Government Steps In To Stabilise Property Market
The Government has announced a series of measures to curb excessive speculation and forestall excesses building up a property bubble in Singapore.
The most significant impact to potential property buyers is the removal of the Interest Absorption Scheme and the Interest-Only Housing Loan scheme (with effect from 14 Sep 2009).
Both schemes allowed the property owner of uncompleted properties to effectively enjoy the benefits of the earlier defunct deferred payment scheme, where loan repayments usually started only with the issue of the Temporary Occupation Permit. Many property buyers benefited from these schemes as they forked out only 10-20% initial down-payment.
As such, genuine buyers will have to start servicing their loan commitment much earlier and prepare their cashflow accordingly to pay the bank on schedule.
Will the banks be able to counter with another innovative workaround? In any case, my personal take is for an Ang Mo Kio residence to fetch more than $1,000psf, say with a $1,000,000 price tag on a 80% loan over tenure of 30 years at average 2% interest, the monthly installment of $3,000 sure isn’t that affordable especially for a young couple. Given the property frenzy of late, it does seem surreal we are in midst of a recession.
