Many have considered the most recent round of property cooling measures premature.
Yet others consider it timely as the pace of price-increments has far exceeded that of its previous decline.
Stamp duty hikes a noticeable obstacle to home ownership
It is true that the property market has just begun to recover early this year and truncating its growth at this point may seem embryonic, but the authorities may have their reasons for doing so.
The 5% increase in stamp duty may seem like an obstacle for the property sector. It raises the entry costs for private home ownership and may cool demand from investors and foreign buyers. Market forces have often been left to deal with supply and demand of residential real estate here in Singapore, and the private sector functions mainly on investor- and buyer-confidence.
Previously, many property players were still hoping for a relaxation of the property curbs which were in place then. With this unexpected move, many may be thrown off track with their development and investment plans.
Redas president Augustine Tan has brought up the point that “the market is barely into its first year of recovery and yet to find its own course and reach a sustained supply-demand equilibrium”.
Market sentiment has also taken a beating with contrasting buyers’ response prior to and after the measures were announced and implemented on July 6.
Positive sentiments often boost and account for a healthy market environment. But this may have halted because of the measures.
How the market will react awaits confirmation in the next few months.
Volatile global circumstances and rising household debt issues to watch
For the authorities, these measures are likely considered preemptive. Albeit a tad early, they have their reasons for timing it so.
The US-China trade war, Brexit and eurozone geopolitics are situations that may shift one way or the other in a second. And with drastically different consequences. Instead of leaving it up to chance, the local authorities have tightened the loan-to-value (LTV) rates to prevent over-lending. Household debt has risen since 2007, and depending on certain volatile global events, some homeowners may find themselves unable to cope with the large loans previously undertaken.
Policymakers may also be satisfied with the strong fundamentals in the local real estate sector, which will withstand the new measures with a stable market correction.