Minister Shanmugam assures Government will not let market collapse – economic analyst stands by Iceland-style meltdown

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Speaking to over 2000 property agents in ERA Realty Conference yesterday (3 Feb) the Law and Home Affairs Minister, Mr K Shanmugam, responding to a question on when the Additional Buyer’s Stamp Duty (ABSD) would be removed said that the Government has a rough idea when to do so, but will not prematurely announce it.

“The question is when (the ABSD will be removed), and many analysts have tried to set a target of how much prices will come down before the government removes the measures, but I do not think that is the case. The government is concerned about Singaporeans over-leveraging themselves as there are many potential buyers waiting on the sidelines,” the Minister said.

“Right now, we’re not sure how quickly prices will rebound if one of the measures is removed, and I think that is the litmus test for the government. They don’t want to remove something and cause prices to rebound, derailing the measures. They are looking at market stability rather than a target price. When the time comes, they will make the decision to reverse the measures, which will be a quick and easy process,” he added.

Assuaging property agents concerns that the property market will crash Mr Shanmugam said, “we cannot have a healthy economy if the property market has crashed. So it’s not in anybody’s interest to see it crash.”

The ABSD was revised upwards in January 2013 to better control Singapore’s rising residential property prices. The additional tax was first introduced in 2011.

ABSD requires Singaporeans to pay an ABSD of 7% for a second property, and 10% for a third and subsequent property. Foreigners however, are required to pay an ABSD of 15% for their first and subsequent property purchases.

Meanwhile an economic analyst, Jesse Colombo, describing the Southeast Asian boom as a bubble-driven illusion, is standing by his prediction – that Singapore’s economy is headed for an Iceland-style meltdown.

Writing in his Facebook page, the analyst referring to news “Hong Kong housing bubble suffers spectacular collapse: sales plunge most on record, prices crash”, said “there are many parallels between Hong Kong and Singapore’s bubbles and I believe these are the “next Ireland and Iceland.””

In 2014 when the Mr Colombo made the prediction, the Singapore Government has countered his argument saying serious observers and investors are not in doubt about the Singapore’s financial health, and that the government has “taken decisive steps to cool property demand and prevent excessive leverage”.

The analyst dismissed the Singapore government’s arguments in an op-ed for Forbes magazine, “It’s not a bubble until it’s officially denied, Singapore edition”.

Jesse Colombo correctly predicted the oil bust in June 2014, when crude oil was trading at over US$100 per barrel.