Singapore announces new steps to cool property market

SINGAPORE Singapore unveiled a package of measures for the property market, including tighter lending limits for housing loans in response to a rise in interest rates, as well as new steps to moderate demand.

The move would ensure prudent borrowing and prevent difficulties in servicing home loans, said the Ministry of National Development and the Housing Development Board in a joint statement late on Thursday.

The measures - including lowering the amount of government loans available for public housing by 5 percentage points - were announced late on Thursday and came into effect on Friday.

The interest rate floor has been raised, which has lowered the amount of lending a person can get in relation to their income level when buying from the public or private property market.

OCBC economist Selena Ling said the steps were prudent and should dampen exuberance and slow the pace of price appreciation. ALSO READ: Let people play is a missing element in Hong Kong's urban development

Foreign investors are more tuned to the global interest rate situation and less dependent on loans, as a result of the measures, said Ling.

The government implemented a broad package of cooling measures last December, but there was still an upward momentum in public housing prices, which had increased by more than 5% since the end of the second quarter of this year, the authorities said.

Private home prices rose by 3.5% in the second quarter, five times more than the 0.7% increase in the previous quarter.

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The construction delays in Singapore have exacerbated the higher prices of private and public housing apartments, where real estate is seen as a safe-harbor investment.

Interest rates have risen significantly and are likely to go up further in the near future, authorities said in Thursday's statement.

We urge households to exercise prudence before taking up any new loans, and be sure of their debt-servicing ability before making long-term financial commitments. Recently, central banks have increased interest rates in order to fight inflation. Commercial banks determine interest rates for bank mortgages in Singapore. Three local banks have temporarily removed fixed-rate home loans in the past few weeks.

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The central bank is expected to tighten its policy at its scheduled review next month after Singapore's monthly inflation rate has remained elevated in recent months, according to economists.