Singapore Home Prices Climb to Record as Loan Curbs Imposed

Singapore home prices climbed to a record in the second quarter as gains in suburban housing values accelerated, leading to new government measures on property loans at the end of last week.

The island state’s private residential property price index rose 0.8 percent to 214.9 points in the three months ended June 30, extending a 0.6 percent increase in the first quarter, according to preliminary estimates released by the Urban Redevelopment Authority today. The pace of gain in suburban home prices more than doubled from the previous three months.

Record home prices amid low interest rates raised concerns of a housing bubble and prompted the government to widen a four-year campaign in January to curb speculation prices in Asia’s second-most expensive housing market. Singapore on June 28 unveiled new rules governing how financial institutions grant property loans to individuals, extending efforts to curb excessive price increases.

“In the immediate-term, there could be some negative impact on property sales as buyers and banks alike take time to digest how the new framework impacts them,” analysts Desmond Ch’ng and Wilson Liew at Maybank Kim Eng Securities said in a note to clients today. “We maintain our view that the mass market residential segment is the most vulnerable to downside price pressure.”

The analysts said in the report that they prefer so-called diversified and retail developers.

Suburban Gains

Apartment prices fell 0.2 percent in prime districts in the second quarter, compared to a 0.4 percent gain in the previous three months. Those in the suburbs climbed 3 percent, compared to the 1.4 percent increase in the previous quarter, according to today’s government data.

“The continued climb in private home prices suggests that market fundamentals have not been overly compromised by the cooling measures as they are still able to generate sufficient sales momentum to thrust prices forward,’’ said Mohamed Ismail, CEO of PropNex Realty, a brokerage in Singapore.

Singapore is Asia’s most-expensive housing market after Hong Kong, according to a Knight Frank LLP and Citi Private Bank report released last year that compared 63 locations globally. Hong Kong homes cost an average $28,300 per square meter in 2011 compared to Singapore where an apartment would cost $25,600 per square meter, the report showed.

Stocks Fall

The measure tracking the city’s property stocks fell 0.8 percent at the close in Singapore trading, the first drop in five days. Shares of CapitaLand Ltd., the country’s biggest developer, dropped 2.3 percent to S$3.01, while City Developments Ltd., the second largest, declined 1.6 percent.

“The latest credit tightening measures are expected to cause a dent on volume in the coming months as buyers will hold off decision-making,” said Joseph Tan, Singapore-based executive director for residential at CBRE, a property consulting company.

A report by the National University of Singapore’s Institute of Real Estate Studies showed the NUS - Singapore Residential Property Index fell 0.2 percent in May from the previous month. Those in the central region rose 1.5 percent.

The government measures in January included an increase in the stamp duty for homebuyers by between 5 percentage points and 7 percentage points, with permanent residents paying taxes when they buy their first home. Singaporeans will also have the levy starting with their second purchase.

Singapore also plans to raise taxes for luxury homeowners and investment properties. The higher tax will apply to the top 1 percent of homeowners who live in their own residences, or 12,000 properties, Singapore Finance Minister Tharman Shanmugaratnam said in his budget speech on Feb. 25.