It is not unexpected that the Singapore government will come up with more ways to cool the upbeat property market. And in a knee jerk reaction on property stocks yesterday, closed lower after a sharp sell-off.. Leading the pack was Allgreen properties (fell 7.9%) with CDL next in line (fell 7.6%). The latest measures announced by National Development Minister – Mah Bow Tan in Parliament yesterday “It is in everyone’s interest to have a steady property market where prices move stably in line with economic fundamentals. “

These measures that Mr Mah had announced affects the Interest Absoption Scheme (commonly known as IAS) and the Interest Only Housing Loan (commonly known as IOL), were banned to curb the rocketing prices and sudden surge of property buyers in recent months.

The ban however DOES NOT affect property projects that have been launched and offer IAS. The scheme can continue to be offered to buyers at these developments.

The government’s strategy is a two pronged approach, on the demand side the removal of the IAS and IOL will impact buyers, on the supply side, it has reinstated the confirmed list of the Government Land Sales programme in the first half of 2010.

Our analysis of the situation is this. The government can reinstate the GLS programme, it is still for the developers to want to buy – which is likely that they will to add to their land bank. We believe that the removal of IAS at new launches will have minimal impact, as it has proven that only about 15-20% of buyers at property launches choose IAS. It is too early to claim that this tactic of removing IAS will or will not work. There are of course genuine buyers (not speculators or specuvestors), who are in need of these schemes.

Take Trevista for example, situated in the mature town of Toa Payoh, with limited new flats in that area, first time property buyers that missed the boat for The Peak @ Toa Payoh, could try their luck with Trevista, and yes it is still offering IAS. Speculators and Specuvestors, especially experienced ones know that with IAS, the effective price of the property is higher, hence affecting their margin. So it is unlikely that they use IAS when trying to flip, at Trevista, only 20% of buyers opted for IAS.