SINGAPORE, July 5 (Reuters) - Singapore on Thursday announced a five percentage point rise in stamp duty for some home buyers and tightened housing loans in a bid to cool the property market and keep price increases in line with economic fundamentals.
After falling for nearly four years, house prices started rising in the third quarter of last year and have increased by 9.1 percent over the past year, the Singapore government said in a statement.
“The sharp increase in prices, if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply,” it said.
Demand for private residential property has also seen a strong recovery as transaction volumes continue to rise, the joint statement by the Finance Ministry, the Ministry of National Development and the central bank said.
Stamp duty for Singaporeans and permanent residents buying their first home will be unchanged, but those buying their second or more properties will see increases of 5 percentage points effective on Friday, it said.
Foreigners would now have to pay stamp duty of 20 percent versus 15 percent previously, while the amount goes up by 10 percentage points for “entities”.
An additional 5 percent stamp duty will be introduced for developers buying residential properties for development, it said.
The loan-to-value limits will be tightened by 5 percentage points for all housing loans issued by financial institutions effective Friday.
Singapore this week reported a second quarter home price increase of 3.4 percent from the previous quarter.
On Wednesday, the head of the Monetary Authority of Singapore, Ravi Menon, said the recovery in the property market was welcome but should not veer too far from economic fundamentals.
Reporting by Jack Kim and Aradhana Aravindan; Editing by Nick Macfie