Singapore unveils new property cooling measures

Cheryl ChiewDecember 16, 2021

Buildings singapore

The new Singapore property cooling measures, which include a higher ABSD, lower TDSR, and tighter LTV, will take effect from today, 16 December 2021.

The Government on Wednesday (15 December) unveiled a package of measures to cool the private residential and HDB resale markets.

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

The curbs will take effect from Thursday (16 December).

“The Government has been closely monitoring the property market for several quarters. The private residential and HDB resale markets have been buoyant, despite the economic impact of COVID-19,” said the authorities.

Related article: Singapore Property Market Outlook 2022 Overview

They noted that private home prices have increased by about 9% since the first quarter of 2021, while HDB resale flat prices rose by about 15%, reversing a six-year decline.

And while House Price-to-Income ratios have remained below historical averages, there is “clear upward momentum”.

Transaction volumes within the HDB resale market and private housing market have 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,” read the statement.

The measures to cool the public and private housing markets are targeted at promoting continued housing affordability.

The authorities explained that the measures for private residential are calibrated to dampen broad-based demand, particularly from those buying property for investment instead of owner-occupation.

The measures aimed at tightening financial conditions for both private and public housing will encourage greater financial prudence.

Related article: Rising Interest Rates Ahead in 2022/2023: How This Affects Your Mortgage and How to be Prepared

To cater to demand, the Government will also ramp up the supply for both public and private housing.

Currently, the ABSD rates for Singapore citizens and permanent residents (PRs) buying their first residential property will continue to be unchanged at 0% and 5%, respectively.

However, the ABSD rates will be increased for their second or subsequent residential property purchase.

Singapore citizens will pay an ABSD rate of 17% for their second residential property, up from 12% previously.

For their third and subsequent residential property, Singapore citizens will pay an ABSD rate of 25%, up from 15% previously.

Permanent residents will see ABSD rates for their second or third and subsequent acquisition increase to 25% and 30%, respectively, up from 15%.

Foreigners and entities will also see higher ABSD rates when buying any residential property.

Foreigners acquiring properties here will have to pay an ABSD of 30%, up from 20%, while developers of residential projects will pay an ABSD of 35%, up from 25% previously.

“This 35% may be remitted under the Stamp Duties (Non-licensed Housing Developers) (Remission for ABSD) Rules and the Stamp Duties (Housing Developers) (Remission of ABSD) Rules, subject to conditions,” said the authorities.

They added that “the non-remittable component remains unchanged at 5%”.

They noted that the highest applicable ABSD will apply for acquisitions jointly made by two or more parties of different profiles.

If the buyers are married couples with at least one Singaporean spouse, they can apply for a refund of ABSD, provided they sell their first property within six months of acquiring their second property.

“The revised ABSD rates will apply to cases where the Option to Purchase (OTP) is granted on or after 16 December 2021,” said the authorities.

A transitional provision allows for the application of the old ABSD rates in cases that meet all the following conditions.

a. The OTP is granted by sellers to potential buyers on or before 15 December;

b. The OTP is exercised on or before 5 January 2022, or within the OTP validity period, whichever is earlier; and

c. This OTP has not been varied on or after 16 December.

The authorities added that the Additional Conveyance Duties “for buyers of equity interest property-holding entities will be raised from up to 34% to up to 44%”.

The TDSR threshold will also be tightened to 55% from 60%.

“The revised TDSR threshold will apply to loans for the purchase of properties where the OTP is granted on or after 16 December 2021, and for mortgage equity withdrawal loan applications made on or after 16 December 2021.”

The new TDSR threshold will not apply to borrowers with existing property loans granted before 16 December when refinancing their loans.

Meanwhile, the LTV limit for HDB housing loans will be tightened to 85% from 90%.

The revised LTV limit will not apply to loans extended by financial institutions, which remains at 75%.

“The LTV limit of 85% will apply to new flat applications for sales exercises launched after 16 December 2021, and complete resale applications which are received by HDB from 16 December 2021 onwards.”

Related article: Feb 2022 HDB BTO Launch Review: Geylang, Kallang/Whampoa, Yishun, and Tengah

Dr. Tan Tee Khoon, Country Manager, PropertyGuru Singapore, noted that the HDB buyers taking bank loans are unaffected (remaining unchanged at 75% for bank loans); only those who plan to take loans from HDB are affected. Additionally, first-time buyers aren’t affected by the hike in ABSD rates, only by the change in TDSR.

“This is a move by the Singapore government to reduce household mortgage debt given the economic uncertainties caused by the pandemic and easy accessibility to low interest rate loans. While LTV remains at 75%, new borrowers are subject to more stringent credit assessment.”

He added that multiple groups of property buyers will be affected by the increase in ABSD. 

“What the hikes in ABSD mean in real terms is that for a million-dollar second or third property purchase, a Singaporean pays another $50,000 to $100,000 and for PRs, an extra $100,000 to $150,000. Foreigners pay another 10% more as their ABSD for their first property is raised from 20% to 30%.”

As a result of these new cooling measures, Dr. Tan Tee Khoon postulates that buying overseas properties and commercial properties may make a comeback as there is no ABSD imposed.

Details of measures to increase the supply of public and private housing will be announced by the Government on 16 December.

“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,” said the authorities.

Looking for a property in Singapore? Visit PropertyGuru’s ListingsProject Reviews and Guides.

Cheryl Chiew, Digital Content Specialist at PropertyGuru, edited this story. To contact her about this story, email: cheryl@propertyguru.com.sg.

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