Singapore’s government sees a danger of a property bubble forming and recent measures to cool speculation were designed to pre-empt this.

The real estate market has become “a little exuberant of late,” Mah Bow Tan, the island’s national development minister, said in parliament today. The government on Aug. 30 increased down payments for second mortgages and imposed a stamp duty on property held for less than three years.

 

Singapore is joining Hong Kong and China in seeking to cool its real estate market after the island’s US$182 billion ($243 billion) economy rebounded from last year’s global slump, helping to boost property prices. Private residential prices have climbed for four straight quarters, with an index measuring them reaching a record in the second quarter.

 

“There is a danger of a property bubble forming given the strong momentum of the market and a likely slowdown in the pace of economic growth as well as the economic uncertainties ahead,” Mah said. “The measures are aimed at reducing the level of speculative demand in the market and encouraging financial prudence.”

 

The city-state has been attempting to rein in home prices since last year when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built.

A total of 14,688 homes were sold last year, just shy of the record 14,811 transacted in 2007, the Urban Redevelopment Authority has said. Total transactions slowed to 1,248 last month from 1,549 in July, after more than 8,400 units were sold in the first half, according to data from the government agency.

 

Buyers who hold more than one mortgage can only borrow up to 70% of a property’s value, versus 80% previously, and must pay 10% in cash, up from 5%, the government said on Aug. 30. A seller’s stamp duty will apply to all residential units and land sold within three years of purchase, up from the previous one-year period.

 

CapitaLand, the city’s largest developer said recent government measures to cool the market have created some flux that should settle in a couple of months, the Business Times reported yesterday, citing Wong Heang Fine, chief executive for CapitaLand’s Singapore residential unit.

 

The company will proceed with starting sales of a project designed by architect Zaha Hadid by the end of the year after delaying it twice due to market conditions, according to the newspaper.

 

“There will be upgraders or investors who may be deterred from buying at this point because of the new measures,” Mah said. “However, given the current state of the market, where there is ample public and private housing supply in the pipeline and the prevailing momentum of prices, these measures are timely.”