Concerns about the swift rise in private home prices have prompted the authorities to further tighten cooling measures last night, in a surprise move that will lead to property buyers paying higher stamp duties.
From today, Singaporeans and permanent residents have to pay 5 percentage points more for their second and successive properties. For example, a second home that costs $1 million will incur an extra $50,000 in stamp duties.
But for foreigners, this Additional Buyer's Stamp Duty (ABSD) applies even on their first property.
Residential property buyers will also be allowed to borrow less.
The proportion of a property's value that a buyer can borrow, known as the loan-to-value (LTV) limit, has been slashed by five percentage points. For instance, a buyer taking his first loan on a $1 million home can borrow only $750,000, down from $800,000.
These measures do not apply to residents taking Housing Board loans.
Developers appear to be hit hardest. For those developers purchasing residential properties for housing development, they will be subject to an ABSD of 25 per cent, up from 15 per cent, although this will not be applied if they fulfil several conditions, including completing and selling all their units within a prescribed period.
However, they must pay upfront an extra 5 per cent of the property price, and this will not be waived. This will have an impact on properties sold en bloc, for example.
The moves, announced at 7pm, are aimed at dampening demand.
On Monday, the Government's second-quarter flash estimates showed private home prices rising by 3.4 per cent, bringing the total increase to 9.1 per cent over four quarters since the middle of last year.
This uptrend came after 15 straight quarters of decline, which pushed private home prices down 11.6 per cent by the middle of last year.
The steep price recovery led Minister for National Development Lawrence Wong to say last night that the Government is "concerned that prices are running ahead of economic fundamentals".
The combination of rising interest rates and a large supply of new units expected to go on sale in the next two to three years could lead to buyers over-extending themselves financially.
"We want to avoid a severe correction later, which can have more destabilising consequences. Hence, we are acting now to maintain a stable and sustainable property market," Mr Wong added.
The recovery had also led observers to predict a new peak in private home prices by the end of this year, as Monetary Authority of Singapore managing director Ravi Menon warned about "euphoria" in the property market on Wednesday.
Observers were divided on how effective the measures would be.
Property analyst Nicholas Mak of ZACD Group believes the new measures are premature, saying it might hasten an oversupply of units in the market as cautious investors put off their purchases.
In a bid to beat the higher taxes, property agents sent out messages and crowds flocked to showflats such as Riverfront Residences in Hougang and Parc Colonial in Woodleigh last night to sign sales agreements for new homes.
VestAsia Group chairman Steven Choo, however, said the measures were likely to prevent a rush of foreign funds and "en bloc cash" from snapping up units at escalating prices.
"Markets are psychological: When things are going up, people want to sell and buy, and it feeds into each other. The Government has moved decisively to moderate that," he said.
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Correction note: An earlier version of this story said Singaporeans and permanent residents have to pay 5 per cent more for their second and successive properties. It should be 5 percentage points. We are sorry for the error.