S'pore Ends Delayed Home Payments Scheme

Source : The Business Times, October 26, 2007

Singapore said late on Friday that real estate developers could no longer let home buyers delay payments on the bulk of their property purchases, a move that could douse the rise in housing prices.

Residential property prices in the city-state have soared to their highest levels in a decade, fuelled by a strong economy and a supply crunch as well as liberal payment schemes that allow buyers to make a 10 to 20 per cent deposit and delay the bulk of payments until a project nears completion.

But Singapore's Urban Redevelopment Authority (URA) said these schemes, introduced in 1997 when the economy was in recession, were no longer necessary.

'In view of the current buoyant property market, the Government has decided to withdraw the deferred payment scheme for the sale of uncompleted private residential and commercial properties with effect from 26 Oct 2007,' URA said on its website.

Up to 90 per cent of buyers in projects by Singapore developers such as City Developments and Keppel Land opt for such payment schemes.

The URA said the move would encourage greater financial prudence among investors by compelling them to seek sufficient funds or adequate bank loans before they commit to buying a property.

According to government figures released earlier on Friday, Singapore private home prices rose 8.3 per cent between July and September, or over 21 per cent since the start of the year.

Some government leaders have expressed concern that the rapid rise in housing prices could threaten Singapore's competitiveness with rival regional cities such as Hong Kong.

Fewer uncompleted residential units in Singapore were sold in the third quarter versus the previous quarter, reflecting investor unease following the sub-prime mortgage debt fallout in the United States.

'I think we're at the peak of property prices. If this move doesn't cool property prices, we could see the reintroduction of the capital gains tax to further weed out property speculators,' said Song Seng Wun, an economist at CIMB-GK Research.

Analysts said the move could also hit investor sentiment on Singapore property shares, although bigger firms such as CapitaLand were well diversified out of the city-state.

'There is still a lot of demand for homes. The underlying market fundamentals are still strong because of robust wage and jobs growth,' Ku Swee Yong, director of marketing and business development at consultancy Savills, said. -- REUTERS