New stamp duty taxes to cool Singapore's property market

Just read online that the government is imposing new stamp duty taxes. Check out the following articles:

http://www.businessweek.com/news/2011-12-07/singapore-imposes-new-stamp-duty-taxes-to-cool-property-market.html

http://www.channelnewsasia.com/stories/singaporebusinessnews/view/1170002/1/.html

In terms of the broader economic policy considerations, as always, there is a balancing approach that the government is trying to take here. If we free up the markets too much, we risk huge and sudden inflows and outflows of funds. This is destabilising because if all the investors of the world are trying to cash in on the booming property market in Singapore and invest all at once, property prices will sky-rocket i.e. inflation occurs. On the other hand, if we tax too heavily, businesses and individuals alike will be deterred from investing in Singapore property, which would lead to lower economic growth. Already I'm sure the various property investment companies aren't too pleased with this new tax.

Politically, I imagine that it would also not be popular for the government to allow a situation where foreigners own the vast majority of private residential property. That may well be the case in a totally free market especially with stories of the uber rich mainland Chinese buying up Sentosa Cove bungalows. This new tax is broadly in line with the efforts of the government to make housing affordable to Singaporeans, which was one of the main complaints made during the recent General Elections. However it is worth noting that this tax is only for private residential property and does not affect HDB flats which is the concern of Singaporean families with an average income. That said, the tax increase also affects PRs and Singaporeans, but to a lesser degree than foreigners. As an aside, I like that the government thought about what would happen if a citizen bought property with a foreigner and covered off that loophole.

In land-scarce Singapore, it seems that property prices have been on an upward trajectory and will as a general trend continue to just keep on rising unless the government takes increasingly drastic action such as higher taxes or massively increasing the supply of property. Singapore is becoming like Hong Kong in this regard. Whether the government introduces more or higher stamp duty taxes will depend on how successful these measures are at cooling the property market.