Singapore To Keep Properties Market Under Control Some Possible Measures
With the local economy continues to work itself out of the shadow of financial downturn and H1N1 flu, the Singapore property market has been doing brisk business. Past two years has seen a flurry of buying activities and bullish developers have been assaulting our senses with their incessant advertisements on a daily basis, all hawking for our attention on their properties. The business is so great that government has turned cautious on the sustenance of the current phenomena.
No doubt the experience of the mid nineties boom and bust cycle still stays fresh in the administration’s mind. With the benefit of past experience, government is ready to pull out all stops to make sure this would not repeat itself in the near future.
There are several tools in the government of Singapore’s available to treat a similar event. Among them are decisions the country, monetary and fiscal policy tightening supply. We are pleased to tell you how it works and measures how effectively can be overheated market under control.
Land Supply Decision – Government is the biggest land owner in this island and when they do decide to cut down land supply for development, it will have a direct impact on the property market. Developers would have nowhere to turn to for the building of their luxury properties and correspondingly minimize the new launches. As a result, speculation of newly built property would cut down drastically.
Credit crunch – popular story is that in the area of real estate that a comprehensive assessment of the credit market is in full swing. The maximum loan quantum is 90 percent of the value of the property. If the government takes a decision to make it to 80 percent or even lower, hit the entire market hard.
Capital Gains Tax – This is a tax derived from the profit obtained from the sales of property. When this taxation is applied, it will treat profit as income and subject to the prevailing tax rate at either individual or corporate level. Government introduced capital gains tax at the height of nineties property boom but has since abolished it. If this is brought back into the fray, it is expected demand would be slowed down significantly and will be effective to discourage speculation as profit would be reduced.
Property Tax – Another effective way to deal with an overheating market is to raise the property tax. Again based on reduced profit psychology, speculative activities could be significantly reduced due to the perceived small profit.
Double Stamp Duty – A legislative change may necessitate that both buyer and seller pay stamp duty. When it is implemented both ways, it is hoped that sellers/speculators would be more reluctant to freely sell/trade a piece of property.Currently stamp duty applies to buyer only.
These are just some of the measures that can give the government in its efforts to the real estate market under control. But it is still too early to say whether the existing ownership interest is real, and thus sustainable, or if another bubble in real decision-making.
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