said.
“I think we need to do more. Our purpose is to make sure in the long term, Singaporeans can own their homes and afford it and it will be a gradually appreciating asset which will grow as Singapore grows.”
He foreshadowed yesterday’s moves in that speech.
The government in February said it will levy a seller’s stamp duty on all residential properties and land that are sold within one year from the date of purchase. It also cut the loan-to-value limit to 80% from 90% for all housing loans provided by financial institutions regulated by the government.
Last year, the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments that are still being built.
Singapore private residential prices rose 38% in the second quarter from a year earlier, according to the Urban Redevelopment Authority.
In its statement yesterday the government said that "While the rate of price increase of private residential properties has moderated in the last 3 quarters, prices have still increased significantly by 11% in the first half of 2010, and price levels have now exceeded the historical peak in the second quarter of 1996.
"While Singapore has enjoyed strong economic growth in the first half of 2010, our economic growth is expected to moderate in the second half of the year.
"There are also still uncertainties in the global economy.
"Should economic growth falter and the market corrects, property buyers could face capital losses, with implications on their own finances and the economy as a whole.
"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.
"Therefore, the Government has decided to introduce additional measures now to temper sentiments and encourage greater financial prudence among property purchasers."
The Singaporean announcement came a day after the South Korean government eased mortgage lending rules and tax breaks for property purchases in an effort to halt a slide in home sales.
The South Korean government will ease restrictions on mortgage loans for first-home buyers and owners of one residence until the end of March, 2011.
The waiver for taxes on home sales will be extended by two years until the end of 2012.
In effect, it is the reverse of what Singapore (and China) are doing to slow their heated markets.
Like Singapore, the moves in South Korea are a second government attempt to correct a problem, in this case a slide in home sales that has now lasted for 18 months.
The number of homes sold in the first seven months of 2010 fell 7.3% from the same period of 2009, when they were depressed by the loss of confidence caused by the slowdown.
The number of sales in July was the lowest since February of last year.
South Korea uses a debt to income limit to control the size of housing loans.
That’s a limit of 50% in Seoul and 60% in areas outside the capital and it will be scrapped temporarily for all but three so-called speculative hot spots in the capital.
The construction sector is contracting (but the economy is expanding due to solid exports). Losses are rising for many companies and jobs are being lost.
Because growth is growing at more than 5% at the moment, the Bank of Korea is moving to tighten monetary policy after increasing its key rate for the first time for more than a year in July.
The rate was pushed up to 2.25%
