The government has announced 2 measures to curb speculation in the property market, thereby taking steps to avoid a property bubble from forming.

Starting from 20 February 2010, there will be a seller’s stamp duty on all residential properties and residential lands that are bought and sold within 1 year from the date of purchase.

The loan-to-value limit will also be lowered from 90% to 80%, for all housing loans provided by financial institutions regulated by the Monetary Authority of Singapore.

In September last year, the Government introduced a set of measures to temper the exuberance in the private residential market. However, while the September 2009 measures helped to cool the property market, there are recent signs that it is starting to heat up again.

This is evidenced by the sharp spike in demand for private housing units in January this year. The number of units sold by developers in January was triple that in December 2009 and was the highest monthly total since September 2009.  Prices have also increased sharply in the second half of 2009, at a faster rate compared to previous rebounds from the troughs of property cycles, and the price increase has continued in January. Mortgage lending has also increased steadily by around 12% year-on-year through 2009.

The government thinks that while the current level of speculative activity in the market is still lower than what it was at the height of the property market boom, and overall price levels are below the previous peak, there is a risk that the market could overheat in the next few months, fuelled by low global interest rates and positive sentiments associated with the economic recovery.

All of this was revealed in a Ministry of National Development press release. The government has said it will continue to monitor the property market closely and will introduce additional measures if required later, to promote a stable and sustainable property market.

PropNex CEO Mohamed Ismail said,“The prices and volume of private property sales are not likely to be significantly impacted as the stamp duty imposition is meant to weed out speculators. Many private property buyers would be unaffected as they have bought their properties for dwelling, with a mid-to-long term view of their purchase.”