Singapore July Home Sales Drop to Lowest Since December 2009

Singapore’s home sales in July slid to the lowest since December 2009 as investors balked at new curbs on property loans and developers marketed fewer projects.

Home sales fell to 481 units last month, 73 percent lower from a month earlier, according to data from the Urban Redevelopment Authority released today. Sales rose to a record 2,793 units in March.

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 in Asia’s second-most expensive housing market. Singapore in June also unveiled new rules governing how financial institutions grant property loans to individuals, extending the efforts.

“Prospective homebuyers are exercising caution in their capital outlay before they make the property purchase,” Alice Tan, head of consultancy and research at Knight Frank Pte Ltd. said in an e-mail. “New sales volume is likely to stay low in August 2013 at around 500 to 700 units.”

A new framework requires that lenders take a borrower’s debt into consideration when granting property loans, the Monetary Authority of Singapore said June 28. Home loans should not exceed a total debt-servicing ratio of 60 percent and those that do will be considered “imprudent,” it said.

Prices Rising

The island-state’s private residential property price index rose 1 percent to 215.4 points in the three months ended June 30, extending a 0.6 percent increase in the first quarter. Suburban home prices climbed 3.8 percent in the June quarter, compared with the 1.4 percent increase in the previous quarter, according to government data.

The index tracking property stock dropped 0.6 percent to the lowest in more than a month at the close in Singapore.

Home sales reached 22,699 units in 2012, based on the government data that dates back to 1996.

Singapore also plans to raise taxes for luxury homeowners and residential properties that are rented out. 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 February.

The government tightened loan-to-value limits for buyers seeking a second mortgage, referring to the amount they are allowed to borrow relative to the value of their properties. The cash down-payment will rise to 25 percent from 10 percent starting from the second loan, it said.

‘The Shock’

“The lower sales are due to the shock of the new loan rules,” said Nicholas Mak, executive director at SLP International Property Consultants in Singapore. “That coupled with slower loan processing by banks to enforce new rules resulted in fewer launches by developers.”

Singapore has been attempting to rein in prices since 2009, when the government barred interest-only loans for some housing projects and stopped allowing developers to absorb interest payments for apartments still being built.

Home prices moderated “significantly” after several rounds of cooling measures by the government, the Ministry of National Development said on Aug. 13 in statement on its website in response to lawmakers’ queries in Parliament.

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