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Costas Paris & Gaurav Raghuvanshi
The Wall Street Journal
Singapore announced Monday measures to cool the property market as the island state’s rapid economic recovery fuels growth in property prices.
The Monetary Authority of Singapore, the Ministry of Finance and the Ministry of National Development said in a joint statement the government will introduce three new measures to “temper sentiments” in the private property market and “encourage greater financial prudence among property purchasers.”
Property buyers with outstanding loans on one or more properties must pay a bigger portion in cash—at least 10% of the value, up from 5%—and borrow only up to 70% for the purchase, down from 80%.
“We took steps last year and earlier this year to cool the private-property market, but prices are still going up. This is engaging our attention,” Prime Minister Lee Hsien Loong said ahead of the official announcement during his National Day Rally speech Sunday.
He also said Singapore will limit its number of foreign workers to a third of the working population. About 80,000 foreign workers will be added in 2010, lower than the 100,000 estimated earlier, he said.
“We have moved fast over the past five years,” he said. “But now I think we should consolidate, slow down the pace. We can’t continue like this, increasing the population by 100,000, 150,000 a year indefinitely.”
The move touches on a hot-button issue in Singapore, where foreign workers have long had a major role but where rising prices and wage pressure are beginning to fuel discontent in the tightly controlled city-state.
The real estate moves are the latest by an Asian economy to rein in property prices as growth rates jump past the U.S. and Europe. China has taken steps to curb property prices, while Hong Kong earlier this month tightened mortgage limits.
In an effort to keep private home prices under control, Singapore earlier this year increased the land supply for private developments and what’s known as a stamp duty for sellers, and also boosted the down payment needed to purchase a house or apartment.
Mr. Lee said Singapore’s economy has strongly recovered from the global economic crisis and reiterated that gross domestic product will grow between 13% and 15% this year.
“The economy has rebounded. Businesses are thriving and we can look forward to more overtime and more bonuses. The future looks bright, but we still have to work hard to continue prospering,” he said.
The prime minister sought to address concerns among the local population that foreigners are getting better paying jobs.
He said Singapore will continue to depend on foreign workers as it expands, but will limit their numbers. He also said a levy of around 300 Singaporean dollars (about $222) that employers pay to the government each month for any foreign blue collar worker they employ will be increased to manage the flow of immigration, but did not say by how much.
But he stressed that foreign talent will continue to be welcome because “we have very good people, but never enough.”
Singapore’s GDP grew a blistering 24% in the second quarter from the first quarter in seasonally adjusted, annualized terms and 18.8% from the year-earlier quarter.
Singapore was among the hardest hit economies in the 2008 global financial crisis, but was quick to recover as a revival in Chinese demand powered an upturn region wide, helping to drive the island-state’s export-dependent economy.
But Mr. Lee said such pace of growth can’t be sustained and that if Singapore manages to grow between 3% and 5% in the years ahead, that would be satisfactory.
“There will be future crises and we should be ready for them,” he said, adding that the country must continue to push to improve productivity.
He said Singapore managed to recover from the economic crisis because, unlike the U.S., Japan and Europe, it built up huge reserves which it partly used to cushion the impact from the recession and faced no debt issues.
Mr. Lee said the two casino resorts that opened in Singapore this year have helped add 20,000 jobs and will contribute tax revenues to the government’s coffers.