(Bloomberg) — Singapore home purchases fell last month after the government curbed a market practice seen to be inflating sales figures and to discourage speculation in the property market.
Apartment sales declined 51% to 642 last month, Urban Redevelopment Authority data released Monday showed. Sales in September reached the highest in more than two years.
The drop comes after the government tightened a market practice in September involving what’s called options-to-purchase. It’s an agreement where buyers reserve a residential property they intend to buy, with the rights expiring three weeks later. If no purchase is made in that time, the seller has to pay fees to forfeit the reservation.
However, developers can re-issue the options and the time given to buy the property can run for more than a year. The rationale was to give buyers time to sell their existing home, but the system has led to situations where some buyers agree to purchase units only to backtrack, thus inflating sales figures.
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Since the end of September, developers can no longer re-issue options-to-purchase within 12 months of the expiry of the earlier agreement. They also can’t provide upfront agreements to buyers to re-issue options-to-purchase.
After Singapore lifted its two-month lockdown in June, home sales rose for four consecutive months until October. With prices gaining 0.8% last quarter, the property market is seen as weathering the city-state’s worst recession as low interest rates and government stimulus prop up demand.
The new rules will not be a major drag on the market as they merely sieve out buyers who still need time to sell existing assets, said Nicholas Mak, head of research and consultancy at APAC Realty Ltd. unit ERA. There are still more buyers looking for new units, especially those upgrading from public housing apartments, he said.
“We can expect home sales to moderate but that’s also because it’s the year-end, which is typically the lull period,” Mak said. “But from January onwards, the market will pick up because of new launches.”
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