Hong Kong vs. Singapore: managing liquidity driven property market

Hong Kong and Singapore are both confronting the wall of money, so both are having pressures (naturally) to stop home prices from going higher. I have missed this news earlier, but yesterday, the Singapore government announced more measures in curbing speculations in the real estate market.

The new measures, which became effective today, asked buyers with existing mortgages on one or more properties to put up more down payment when buying more properties, thus the loan-to-value ratio on new loans will drop from 70% to 60% (this mimics the rules in China for buyers who buy second or third homes). The holding period for seller’s stamp duty is extended from 3 years to 4 years, and the stamp duty rate will be raised to 16% from 3% for properties sold in first year, 12% from 2% in second year, 8% from 1% in third year, and 4% in fourth year (this is something which Hong Kong government learned from Singapore, and now Singapore is stepping it up). Loan-to-value ratio for corporates buyers will also be dropped to 50%.

On the whole, it seems that the measures weren’t much different from failed attempts in Hong Kong and possibly China. I do not wish to pretend to be very familiar with Singapore market (because I am not), but from the recent experience in Hong Kong, I suspect that raising seller stamp duty will not stop property prices from going higher, but creates short-term supply squeeze in secondary market as home owners will try to avoid sell their properties shortly after buying. Speculators will certainly be walking away, but the expectation of high economic growth and inflation will probably remain to be the big reasons why real estate looks like a good investment even they are already expensive.

I suspect that Asian real estates are probably all in bubble (I would definitely need to look for more numbers to say that for sure). Following my forecast for Hong Kong real estate market, however, I will not be surprised that real estates can still go up in prices because there are still ample of liquidity around. When they drop in prices, it will be quick and unexpected, like most bubbles.

For global comparison of home prices, see the table compiled by the Economist.

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About Zarathustra

Zarathustra: Founder and Managing Editor of Also sprach Analyst. Once an analyst, now an investor and entrepreneur. Based in Hong Kong, but Londoner at heart.