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What is the government’s ways of cooling the property market?

SINGAPORE—The Singapore government unveiled more measures to stabilize prices in the city-state’s housing market, which it says could rise beyond “sustainable levels.”

Singapore Government cools down property

Singapore Government cools down property

The moves come less than five months after an earlier set of measures aimed at curbing speculative activity in Singapore’s property market and at a time when Asian economies face mounting inflationary pressures and rising asset prices.

Earlier Thursday, South Korea surprised markets by tightening its benchmark interest rates to ward off inflationary pressure, joining Thailand, China and Taiwan, which have already resorted to policy tightening. The Reserve Bank of India is also expected to raise rates this month.

“Previous government measures have to some extent moderated the market, but sentiments remain buoyant,” Singapore’s Ministry of National Development, Ministry of Finance and the Monetary Authority of Singapore said in a joint statement. “Low interest rates plus excessive liquidity in the financial system, both in Singapore and globally, could cause prices to rise beyond sustainable levels based on economic fundamentals.”

The new measures, which take effect Friday, include making individual buyers with outstanding loans on one or more properties put up more cash. They will be allowed to borrow as much as 60% of the property’s value for their purchase, down from 70%.

The government also increased the holding period for the imposition of seller’s stamp duty to four years from three years and raised the rate of duty for homes sold at various stages during the holding period.

In addition, the government will limit loans that group purchasers—such as corporations, trusts and collective investment schemes—are allowed to take to 50% of a residential property’s value.

According to latest government data, the increase in private home prices in the fourth quarter slowed to 2.7% from 2.9% in the third quarter. For 2010, private home prices rose 17.6% while Singapore’s economy grew 14.7%, the fastest expansion since the city-state’s independence in 1965.

In August last year, the government unveiled its third set of property price curbs in 12 months, which included cutting the loan-to-value ratio to 70% from 80% for individual purchasers with existing home loans and increasing the holding period for the imposition of seller’s stamp duty to three years from one.

Separately, the government in November announced a continuation of its aggressive land supply program for the first half of 2011 in a bid to temper price pressures at the development stage.

“The government will continue to monitor the property market closely and take further steps to promote a stable and sustainable property market if necessary,” the government said Thursday.

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