By targeting sources of risks including transactions of speculators, foreigners and corporates through stamp duties, the cooling measures undertaken by the Singapore regulator since 2013 have successfully limited the excessive property price increases seen before 2013.
For example, stamp duties worked to limit excessive property price increases in Singapore by curbing the demand of speculators, foreigners, and corporates, which were found to be significant drivers of residential property prices.
Prices in the private residential property market increased by almost 16 per cent between 2010 and 2013. Speculative activity, as indicated by the large shares of short-term resales, as well as interest from foreigners, was high during this period. Notably, purchases by foreigners peaked at about 20 per cent of all transactions in 2011.
Short-term resales could be positively related to residential property prices as flippers were timing the market, selling their properties when prices were rising fast.
Foreigners’ purchases were found to have the largest impact on the growth of residential property prices, with the effects “economically significant”. The share of transactions by foreign buyers account for 5-6 per cent of total transactions over the past three quarters. For that of corporates, the share stood at 1-2 per cent.
Despite making up a small fraction of the residential property market, speculators had an outsized impact on property prices as well. Property flippers – making up about 5 per cent of total resale transactions between 2004 and 2012 – can influence property prices by inducing a positive feedback to owner-occupiers and rental investors.