Government reins in the market

THE Government has moved to rein in the fast-rising private property market, banning a popular scheme that allowed cash-poor buyers to defer paying the bulk of their purchase price until the property was completed.

With immediate effect, the interest absorption scheme (IAS) can no longer be offered with new properties for sale, National Development Minister Mah Bow Tan said in Parliament on Monday.

He added that the Government is also resuming land sales next year, a move that will increase the supply of new sites and further cool rising prices. It is doing this by re-introducing a confirmed list of sites that will be put up for sale according to a pre-determined schedule, regardless of developers’ interest.

The Government also announced it will not extend measures introduced in January’s Budget to aid developers in the recession. These included deferring property tax and allowing developers more time to complete their housing projects.

These measures come after weeks of speculation over how the Government would react to an unexpected property boom that has resulted in record sales volumes and a dramatic run-up in prices.

Developers sold 10,000 units in the first seven months of this year, more than the 4,300 units sold in the whole of last year. In July alone, they sold 2,767 units – the highest monthly tally on record.

Private home prices are now about 10 per cent to 20per cent above the lows in the first quarter of the year. At selected projects, prices have rocketed 30per cent. Experts said the immediate impact of the measures would likely be private home prices stabilising, or even slipping, for the rest of the year.

‘The moves will certainly take some wind out of the property market, but they will not kill it,’ said Cushman & Wakefield managing director Donald Han. ‘The Government wants to keep the momentum going, but at a slower rate, as we are indeed in a recession.’

The Government is also disallowing a close relative of the IAS – interest-only housing loans – with immediate effect. These loans are designed so that the buyer pays a very low instalment until the property is completed.

The removal of the two schemes applies across the board to all private residential developments, the Ministry of National Development said on Monday. The only exemption is for uncompleted private residential projects in which the units had already been offered for sale under the IAS before Monday.

Source: Straits Times