Singapore Government Announced Property Cooling Measures

[Dennis Ng]

30 Aug 2010 - MEASURES TO MAINTAIN A STABLE AND SUSTAINABLE PROPERTY MARKET

1 The Government announced today 30 Aug 2010 the following measures to maintain a stable and sustainable property market:

Increase the holding period for imposition of Seller’s Stamp Duty (SSD) from the current one year to three years.


For property buyers who already have one or more outstanding housing loans1 at the time of the new housing purchase:


Increase the minimum cash payment from 5% to 10% of the valuation limit2; and


Decrease the Loan-to-Value (LTV) limit for housing loans granted by financial institutions regulated by MAS to these buyers from the current 80% to 70%.


The measures will take immediate effect on 30 August 2010.

2 The Government's objective is to ensure a stable and sustainable property market where prices move in line with economic fundamentals. The property market is currently very buoyant. While the rate of price increase of private residential properties has moderated in the last 3 quarters, prices have still increased significantly by 11% in the first half of 2010, and price levels have now exceeded the historical peak in the second quarter of 1996.

3 While Singapore has enjoyed strong economic growth in the first half of 2010, our economic growth is expected to moderate in the second half of the year. There are also still uncertainties in the global economy. Should economic growth falter and the market corrects, property buyers could face capital losses, with implications on their own finances and the economy as a whole. Moreover, the current low global interest rate environment will not continue indefinitely, and higher interest rates could have severe implications for buyers who have overextended themselves. Therefore, the Government has decided to introduce additional measures now to temper sentiments and encourage greater financial prudence among property purchasers.

Extending the Holding Period for Imposition of Seller’s Stamp Duty (SSD) on Residential Properties Sold from 1 Year to 3 Years

4 The Government imposed in February 2010 a seller’s stamp duty (SSD) for sellers who buy residential properties3 on or after 20 February 2010 and sell them within a year of purchase.

5 For residential properties bought4 on or after 30 August 2010, SSD will be imposed if these properties are sold within three years of purchase. Specifically, the SSD levied on residential properties will be revised to as follows:

Sold within the first year of purchase, i.e. the property is held for 1 year or less from its purchase date – The full SSD rate (1% for the first $180,000 of the consideration, 2% for the next $180,000, and 3% for the balance) will be imposed.


Sold within the second year of purchase, i.e. the property is held for more than 1 year and up to 2 years – 2/3 of the full SSD rate.


Sold within the third year of purchase, i.e. the property is held for more than 2 years and up to 3 years – 1/3 of the full SSD rate.


No SSD will be payable by the vendor if the property is sold more than 3 years after it was bought. Please see Annex for examples of how the SSD will be computed.

6 The extended SSD will not affect HDB lessees as the required Minimum Occupation Period for HDB flats is at least 3 years.

7 IRAS will be releasing an updated e-tax guide on the circumstances under which SSD will apply and the procedures for paying SSD. The e-tax guide will be available at www.iras.gov.sg. Taxpayers with enquiries may call IRAS at 6351 3697 or 6351 3698.

Increase the Minimum Cash Payment from 5% to 10% of the Valuation Limit for Property Purchasers with one or more outstanding Housing Loans

8 Previously, property buyers have to make cash payment of at least 5% of the valuation limit5. With effect from 30 Aug 20106, the cash payment is increased from 5% to 10% of the valuation limit7. This measure is applied only to buyers of private residential properties, Executive Condominiums, HUDC flats and HDB flats (including those under the Design, Build and Sell Scheme, or DBSS flats) who are taking housing loans from financial institutions regulated by MAS and who already have one or more outstanding housing loans at the time of applying for a housing loan for the new property purchase.

Decrease the LTV limit for housing loans granted by financial institutions regulated by MAS from the current 80% to 70% for Property Purchasers with one or more outstanding Housing Loans

9 The LTV limit is lowered from 80% to 70% with effect from 30 Aug 20108 for borrowers who have one or more outstanding housing loans (whether from HDB or a financial institution regulated by MAS) at the time of applying for a housing loan for the new property purchase. Borrowers who do not have any outstanding housing loans continue to have an LTV cap of 80%. These rules apply to housing loans granted by financial institutions for private residential properties, Executive Condominiums, HUDC flats and HDB flats (including DBSS flats).

10 Loans granted by HDB for HDB flats (including DBSS flats) will still have an LTV cap of 90%. HDB loans are offered to eligible first-time flat buyers and second-timers who are right-sizing their flats to meet their housing needs. They are required to utilise all of their CPF Ordinary Account balance before HDB loans will be granted. Furthermore, those taking a second concessionary HDB loan must use the CPF refund and 50% of the cash proceeds from the sale of their previous flat before they are granted an HDB loan. This is in line with HDB's home ownership policy of helping eligible buyers, especially first-time buyers, purchase public housing in a financially prudent manner.

11 Financial institutions' lending standards have remained prudent and the asset quality of housing loans has stayed robust, with the non-performing loans ratio at less than 1% as at Q2 2010. Nonetheless, there are signs that more housing loans are originating at higher LTV bands of above 70%. In line with the objective of ensuring a stable and sustainable property market, lowering the LTV limit sends a clear signal to financial institutions to maintain credit standards, and encourages greater financial prudence among property purchasers already servicing one or more outstanding housing loans.

Adequate Supply in the Pipeline

12 The Government will also continue to ensure that there is adequate supply of housing to meet demand. In the second half 2010 GLS Programme, we have made available sites that can yield about 13,900 private housing units, of which about 8,100 units will be from sites on the Confirmed List. This is the highest potential supply quantum in the history of the GLS Programme. We will inject an even larger supply of private housing in the first half 2011 GLS Programme, if demand continues to be strong.

13 Apart from the supply from the GLS Programme, there are also 61,800 uncompleted units of private housing from projects in the pipeline as at 2Q20109. Of these, 32,600 units were available or could be made available for sale. These comprised units that had been launched for sale by developers, units that had pre-requisite conditions for sale10 and which could be launched for sale immediately, as well as units with planning approvals for which pre-requisite conditions for sale could be obtained quickly from the Government and made available for sale11.

14 The Government will continue to monitor the property market closely and will introduce additional measures if required later, to promote a stable and sustainable property market.

*****

1 Financial institutions are required to conduct checks with HDB and with one or more credit bureaus on whether the buyer has an outstanding housing loan at the time of applying for a housing loan for the new property purchase. For joint buyers, if either buyer has an outstanding housing loan, the joint buyers will be considered as having an outstanding housing loan.

2 This is in addition to the cash over valuation amount that has to be paid in cash.

3 The SSD will apply to the transfer or disposal of interest (including sale and gifts) of residential lands and residential units (whether completed or uncompleted).

4 The date of purchase for computation of the holding period for SSD shall be the date when a buyer (i.e. Buyer A) exercises the option to purchase the property, or signs the sale and purchase agreement, whichever is earlier. The date of resale of the property shall be the date when the subsequent buyer (i.e. Buyer B) exercises the option to purchase the property from Buyer A, or signs the sale and purchase agreement, whichever is earlier.

5 The amount of CPF monies plus housing loan taken for the purchase of the property cannot exceed 95% of the valuation limit (defined as the lower of property value or property price).

6 The 10% minimum cash payment will apply to transactions where the date on which the option to purchase (OTP) was granted falls on or after 30 August 2010; or if there is no OTP, where the date of the sale and purchase agreement falls on or after 30 August 2010.

7 Therefore, the amount of CPF monies plus housing loan that can be used for the purchase of the property will be reduced from 95% to 90%.

8 The 70% LTV limit will apply to transactions where the date on which the option to purchase (OTP) was granted falls on or after 30 August 2010; or if there is no OTP, where the date of the sale and purchase agreement falls on or after 30 August 2010.

9 These refer to new development and redevelopment projects with planning approvals, i.e. either a Provisional Permission (PP) or Written Permission (WP).

10 These refer to private residential developments with Housing Developer Licence and Building Plan Approval. Under the Housing Developer (Control and Licensing) Act, a sale licence must be obtained for a project with more than 4 units, if the developer intends to sell uncompleted residential units in the development. However, the sale of the residential units can only commence with the approval of the building plans of the development.

11 These refer to uncompleted private residential developments without pre-requisites for sale but with WP or PP granted. The sale licences could be obtained within 5 working days and building plan approvals could be obtained within 7 working days from the date of application for cases where clearances from various technical agencies are obtained and relevant documents are in order during formal submissions.

Issued by: Ministry of National Development, Ministry of Finance and Monetary Authority of Singapore
Date: 30 August 2010

[boonseah]

Hi all,

Of all the property cooling measures, personally I feel that the reduction of LTV to 70% will have the greatest effect. First, this measure will increase the downpayment by another $100k easily. This will definitely add a higher obstacle to potential property investor to leverage on “good debt”. Next, this extra downpayment will maybe wipe off the 12-24mth “standby installment” & greatly reduce the holding power of investor.

All these will delay my plan to invest in 2nd property.

Any other comment regarding the new measures?

[Dennis Ng]

Hi all,

Of all the property cooling measures, personally I feel that the reduction of LTV to 70% will have the greatest effect. First, this measure will increase the downpayment by another $100k easily. This will definitely add a higher obstacle to potential property investor to leverage on “good debt”. Next, this extra downpayment will maybe wipe off the 12-24mth “standby installment” & greatly reduce the holding power of investor.

All these will delay my plan to invest in 2nd property.

Any other comment regarding the new measures?

Compared to HK and China, 70% financing is actually the Highest among 3 countries, China, HK and Singapore.

HK currently only lends 60% for property investment, and for China, the max financing for property investment is 50% only. And in China, now the rule is you cannot even get loan for the 3rd property.

Thus, compared to HK and China, where property prices are higher, Singapore still remain more attractive to invest into Property.

The max 70% financing for property investment will deter those borderline investors from investing. But for many property investors who own more than 2 properties, 70% financing is typically what they borrow, NOT 80%.

That said, this measure is likely to result in many people taking a Wait and See attitude. Developers who are planning to launch new projects after 7th lunar month must now be cursing the government for giving them such a good "National Day Present".

[Stradlinz]

Actually the "killer moves" is the 5 yrs MOP for resale HDB and cant's own private concurently if within MOP and must sell within 6 mths. This will definitely dampen the demand for resale HDBs as pte ppy owners now will not have any incentive to buy for investment

[Dennis Ng]

Actually the "killer moves" is the 5 yrs MOP for resale HDB and cant's own private concurently if within MOP and must sell within 6 mths. This will definitely dampen the demand for resale HDBs as pte ppy owners now will not have any incentive to buy for investment

agree. The really big impact is that anyone who owns a private property cannot buy HDB Resale flats. If they do so, must sell their private property within 6 months.

This will eliminate all private property owners who want to buy HDB Resale flats as investment.

So, HDB Resale flats transactions definitely would fall and COV and prices might fall as well.

[lootster]

I think that is generally good news for young couple who genuinely wants to buy resale falt for their own stay if COV comes down, previoulsy many has postpone their plan of owning a flat due to high COV.

Dennis, regarding this rule, i am a bit confuse.........

"With effect from 30 Aug 20106, the cash payment is increased from 5% to 10% of the valuation limit7. This measure is applied only to buyers of private residential properties, Executive Condominiums, HUDC flats and HDB flats (including those under the Design, Build and Sell Scheme, or DBSS flats) who are taking housing loans from financial institutions regulated by MAS and who already have one or more outstanding housing loans at the time of applying for a housing loan for the new property purchase."

It applies to 2nd property onwards right? But one person cannot have 2nd HDB flat right? So how does it applies to HDB?

[ironman]

I think that is generally good news for young couple who genuinely wants to buy resale falt for their own stay if COV comes down, previoulsy many has postpone their plan of owning a flat due to high COV.

Dennis, regarding this rule, i am a bit confuse.........

"With effect from 30 Aug 20106, the cash payment is increased from 5% to 10% of the valuation limit7. This measure is applied only to buyers of private residential properties, Executive Condominiums, HUDC flats and HDB flats (including those under the Design, Build and Sell Scheme, or DBSS flats) who are taking housing loans from financial institutions regulated by MAS and who already have one or more outstanding housing loans at the time of applying for a housing loan for the new property purchase."

It applies to 2nd property onwards right? But one person cannot have 2nd HDB flat right? So how does it applies to HDB?

I think wat it means is, for example, someone owns a hdb and he wants to buy another hdb for upgrade or downgrade. As he still has outstanding loan for the current hdb, he has to come out with 10% cash instead. Of coz, after he buys, he gotta sell his existing hdb i.e. contra...hence, end of the day, he will only have 1 hdb.

Well, correct me if i'm wrong....

[boonseah]

Hi Dennis,

you mentioned that
"But for many property investors who own more than 2 properties, 70% financing is typically what they borrow, NOT 80%."

Do you mean that it's still not advisable to take max loan even for investment purpose? Any reason behind this, eg interest?

Thanks.

[Dennis Ng]

Hi Dennis,

you mentioned that
"But for many property investors who own more than 2 properties, 70% financing is typically what they borrow, NOT 80%."

Do you mean that it's still not advisable to take max loan even for investment purpose? Any reason behind this, eg interest?

Thanks.

Hi Boonseah,
the fact is for people who own more than 3 properties, Banks TYPICALLY only Grant 70% financing, not 80% financing anyway.

[boonseah]

Oh I see...

Thanks for the clarification.

[mort]

I am not sure how is the government going to enforce the sale of private property within 6 months of getting a HDB flat. Selling a house in 6 months may not be possible in some cases; will we be looking at "fire" sale to quickly sell these propoerties?

It will not be very fair for those who want to downgrade and get some $ from their exisitng property e.g. senior citizens. We all know Singaporeans are asset-rich but cash-poor. MND should look at such cases with a light touch and should extend the period if owners are really trying their best to sell. If not, Singaporeans will have to sell their private property first before hunting for a HDB flat. The good work of Dennis should help to address this asset-rich but cash-poor situation and hopefully subsequent generations will have better financial planning and can live off their savings and investments without selling their house.

Another observation is that, if one have enough cash for downpayment, maybe a HDB upgrader (after 5 years of MOP) should keep their exisitng HDB flat and buy their new private property with cash. This is the only situation for someone who can co-own a HDB and private property at the same time. Correct me if my observation is incorrect.

Thanks.

[Dennis Ng]

I am not sure how is the government going to enforce the sale of private property within 6 months of getting a HDB flat. Selling a house in 6 months may not be possible in some cases; will we be looking at "fire" sale to quickly sell these propoerties?

It will not be very fair for those who want to downgrade and get some $ from their exisitng property e.g. senior citizens. We all know Singaporeans are asset-rich but cash-poor. MND should look at such cases with a light touch and should extend the period if owners are really trying their best to sell. If not, Singaporeans will have to sell their private property first before hunting for a HDB flat. The good work of Dennis should help to address this asset-rich but cash-poor situation and hopefully subsequent generations will have better financial planning and can live off their savings and investments without selling their house.

Another observation is that, if one have enough cash for downpayment, maybe a HDB upgrader (after 5 years of MOP) should keep their exisitng HDB flat and buy their new private property with cash. This is the only situation for someone who can co-own a HDB and private property at the same time. Correct me if my observation is incorrect.

Thanks.

Hi mort,

yes, agree. For anyone with a HDB flat, needs to think twice before selling. Becos if you buy a private property, you can no longer buy a HDB flat (new or Resale) in future.

I think they can extend the 6 month rule on a case to case basis. Typically, you need to show proof that you tried to sell the property eg. Classified advertisement in newspapers to sell the property etc, etc.

But again, it shows to all that what I shared in the Seminar is correct. I said that in 5 to 10 years' time, Singapore will become a Heaven for the Rich.

The latest measures had little impact on those who have the means, who don't need more than 70% financing (which shows again I'm correct when I say anyone who borrow 70% loan is very safe, no need to worry).

Rich foreigners are not affected at all. Since all along, most of them can get only 70% financing for property purchase in Singapore, so there is NO change to them.

Who are the ones really Hit? The middle class, those who are not Poor but not Rich yet. Those who want to upgrade or sell one HDB flat and buy another to replace......

Why am I conducting seminars?

Becos Life will get harder and harder for the middle class, I hope I can through my seminars help as many middle class Households to move up to become Rich (at least one Million dollars)....so that you can then truly enjoy the "status" of Singapore is Heaven for the Rich....

1. No Estate Duty
2. No Capital Gains tax
3. one of the lowest income tax around
4. Safe (low risk of being kidnapped)
5. Clean (we can see Blue Sky, do you know that Shanghai and Beijing one cannot see Blue Sky anymore?)
6. Legal and transparent. (rules are very clear, if you know the Rules of the Game, you can get Richer and Richer).

So I really urge people who have not attended any of my full-day Seminars, please do so as soon as possible, so that you can become Richer sooner, rather than later.

[dreamslink]

Below is from PropertyGuru:-

http://www.propertyguru.com.sg/property ... seas+homes

"According to HDB, the new rule also applies to people owning a property abroad. This means that an overseas property must be sold within six months of purchasing an HDB resale flat."

How about those Singapore PR from Malaysia, China, etc...? If they own a property in thier hometown and want buy a resales HDB here? Consider owning a property abroad?

[Stradlinz]

I wonder how the govt gonna do the background check on overseas properties... I believe govt do not have complete access to that information..

[Dennis Ng]

Below is from PropertyGuru:-

http://www.propertyguru.com.sg/property ... seas+homes

"According to HDB, the new rule also applies to people owning a property abroad. This means that an overseas property must be sold within six months of purchasing an HDB resale flat."

How about those Singapore PR from Malaysia, China, etc...? If they own a property in thier hometown and want buy a resales HDB here? Consider owning a property abroad?

yup, considered. So if they own a property in their home country, and buy a HDB flat here, they have to sell their private property (in home country) within 6 months.