Experts: More cooling measures not likely

(With a troubling global economy and a less frenzied local property market, experts say further cooling measures are unlikely and unnecessary. Image courtesy of Thinkstock.)

Last week, Bank of America Merrill Lynch economist Chua Hak Bin said that despite murmurs of additional housing regulations growing louder, a sixth round of cooling measures is not warranted at this point.

According to Chua, the last round of cooling measures in December last year has already dealt a heavy blow to buying sentiment and consequently, transactions. In the first three months of this year, prices of private homes have dipped 0.1%, where the previous quarter experienced a 0.2% gain. This year%E2%80%99s first quarter also saw the total value of flats sold plunge 26%.

Foreign buyers have also been sieved away. While this group of buyers accounted for 35% of transactions in the first five months of 2011, they only made up 23% of transactions in the same period this year. “The luxury property market, defined as sales at more than $5 million, has practically collapsed, with the number of transactions falling by some 61% [in the same period],” added Chua.

There are more indicators that point toward a continuing slowdown. For instance, economic growth came in at a mere 1.6% in the first quarter, noted Chua, with growth expected to slow even further. Other factors include China%E2%80%99s slowing economy and Europe%E2%80%99s escalating debt crisis. “In an ugly scenario where Greece exits [the euro zone] and a disorderly default occurs, Singapore's economy may contract by 1% this year,” said Chua in his report.

“Maintaining the threat of additional property measures is a sensible policy to cool the market, but current conditions probably do not warrant another round.”

Other experts have suggested that current measures might even be scaled back. PropNex chief executive Mohamed Ismail, for one, told The Straits Times that the additional buyer%E2%80%99s stamp duty (ABSD) should be reviewed in light of the high-end market%E2%80%99s persistently lacklustre performance. The ABSD imposes a 10% tax on top of all foreign home purchases.

Ismail offered that should any further measures be put in place, they could involve capping the percentage of shoebox units—homes under 500 sq ft—within each development at a level that will protect the interest of family units, but not dampen demand. Shoebox units have gained popularity among buyers relatively quickly because their smaller sizes result in more affordable prices.

Similarly, head of research at Savills Singapore Alan Cheong, who expects private housing prices to stabilise this year, suggested to The Straits Timesthat some cooling measures could be reversed or fine-tuned by the year-end to make them less draconian.