The core reasons for speculative investments throughout the globe (at least the high-value property markets) are the same.
Unlimited supply of credit, fuelled by quantitative easing
Ultra-low interest rate, artificially suppressed by the government
If not property, the same speculations will happen in stocks, derivatives, silicon valley startups, commodities, and whatnot. And some people would ask questions about them.
Singapore is hardly unique, and in fact, the degree is much smaller compared to Manhattan, London, or Hong Kong.
The only measure necessary is to kill or at least severely curtail the central banks and stop their printing machine. But then, are you ready for the deflation and deleveraging?
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Prof. Phang Sock-Yong of the Singapore Management University gives a summary of the policy measures taken from 2006-2013 by the Singapore government in her recent 2015 paper "Singapore's Housing Policies: Responding To The Challenges Of Economic Transitions" [1]. I think the article can be downloaded for free from the World Scientific website [2] and is worth reading for understanding housing policy in Singapore. It beats spouting uninformed nonsense from a diet of Forbes, WSJ, Cato, Heritage Foundation, etc.
From [1]:
[December 2006] In December 2006, the government withdrew the Buyer Stamp Duty Concession (which allowed a payment to be deferred until Temporary Occupation Permit date or completion for purchasers of uncompleted properties), and all property buyers had to pay their stamp duties within 14 days of the date of excising their purchase options.
[October 2007] In October 2007, a Deferred Payment Scheme introduced by developers, which allowed buyers to defer making payments for properties under construction to the date of issue of Temporary Occupation Permit, was disallowed by the government.
[September 2009] In September 2009, an Interest Absorption Scheme introduced by developers, which allowed buyers to transfer their interest-servicing burden on a housing loan to the developers for properties under construction until the completion date, and Interest-Only housing loan scheme, which allowed buyers to make only interest payments on their housing loans, were disallowed by the government.
[February 2010] In February 2010, seller stamp duty was re-introduced for sale of properties within one year of purchase, and the LTV ratio was lowered from 90% to 80%. August 2010 In August 2010, the holding period for imposition of Seller stamp duty was increased to three years. For borrowers with existing housing loan(s), their LTV ratio was lowered from 80% to 70%, and minimum cash-component down-payment was raised to 10% from 5%.
[January 2011] In January 2011, the holding period for imposition of Seller stamp duty was increased to four years. The seller stamp duty rate was increased to 16%, 12%, 8%, and 4% for properties sold within the first, second, third, and fourth year of purchase, respectively. For borrowers with existing housing loan(s), their LTV ratio was lowered from 70% to 60%.
[December 2011] In December 2011, additional buyer stamp duty was imposed; Singapore citizens buying their third and subsequent residential property pay 3%, Singapore permanent residents buying their second and subsequent residential property pay 3%, and foreigners buying their first and subsequent residential property pay 10%
[October 2012] In October 2012, the Monetary Authority of Singapore (MAS) imposed a 35-year tenor restriction for housing loans on new residential properties. For borrowers without any existing housing loan(s) and where loan tenors exceed 30-year or extend beyond borrowers’ retirement age of 65 years old, the LTV ratio was lowered to 60%. LTV ratio was lowered to 40% for borrowers with existing housing loan(s) where the loan tenors exceed 30-year or extend beyond borrowers’ retirement age of 65 years old.
[January 2013] In January 2013, additional buyer stamp duty was raised; Singapore citizens buying their second residential property pay 7% and those buying their third and subsequent residential property pay 10%, Singapore permanent residents buying their first residential property pay 5% and those buying their second and subsequent residential property pay 10%, and foreigners buying their first and subsequent residential property pay 15%.
LTV ratio was lowered to 50% and 40% for borrowers applying for their second and third or subsequent housing loans, respectively, where loan tenors do not exceed 30-year or do not extend beyond borrowers’ retirement age of 65 years old. In cases where loan tenors exceed 30-year or extend beyond borrowers’ retirement age of 65 years old, LTV ratios of
30% and 20% apply for borrowers applying for their second and third or
subsequent housing loans, respectively. The minimum cash-component
down-payment was also raised to 25% from 10% for buyers taking their
second or following housing loan.
[June 2013] The MAS introduced the Total Debt Servicing Ratio (TDSR) for homebuyers with the intention that the measure ‘…will help strengthen credit underwriting practices by [financial institutions, FIs] and encourage financial prudence among borrowers.’ The TDSR is the total monthly debt service as a percentage of the borrower’s income and is capped at 60%. In computation of TDSR, FIs will need to take into account the monthly repayment for the property loan that the borrower is applying for plus the monthly repayments on all other outstanding property and non-property debt obligations of the borrower; apply a specified medium-term interest rate or the prevailing market interest rate, whichever is higher, to the property loan that the borrower is asking for when calculating the TDSR; apply a haircut of at least 30% to all variable income (e.g., bonuses) and rental income; and amortize the value of any eligible financial assets taken into consideration in assessing the borrower’s debt servicing ability, in order to convert them into ‘income streams’.
MAS also required borrowers named on a property loan to be the mortgagors of the residential property for which the loan is taken; “guarantors” who are standing guarantee for borrowers otherwise assessed by the FI at the point of application for the housing loan not to meet the TDSR threshold for a property loan to be brought in as co-borrowers; and in the case of joint borrowers, that FIs use the income-weighted average age of borrowers when applying the rules on loan tenure.
[August 2013] Effective August 27, 2013, new Singapore Permanent residents have to wait for 3 years before they are eligible to purchase resale HDB flats. The maximum tenure for HDB housing loans was reduced from 30 years to 25 years. The mortgage servicing ratio limit was reduced from 35% to 30% of the borrower’s gross monthly income. The maximum tenure of new housing loans and re-financing facilities granted by financial institutions for the purchase of HDB flats was reduced from 35 to 30 years.
[December 2013] From December 2013, the government required second-timer applicants who buy Executive Condominium units directly from property developers to pay a resale levy, similar to second-timer applicants who buy HDB BTO flats. The Mortgage Servicing Ratio for housing loans granted by financial institutions for EC units purchased directly from property developers was capped at 30% of a borrower’s gross monthly income.
References:
Phang, Sock-Yong. "Singapore's Housing Policies: Responding To The Challenges Of Economic Transitions." The Singapore Economic Review 60.03 (2015): 1550036.
SINGAPORE'S HOUSING POLICIES: RESPONDING TO THE CHALLENGES OF ECONOMIC TRANSITIONS