My thoughts on the recent property cooling measures

Private property prices are soaring but the price of HDB public housing is lagging behind. These recent cooling measures introduced by the government are not meant to bring down the stock market, but rather to slow down the bigger bubble created by the property sectors. Minister Tharman qualified that they “don’t intend to engineer a market crash.”

Source: http://sbr.com.sg/residential-property/news/city-developments-be-badly-hit-property-cooling-measures

In my opinion, the government is expecting property prices in Singapore to continue to appreciate, but is trying to slow down the price increase rate so as to allow the middle income Singaporeans to afford public housing and likely, to avoid a property bubble that affected Japan from 1986 to 1991. Bank borrowing rates now are cheap and thus, spurring foreigners to venture into the Singapore property market.

An example of this would be the crash of the Japanese asset price bubble from 1986 to 1991. The bubble's subsequent collapse lasted for more than a decade with stock prices initially bottoming in 2003. Due to the easily obtainable credit that helped fuel the real estate bubble for several years, and banks issuing out loans with low interest rates and have very little guarantee of being repaid.

More info here: http://www.docstoc.com/docs/77782026/Japanese-Asset-Price-Bubble---PowerPoint

Current housing loan from Bank of China (BOC)

Average of (SIBOR + SOR /2) is approximately 0.4% per month. 

The per year interest rates in general works out to be between 1.2-1.5% which is considered to be very low.

Example of a possible risk of increasing interest rates

If interest rates will go up from 1.5% to 6%, property investors will start to panic when they do not have enough money to pay the loans and start to default on their housing loans. Banks will start selling off properties at dirt cheap prices after confiscating from people who defaulted on their housing loans. This risk if applied to Singapore will greatly affect the property market as Singapore has a small land bank and if cheap properties fall into the hands of foreigners, it will affect the credibility of the Government to provide affordable housing for the public. 

Conclusion

Further cooling measures could be expected from the government to curb property prices. However, some of the developers will still be able to sell off their properties quickly due to the prime location of their development properties. One example is Bukit Sembawang, which prices soar from $4.85 to $6.5 in a span of about 6-7 months. I will not further elaborate the details but if you are interested to see what land they develop properties on, visit http://www.bukitsembawang.sg/