http://www.businesstimes.com.sg/sub/...07362,00.html?
Published October 7, 2010
Balancing act with constant fine-tuning
The govt has stepped in many times to restore sanity to the housing market here
By EMILYN YAP
BT looks at some of the major rules imposed on the Singapore public and private housing markets in the past 30 years and their impact.
1980-1989: Lowering restrictions
The 1980s marked the creation and blossoming of the resale flat market. In 1989, the government opened the market to permanent residents (PRs), removed income ceilings for resale flat buyers and allowed resale flat owners to also buy private homes for investment while still living in their public flats.
'We are moving public housing conditions more and more towards private sector practices,' then national development minister S Dhanabalan was reported as saying.
1990-1995: More liberalisation
After the first Gulf War, pent-up demand and the relaxation of more government measures lifted property prices.
In 1991, singles aged 35 and over were allowed to buy resale flats, though they were limited to one- to three-room units outside popular estates in the south.
HDB also let those who bought public flats direct from the board invest in private property. They should have lived in their flats at least five years and had to stay in them after the private property purchase.
From 1993, for resale flats, HDB began granting loans of up to 80 per cent of the flats' valuation or sale price, whichever was lower. It previously offered loans of up to 80 per cent of sale prices in 1984 - a lower benchmark.
The CPF Board also allowed buyers to use CPF savings for interest payments on mortgage loans, on top of principal payments.
In 1995, HDB brought flat valuations closer to transacted prices, effectively allowing buyers to take larger HDB mortgage loans.
The HDB resale price index hit 101.9 in Q4 1995 - more than triple the 33.6 in Q1 1990. The Urban Redevelopment Authority Private Residential Price Index more than doubled - to 164.9 in Q4 1995 from 57.2 in Q1 1990.
1996-2000: Market chill
The government introduced measures to cool the property market in 1996. Among these was a tax on gains from selling property within three years of purchase; additional stamp duty payable by sellers of residential property within three years of purchase; an 80 per cent financing limit on mortgage loans; and a ban on foreigners taking Singapore-dollar loans to buy homes.
In 1997, HDB limited flat buyers to only two subsidised mortgage loans. It also started assessing buyers' creditworthiness, so monthly instalments would not exceed 40 per cent of their monthly income.
Later that year, it raised resale levies and extended the time bar to 10 years from five for those who wanted to buy a second public flat direct from the board.
Aspiring upgraders also had to live in their public flats for five years before they could book private homes. Previously, they were allowed to book in advance uncompleted private homes due to be completed in or after the fifth year.
Tighter rules coincided with the start of the Asian financial crisis in 1997. The government later suspended the stamp duty imposed on sellers and introduced several other measures to support the market.
Still, the URA Residential Price Index slumped 45 per cent from its peak in Q2 1996 to end-1998. And the HDB Resale Price Index plunged 27 per cent from its peak in Q4 1996.
2000-2009: Coping with volatility
The balancing act has become even tougher for the government in the past decade as the property market went through several cycles.
There was a short recovery from 1999-2000 as the economy improved and buyers returned to secure properties at low prices. But the market soon succumbed to a quick succession of global problems: the dotcom bust, the Sept 11 terrorist attacks, the Iraq War, and Sars.
The government introduced more supply and demand-side measures to support the market. For instance, in 2001 it lifted the capital gains tax imposed on property. The next year, it allowed buyers to use CPF savings to pay 10 per cent of the initial downpayment for private property.
HDB also allowed owners of non-subsidised resale flats bought with a bank loan to sell them after a minimum occupation period (MOP) of just one year, down from 2.5 years.
More critical changes happened in 2005. The government lifted the loan-to- value (LTV) limit for housing loans to 90 per cent from 80 per cent and allowed non-related singles to use their CPF savings to buy private property.
These measures, coupled with economic growth, finally lifted the property market out of its gloom. Between 2005 and 2007, the URA Residential Price Index soared 49 per cent and the HDB Resale Price Index rose 14 per cent.
But it wasn't long before the government had to step in to curb sharp rises in prices. It withdrew a concession allowing property buyers to defer stamp duty payment in 2006, and scrapped the deferred payment scheme in 2007.
The onset of the global financial crisis led to a short but sharp slide in private home prices. But the resale flat market chugged along nicely, and prices kept rising, save for a quarter in 2009. As private property became more affordable and interest rates stayed low, HDB upgraders sprang into action, snapping up mass-market homes and driving prices up. Speculators joined in the buying mania.
Worried that rising interest rates and a possible economic slowdown would saddle buyers with excessive debt, the government began introducing cooling measures in 2009 - by scrapping the interest absorption scheme, for example.
2010: more tightening
More policy tightening came early this year. Similar to what happened in 1996, the government imposed a stamp duty on those who sell properties within a year of buying them. It also reversed older policies, cutting the LTV limit back to 80 per cent and raising the MOP for non-subsidised resale flats to three years.
More measures were introduced in September. Among these, the government extended the holding period for the seller's stamp duty to three years. And it cut the LTV limit to 70 per cent for those with outstanding home loans.
It also required private property owners who buy non-subsidised HDB flats to sell their private property within six months of the purchase - regardless of whether that property is here or abroad. Non-subsidised flat owners have to stay at least five years in their units before they can buy private property.