The dramatic rebound of the real estate sector in Singapore, including the renewed interest of foreign buyers, has become a big concern to government officials. This resulted in new measures being created to stop property speculations. The government’s earlier measures to boost the housing market were successful, and its effort to slow it down is working as well.

After the prices of residential property in Singapore increased 15.75 percent in the third quarter this year, the government warned against property speculations, as well as the formation of property bubbles. From 953 housing units sold in the fourth quarter of last year, home sales surged to 10,120 units in the second quarter and 11,518 units in Q3 2009 this year.

After strengthening from 2005 to 2007, home prices in Singapore declined in 2008 due to the global recession. As global demand plummeted, Singapore’s economic condition shrank 9.5 percent in 2008 to the first quarter of 2009, and there was a 24.9 percent fall in home prices during the year to the second quarter of 2009.

In Q3 this year, Singapore’s economic cycle reversed and GDP increased by 0.8 percent year-on-year. Prospects of an economic stability, combined with low borrowing costs, triggered the massive increase in home prices.

With this, the government warned that it will manage the housing cycle.

In September, the government implemented measures to cool down the housing market, including policies, making it difficult for all households to defer mortgage payments.

“We do want to manage the property cycle as best we can, prevent boom and bust,” said Finance Minister Tharman Shanmugaratnam, admitting that it’s uneasy to foresee the property needs of the country. The government is reviewing the use of other measures to manage the home price cycle, such as modifying rules on credit, adjusting land supply and in extreme cases, amending the tax policies of the country.

The MAS also noted in its Financial Stability Review released in November: "As Singapore emerges from recession and with the market expecting low interest rates to persist for some time, the risk of a renewed escalation of speculative momentum cannot be discounted."
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