The authority said it was taking the action as part of the Government’s “broader aim of avoiding a price bubble and fostering long term stability in the property market”.
The measures, unveiled on Friday, limit the tenure of all loans granted by financial institutions for the purchase of residential properties, as of 6 October (Saturday) to 35 years.
In addition, loans exceeding 30 years tenure will face significantly tighter loan-to-value limits, the MAS said, in a statement.
It said the new limits would apply to both private properties and so-called HDB flats – that is, government housing.
In its statement, the MAS said the new rules were aimed at “[curbing] continued upward pressure on residential property prices, driven by low interest rates and rapid credit growth”.
Tharman Shanmugaratnam, Chairman of the MAS, noted that his authority’s action came at a time when “monetary conditions worldwide are far from normal”.
“QE3 and low interest rates have made credit easy, but this will eventually change,” he said.
“We are taking this step now to require more prudent lending, and will continue to watch the property market carefully. We will do what it takes to cool the market, and avoid a bubble that will eventually hurt borrowers and destabilise our financial system.”
The MAS’s action came a little more than two weeks after Singapore media reported that an HDB flat had been sold for S$1m (around £500,000), the first time such a government-built residential property had broken the S$1m barrier.
The 1,615 sq ft flat was 17 years old, and was located in Singapore’s Queenstown district, according to the Straits Times, which said the sale surpassed the previous record for an HDB flat, set just the previous week.
Stamp duty introduced
As reported, at the end of last year, Singapore introduced a new, extra stamp duty equal to 10% of the value of properties sold, which it said would apply only to foreigners seeking to buy residential property there, again in an effort to rein in the soaring cost of residential housing.
Under that measure, citizens of five countries that have free trade agreements with Singapore, including the US, Switzerland, Liechtenstein, Norway and Iceland, would avoid the new charge, which was given the ABSD acronym (additional buyer’s stamp duty, on top of the top stamp duty rate of 3%).
Also exempt were foreigners who are permanent Singapore residents and buying their first residential property. Permanent residents who already own one residence and who are buying a second or subsequent one would, however, still pay an ABSD of 3%, the government said in a statement.
In announcing the new stamp duty last year, the government said it was necessary for “a stable and sustainable property market,” noting that foreigners had accounted for 19% of all private residential property purchases in the second half of 2011, up from 7% in the first half of 2009.
Cyprus market fall continues
While frustration mounts in Singapore over the seemingly inexorable rise in house prices, certain other countries are struggling with the opposite problem. Among them is Cyprus, where the release last week of September’s property sales data revealed that “the number of properties sold across the island continued to fall, with overall sales declining by more than a quarter,” according to Cyprus Property News publisher Nigel Howarth.
“Record levels of unemployment, lack of liquidity, the economic situation, uncertainty in the market and the Title Deed fiasco continue to depress” the market, Howarth noted.
The so-called Title Deed matter has to do with title deeds to properties being difficult for Cyprus property owners to obtain, which in turn makes it difficult for them to sell on properties they may have purchased without realising that they would not be given the title deeds to them.
