The government of Singapore intends to dampen escalating property prices, spurred by historically low interest rates, through a series of measures including the introduction of a seller’s stamp duty on industrial properties to further curb speculative buying.

Actions to moderate residential property prices have already been implemented, and while reducing speculative buying, demand for such properties remains firm and prices have continued to rise, said the government in a statement. 

Singapore is not the only Asian economy to intervene in a bid to cool its country’s real estate prices – fellow Asian wealth-hub, Hong Kong, recently introduced a special stamp duty in an attempt to decrease demand for high-end residential properties. The state of the property market also highlights how these jurisdictions have become some of the world's most desirable locations. Last week, the CATO Institute think tank, said that Hong Kong and Singapore are two of the world's most economically free markets.

In response to the announcement, Barclays (Bank) Research said: “The reaction to this set of comprehensive measures will be the most significant thus far, relative to the earlier six rounds. Coupled with the large supply pipeline of public and private housing over the next few years, we think property prices will very likely stabilise, if not fall, this year.”

Last year saw a record level of housing transactions, particularly from investment demand, leading to the government taking further action to be tighter on property ownership for investment, as well as on foreign buyers.

“The reality we face is that interest rates are extraordinarily low, globally and in Singapore, and continue to add fuel to our property market. We have to take this further round of measures now, to check recent market trends and avoid a more serious correction in prices further down the road,” deputy prime minister and minister for finance, Singapore, Tharman Shanmugaratnam said.

Seller’s stamp duty

Prices of industrial properties have doubled over the last three years, outpacing the increase in rentals. In addition, there has been increasing speculation in the segment - in 2011 and the first eleven months of 2012, about 15 and 18 per cent respectively of all transactions of multiple-user factory space were resale transactions carried out within three years of purchase. This is significantly higher than the average of about 10 per cent from 2006 to 2010.

Consequently, the government is introducing a seller’s stamp duty on industrial property, to discourage short-term speculative activity which could distort the underlying prices of industrial properties and raise costs for businesses. This stamp duty will range from 5 to 15 per cent, depending on how long the property is held from the date of purchase, and will be imposed from 12 January 2013.

Residential property

Also from 12 January this year, additional buyer’s stamp duty rates will be raised between five and seven percentage points across the board, and applicable to permanent residents purchasing their first residential property, and on Singaporeans purchasing their second residential property.

To discourage over-borrowing, financing conditions for housing have also been tightened – this includes tightening loan-to-value limits on housing loans for those who already have one outstanding loan, and an the increase of minimum cash down payments required for subsequent housing loans.

These measures are temporary and will not impact most Singaporeans buying their first home said the government. (Additional exemptions and conditions apply.)

Measures specific to public housing and executive condominium developments will also come into action this month.

Singapore is not the only government intervening to cool its country’s real estate prices – fellow Asian wealth-hub, Hong Kong, recently introduced a special stamp duty in an attempt to decrease demand for high-end residential properties.