Martin Lee @ Sg
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Interest Absorption Scheme Stopped

After weeks of warning, the government finally announced steps to cool down the Singapore property market yesterday.

The first to go is the interest absorption scheme (IAS), which allows buyers of new properties to pay only the downpayment and nothing more until the property is completed. This scheme is particular useful to property speculators who hope to cash in on their property investment before it is completed.

Another scheme to go is interest-only housing loans. These loans are designed for buyers to pay a very small installment until the property is completed. These loans will now be forbidden.

The two “bans” take effect immediately across all private residential projects. Only uncompleted properties which have already been launched under the IAS prior to yesterday can continue to do so.

Lastly, the government will also resume land sales from next year. This will help increase the supply of new sites and cool rising prices.

The measures will no doubt dampen the sentiments of property speculators, who will now have to fork out more capital before they can buy a property.

With less competition from speculators, serious property buyers will have a better chance of finding a more affordable home.

Leave a Comment:

Alan says 11 years ago

Hi all…

What I can say is, cheap/expensive is very much relative on how much is the household income, how much you like it and the
value it can give towards you. Property is a hedge against inflation.

As long as there is increase in population and Income, the price will still increase be it 99 or FH. No one can outlive 99 lease as most owners are buying at age 30-45 and we’re half way to our grave. Also some places, they only offer 60 years lease.

End of the day, buy what you need and take it as a bonuse if you’re able to flip or get capital appreciation from your house. So you don’t get yourself so stress out.

Last but not least, do you find it’s only the buyer’s are complainting…. We don’t see seller complaint about high price…. To me, other than property, my best bet against inflation is to increase the income.

    lioninvestor says 11 years ago

    Hi Alan,

    Even though sellers don’t complain, I think it’s a zero sum game for them they are going to buy back an equivalent unit after they sell one.

    They only really make a profit if they downgrade or it is an excess unit they are selling.

Huge Debt says 11 years ago

Hi James,
I encountered similar situations 3 times the last 2 months. Agent told me developers instructed them “give me your cheque as a deposit, then I let you into the showroom to choose your choice units”. Must bring cheque in order to enter the showrrom. It started with [email protected], which I was invited to a preview, by invitation cards. Then when the preview day came, agent call me to bring a cheque of X amount as deposit and give it to her. I was very angry. I thought I was the previliaged one, but end up kanna sidelined. She kept apologizing to me and said this is the instruction from developer. Why did this happen? Partly speculators, partly kiasu people. They queue up for 2 days before the preview (mind you, it’s only a preview by invitation and not the actual launch). Regarding holding on to the units, what I meant was finished units, already TOP, be it 99 yrs or freehold. There are many units like that in S’pore today in completed projects that I went for viewing. The condo in front of my house TOP 6 years ago but still with many vacant units. Developer want to sell only at current prices even though the previous launch price was already making a nice profit. I visit 2 vacant units there and went home scratching my head, why?
Speculators typically will buy 3 to 5 units, in each development and flip it the very next day through the sales agent. They took advantage of the DPS, IAS or ILPS to buy many units with a sum of money. You just need a million dollar to flip 3 to 4 units typically. If you are observant you will also noticed most of the time, 1 agent has quite a number of units for sale in the same project, asked more questions and you will be find out some units are owned by 1 person. I actually did a simple study on this few months back. My estimate is 1/3 are speculators, 2/3 are for own stay or long term investments.
All those factors above add up to the high prices today and will keep spiralling upward because of greed and fear.
If the government don’t step in, the genuine buyers will suffer. SLA is also able to see the speculative trend through the caveats lodged and sale documents. How can one person live in so many units? This time round, the government did the right thing, but I think the 4 years could be reduced to 2 years instead.

Huge Debt says 11 years ago

Hi Alice
How long you have to wait depends on how flexible you are with your requirements, and how many criterias you have. There are many unsold HDB left, brand new, you can get a copy from HDB Hub. Is it also a must that you buy now, or can you afford to wait for the euphoria to die down?
Honestly, I tend to agree with MBT, many s’poreans are very choosy and unwilling to compromise at all. Just take an example, most people don’t want to buy a unit on 2nd floor and only want high floor, only that block, near market, near MRT, etc, etc. The list goes on and on.
My example in the 90s when I first started my career is I applied for a unit in Tampines because all my families are in the East. But was advised by HDB that my chance is slim and they recommended I consider Jurong West. Bear in mind, my families are in the East and I worked in the North. Most people will reject it, but I took it and choose a unit that nobody wanted. I stayed for 5 years and sold it for a nice profit, then upgrade back to the East with a resale unit. My point is we need to be flexible, s’pore is not that big to travel a bit or upgrade later and many things are just a matter of adaptation. I’m not saying that you must do what I did, but my point is there are choices in life if we are flexible. So good luck in your search.
Recently, I had wanted to buy a condo, but i think today’s condo price is not sustainable and I’m willing to wait, that’s another flexibility.
Good luck, Alice.

    alice says 11 years ago

    Thanks Huge Debt. Your advice is very much appreciated.

      Huge Debt says 11 years ago

      Hi Alice, you may want to consider renting also. The priviate condo rental market is still quite weak in some areas. Rent for 2 to 3 years and buy later if you are not in a hurry to buy.

Intheknow says 11 years ago

for property, i must say i am Out-The-Know….

i only know current prices are unsustainable!

Huge Debt says 11 years ago

Yup Lioninvestor, I agreed with you on the costs of holding land but noticed I used the words “deep pocket”, the small ones cannot afford to. For the deep pockets, there are several ways to mitigate the costs: land may had been fully paid; rental to offfset costs, etc. I had identified 2 developers through my observations by visiting completed apartments and as an ex-property agent but I will not named them here. You need to survey the ground to know what I saw. There are many apartments TOP 5 to 10 years ago but still not sold because developer insist on higher prices like current prices, and it’s much higher than previous launch price. Even for the smaller developers, as long as they break even by selling sufficient units previously, the vacant ones are their hopes for big profit when market reach a euphoria stage. Very creative strategies in this industry…
I read the minister message in detail last night, and in fact, he shared my concern and I’m glad that he is aware of these tatics. Plse see details below:
c) Giving developers up to four years to dispose of all residential units in development;
d) Allowing developers to rent out unsold units for a maximum
of four years (all four expire 21 January 2010);
e) Allowing up to two years of property tax deferral for land under development (expire 21 January 2011).
It’s not a straight forward subject, and not many people really understand it well. So be prudent when you listen to positive comments and interviews by “insiders”.

    lioninvestor says 11 years ago

    Hi Huge Debt,

    I have to say the property market is something I am not an expert in so thanks very much for sharing your knowledge.

    alice says 11 years ago

    Huge Debt,

    thanks for your detailed reasoning. I just wish to get a reasonable priced resale hdb in coming years, not for investment purpose. how long would i have to wait?

    thanks in advance!

    James Tan says 11 years ago


    Just my two cents’ worth…

    For freehold land or 999-year leasehold land or similar, yes, the tactic would work, as there is no limit to the end of the land lease date.

    However, for 99-year leasehold land, holding land for 10 years and not TOP would put the property in a very unfavourable position. This is where an “educated” property buyer would need to know whether the property is worth that much given that the lease period has lapsed.

    Again, this is willing buyer willing seller… I have visited a few launches but laughed and walked off when I was asked to present a cheque. I find that it has really turned into a game of “Who dares wins!”… Well, I don’t “dare”, so I would rather walk away from a “good” opportunity than end up “sorry” in the future…


Huge Debt says 11 years ago

There’s one more important factor that drove up the prices of property which I’m not sure if government is aware of or doing anything about it.
I read from newspapers and property reports that some developers delibrately pushed back the TOP or launch of new properties so as to restrict supply.
1. That has caused some potential buyers to worry that they have “no house to stay” mentality and rush into the traps and push up prices. I go to show room almost every week for the last few months and this is a common tune sung by property agents. After hearing this message for a while, I became worried as well.
2. This strategy is also unfair to early bird buyers who has a genuine forecasted need for a house at some future dates, as they will receive their keys much later because developers want to sell out before starting construction. I recognized this problem for some projects through my visits to a few projects in D9, 10 and 11. Demand was poor previously due to high prices. The project had been on sale for a year and there’s no sign that the developer is intending to start construction. So I pity the early birds.
I hope the government will set a resonable timeframe for developers to launch their projects and start constructions once the land is sold and not let the developers decide if they want to hold the land indefintely. If all the deep pockets developers use the same strategy to withhold supply until prices reached their target, then no matter how much land the government sells, it will not solve the problem for genuine home buyers. Hope the government recognized this issue as well.

    lioninvestor says 11 years ago

    Hi Huge Debt,

    It’s true that developers will hang on to their projects when the market is bad and vice versa.

    But holding on to land comes at a cost and the weaker players might not be able to do it indefinitely. Even the stronger players will not want to hold on for too long as it will then affect their cashflow/profits.

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