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Singapore announces new property cooling measures: Higher ABSD rates, tighter loan limits

Singapore announces new property cooling measures: Higher ABSD rates, tighter loan limits

HDB flats in Singapore. (Photo: CNA/Calvin Oh)

SINGAPORE: The Government on Wednesday (Dec 15) announced a package of measures to cool the private residential and HDB resale markets.

The measures include raising Additional Buyer’s Stamp Duty (ABSD) rates, tightening the Total Debt Servicing Ratio (TDSR) threshold and lowering the Loan-to-Value (LTV) limit for loans from the Housing and Development Board (HDB), said the Ministry of Finance, the Ministry of National Development and the Monetary Authority of Singapore in a joint press release.

"The Government has been closely monitoring the property market for several quarters," said the statement, which was released to the media just before 11.40pm. It added that the private residential and HDB resale markets have been buoyant, despite the economic impact of COVID-19.

Private housing prices have risen by about 9 per cent since the first quarter of 2020.

HDB resale flat values have also risen by about 15 per cent since the same time, reversing a six-year decline, the authorities said.

"Even though House Price-to-Income ratios remain below their historical averages, there is clear upward momentum. Amid the low interest rate environment, transaction volumes in the private housing market and HDB resale market have also been high despite the COVID-19 situation.

"If left unchecked, prices could run ahead of economic fundamentals, and raise the risk of a destabilising correction later on. Borrowers would also be vulnerable to a possible rise in interest rates in the coming years."

The measures to cool the private and public housing markets are meant to "promote continued housing affordability". 

The agencies said that the measures for private residential are calibrated to dampen broad-based demand, especially from those purchasing property for investment rather than owner occupation.

The measures to tighten financing conditions for both public and private housing "will encourage greater financial prudence".

The Government also will increase public and private housing supply to cater to demand. 

HIGHER STAMP DUTIES FOR THOSE BUYING MULTIPLE PROPERTIES

The current ABSD rates for Singapore citizens and permanent residents purchasing their first residential property will remain unchanged at 0 per cent and 5 per cent respectively. 

For these two groups, purchasing a second or a third and subsequent residential property will incur increased ABSD rates.

Singapore citizens will now pay an ABSD rate of 17 per cent for their second residential property, and 25 per cent for their third and subsequent residential property. This is up from the previous rate of 12 per cent and 15 per cent respectively.

The ABSD rates for permanent residents buying a second or a third and subsequent residential property has been increased to 25 per cent and 30 per cent respectively, up from 15 per cent.

Foreigners and entities will also incur more ABSD when purchasing any residential property.

 

The highest applicable ABSD will apply for purchases made jointly by two or more parties of different profiles, said the authorities. 

Married couples consisting of at least one Singaporean spouse can continue to apply for an ABSD refund when they jointly purchase a second residential property, subject to conditions.

As before, the ABSD will not affect those buying an HDB flat or EC unit from property developers with an upfront remission, if any of the joint acquirers or purchasers are Singaporeans.

The revised ABSD rates will apply to cases where the Option to Purchase (OTP) is granted on or after Dec 16. 

A transitional provision allows for the old ABSD rates to apply for cases that meet all the following conditions:

  • The OTP is granted by sellers to potential buyers on or before Dec 15.
  • The OTP is exercised on or before Jan 5, 2022, or within the OTP validity period, whichever is earlier.
  • The OTP has not been varied on or after Dec 16.

Additional Conveyance Duties for buyers of equity interest property-holding entities will be raised from up to 34 per cent to a maximum of 44 per cent.

TIGHTER DEBT THRESHOLDS AND LOAN LIMITS

The TDSR threshold will be tightened from 60 per cent to 55 per cent. This means new mortgages cannot cause borrowers' total monthly loan repayments to exceed 55 per cent of monthly income.

The new threshold will apply to loans for the purchase of properties where the OTP is granted on or after Dec 16, and for mortgage equity withdrawal loan applications made on or after Dec 16.

Borrowers with existing property loans granted before Dec 16 will not be affected by the revised TDSR threshold when refinancing their loans, the authorities said.

Additionally, in a measure specific to public housing, the tightened LTV limit for HDB housing loans will now be cut from 90 per cent to 85 per cent. This reduces the maximum amount potential homeowners can borrow from HDB.

This revised limit will not apply to loans granted by financial institutions, which will remain at 75 per cent.

The 85 per cent LTV limit will apply to new flat applications for sales exercises launched after Dec 16 and complete resale applications received by HDB from Dec 16 onwards.

More details of the Government's plans to increase the supply of public and private housing to meet housing demand will be provided later on Thursday, the authorities said.

"The measures undertaken in this cooling package will help promote a stable and sustainable property market. The Government remains vigilant to the risk of a sustained increase in prices relative to income trends."

Editor's note: An earlier version of this story said a transitional provision allows for old ABSD rates to apply if the OTP is exercised on or before Jan 5, 2020. This has been corrected.

Source: CNA/nh(ac)

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