Market Updates Feb 20, 2010
New property rules
Government steps up moves to cool the sizzling property market yesterday.
First, anyone who sells a property within a year of buying it will have to pay stamp duty of around 3 per cent. This is on top of the stamp duty you had to pay on the purchase.
Second, lending institutions will now be allowed to lend only up to 80 per cent of the purchase price, not 90 per cent. Buyers will have to come up with at least 20 per cent themselves. Housing Board loans are not affected by this change in what is called the loan-to-value (LTV) limit.
The sellers’ stamp duty will hit short-term speculators, observers said, while the change in the bank loan limit is likely to weed out marginalised buyers. The measures will affect only a limited number of buyers but experts feel they could have a psychological effect on the market. There is also concern that tougher steps are in the pipeline.
Singapore GDP Forecast
SINGAPORE’S economy, which contracted 2 per cent last year, is expected to grow at 4.5 to 6.5 per cent this year, adding to evidence of a sustained regional recovery.
The Ministry of Trade and Industry gave the revised GDP growth forecast in a statement on Friday morning adjusting earlier prediction for the economy to grow 3 to 5 per cent in 2010.
US Federal Reserve Raises Interest Rates
The Fed increased the discount rate (the cost of direct loans to banks) by a quarter-point to 0.75 percent on Feb. 18. This represented a “normalization” of lending rather than a change in policy, said officials. Officials also repeated that economic conditions warrant low levels in the federal funds rate “for an extended period.”
Federal Reserve Chairman Ben S. Bernanke will probably assure Congress that an increase in the benchmark interest rate isn’t imminent during his semi-annual report on the economy and interest rates to House and Senate panels Feb. 24- 25.
The dollar posted its sixth straight weekly gain against the euro, the longest streak since 2000 and Treasuries fell, pushing yields to the highest levels in at least five weeks, following the decision.
Fed Bank of St. Louis President James Bullard said expectations for a rate increase were exaggerated. Markets will likely stablise once investors are assured Fed is confident of the economy but will keep interest rates low.
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