Singapore yesterday moved to cool its property market for the third time in a year, amid worries that low interest rates and rapid economic growth are generating a bubble in much of Asia.

The island state’s announcement follows similar moves by Hong Kong, Australia and China.

South Korea, however, said at the weekend that it wanted to boost its property market to shore up the troubled construction industry. The government eased mortgage lending rules for low-income home buyers and extended tax breaks.

Singapore’s action follows concern about the role of speculators in a 38 per cent rise in average private residential prices for the year to June 30. This took price levels above the previous peak in June 1996.

The government said it would impose a 3 per cent tax on resales within three years, up from a previous one-year period. It also raised the minimum required deposit on second homes from 20 per cent to 30 per cent of the purchase price.

Analysts said the authorities appeared most concerned about the affordability of government-built flats, which provide homes for about four-fifths of Singaporeans. The Housing Development Board resale price index, which tracks sales of these properties, rose 4.1 per cent in the three months to June. 

Chua Yang Liang, head of south-east Asia research at Jones Lang LaSalle, a consultancy, predicted that quarterly price growth would slow to 1-2 per cent for public sector resale properties, and 2-3 per cent for private homes.

Lien Hsien Loong, the prime minister, said that Singapore’s objective was “to make sure [that] in the long term Singaporeans can own their homes and afford [them], and it will be a gradually appreciating asset”.

The ruling People’s Action party is expected to call an early election within six months to capitalise on the country’s recovery from the global financial crisis.

Hong Kong raised minimum deposits for upmarket properties earlier this month and released additional land for development following price rises of about 45 per cent since January 2009.

In April, Australia reinstated restrictions on foreign investment in residential property, following months of complaints that foreigners were pushing up prices.

China’s efforts to cool its property market are probably the toughest, but they also include scope for flexibility at the local level where the rules are enforced.

The general view is that Beijing will keep its policy measures in place until there are clear signs that prices have fallen, partly because it would lose credibility if it reversed its stance too soon.

Some developers have predicted efforts to cool the market, such as a property tax, if prices fail to drop. Xia Bin, an adviser to the Chinese central bank, said at the weekend that policy would not be relaxed in the short term.

Additional reporting by Song Jung-a in Seoul, Geoff Dyer in Beijing and Peter Smith in Sydney