Sitting pretty in the new property landscape

		Mon, Jan 17, 2011 The Business Times
By Uma Shankari THE latest round of measures to cool Singapore's property market, introduced on Thursday, have to be viewed together with all the government interventions in the market over the last two years. Analysts believe that this last blow could kill off any positive sentiment left in the property market. The last three rounds of demand-side cooling measures were introduced in September 2009, February 2010 and August 2010. These caused short-lived declines in volumes but had no visible impact on pricing - similar to what happened in Hong Kong. But this time, it will be different. A significant fall in transaction volume is expected almost immediately. Analysts also expect private home prices to correct by 5-10 per cent in 2011 as the government's two-pronged strategy of releasing more land and controlling demand makes its impact. Market watchers will remember that together with measures to curb demand, the government has boosted supply significantly over the last two years. It released record supplies of land for residential development in both H2 2010 and H1 2011. This, together with the latest measures, may prompt some investors to exit the market. 'We think owners are more likely to sell their units given the persistent measures and large upcoming supply due for completion in 2013 of 11,600 private and 18,300 HDB units,' said Morgan Stanley analysts Brian Wee and Wilson Ng. The pool of available buyers will also shrink. Noted Citigroup analyst Wendy Koh: 'Except for genuine home buyers and long-term investors, potential buyers are likely to think twice before committing to a property now.' It now appears that two sets of buyers are in a sweet spot: first-time home buyers, and buyers with deep pockets (a large number of whom are foreigners). They can now wait for prices to fall before choosing homes from the boosted supply. Buyers looking to buy their first property remain untouched by the new rules. The government's move to slash the loan-to-value (LTV) limit on housing loans from 70 per cent to 60 per cent for individual buyers only affects those with one or more outstanding housing loans. Buyers with deep pockets will also benefit. Analysts say that the most severe measure is a sharp hike in the seller's stamp duty to 16 per cent, 12 per cent, 8 per cent and 4 per cent respectively for properties that are sold in the first, second, third and fourth year after purchase. This is a sharp increase from previously when sellers were subject to a stamp duty of only up to 3 per cent if they sold within the first three years. The new rule applies for properties that are bought on or after Jan 14. Buyers with deep pockets can now take advantage of falling prices to hunt for luxury homes and trophy assets, and wait out the four years before re-selling their properties. They are also unlikely to be deterred by having to fork out 40 per cent in cash upfront. Cash-rich foreign buyers fall into this category. The government has not introduced any specific measures to control property purchases by foreigners.