Rules on property financing will be eased and investing in apartment units will be made simpler for foreign buyers.

Singapore has suffered a 37 per cent drop in property prices since 1996 because of an oversupply of housing, home ownership rates of nearly 90 per cent and a volatile economy.

Property prices in Singapore have increased by only 1 per cent in the past year compared with 50 per cent in Hong Kong and 40 per cent in Shanghai.

The Singapore index of property shares yesterday rose by 7.4 per cent its biggest gain since late 2001 while bank shares alsoperformed well on expec-tations of increased lending.

The measures appear to be intended to increasepurchases in public housing estates, where most Singaporeans own homes.

Cash downpayments will be cut to 10 per cent from20 per cent, with buyers allowed to use more of their state pension funds to buy property.

Foreigners can now buy any unit in an apartment block, except for upscale condominium units, instead of being limited to buildings that are six or more floors high. But restrictions remain on buying houses because of the small size of Singapore.

This is not the first time the government has intervened in Singapore's property market.

Property prices climbed sharply in the early 1990s before the government introduced restrictions to curb speculation, such as imposing heavy taxes on profits from units that were bought and quickly sold. The Asian financial crisis in 1997 further depressed the market.

The burden has fallen heaviest on those living in public housing estates.

The fall in property prices has meant that few have been willing to sell apartments that were bought during the property boom. Perversely, this has helped to create an oversupply of housing as new private apartments have been built to meet demand from new buyers.

Limits on allowing single people to buy public housing units and a falling birth rate have curbed demand.

Singapore has relied increasingly on foreigners to bolster the property market in recent years. Indonesians, worried about instability at home, have been among the biggest property buyers in recent years, accounting for up to 70 per cent of condominium units sold.

Singaporeans have been encouraged by the government to buy homes to produce a “stakeholder” society. But since most of thepurchases have been partly financed by an individual's state pension, it has resulted in a population that is “asset rich but cash poor”, according to economists.

With the population aging, a pensions crisis could loom unless the government finds ways to revive property sales and enable owners to recover some of their investments.
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