Singapore Property Investment Cooling Measures

Singapore Property Investment Cooling Measures

Measures Applicable to all Residential Property

The following measures will take effect on 12 January 2013:

a) Additional Buyer’s Stamp Duty (ABSD) rates will be:
i) Raised between five and seven percentage points across the board.
ii) Imposed on Permanent Residents (PRs) purchasing their first residential property and on Singaporeans purchasing their second residential property.

b) Loan-to-Value limits on housing loans granted by financial institutions1 will be tightened for individuals who already have at least one outstanding loan, as well as to non-individuals such as companies.

c) Besides tighter Loan-to-Value limits, the minimum cash down payment for individuals applying for a second or subsequent housing loan will also be raised from 10% to 25%.

The measures listed above will not impact most Singaporeans buying their first home. Some concessions will also be extended to selected groups of buyers, such as married couples with at least one Singaporean spouse who are purchasing their second property and will sell their first residential property.

These new ABSDs and loan rules are significant, but they are temporary. They are being imposed to cool the market now, and will be reviewed in future depending on market conditions.

Raising Additional Buyer’s Stamp Duty (ABSD) Rates & Imposing ABSD on New Groups of Buyers

Currently, ABSD is imposed on certain groups of buyers:

(i) Foreigners and non-individuals purchasing any residential property, at a rate of 10%,

(ii) Permanent Residents (PRs) purchasing their second and subsequent properties, at a rate of 3%; and

(iii) Singaporeans purchasing their third and subsequent properties, at a rate of 3%.

ABSD rates will be raised on the above groups of buyers. In addition, ABSD will be imposed on two new groups of buyers:

(i) PRs purchasing their first residential property at a rate of 5%; and
(ii) Singaporeans purchasing their second residential property at a rate of 7%.

The new ABSD structure is as follows:

Singaporean first-time buyers and Singaporean buyers of HDB flats will not be affected by the new measure.

For purchases made jointly by two or more parties, the higher applicable ABSD rate will be imposed. For example, if a Singaporean purchases a property with a foreigner, the ABSD rate of 15% will apply irrespective of the number of properties each owns.

If two Singaporeans jointly purchase a property with one of them already owning a residential property at the time of purchase, the ABSD rate of 7% will apply.

However, ABSD relief will be provided for joint purchases by married couples with at least one Singaporean spouse (i.e. a married couple with a Singaporean spouse and PR / foreigner spouse). Such purchases will not be subject to ABSD, as long as both spouses do not own any other property at the time of purchase. This relief facilitates their purchase of a matrimonial home, and puts them in the same position as a married couple with both Singaporean spouses who are purchasing their first residential property.

ABSD relief will also be provided to eligible married couples with at least one Singaporean spouse, who have purchased a second private residential property and will dispose their existing residential property.

(i) The ABSD paid will be refunded if these Singaporean married couples dispose their first property within six months of the purchase of the second property, if the latter property is a completed unit.

(ii) If the second property is an uncompleted unit, the refund will be given if the first property is disposed within six months of the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) date of the second property, whichever is earlier.

(iii) These Singaporean couples must also not acquire any other residential property before the disposal of the first residential property, if they wish to avail themselves of the refund on ABSD paid on the second property.

The revised ABSD structure will take effect on residential property purchased
on or after 12 January 20134. If a buyer of a residential property has been granted Option to Purchase on and before 11 January 2013 and exercises it thereafter on or before 1 February 2013 (without any extension of the option validity period), the buyer can apply to the Inland Revenue Authority of Singapore (IRAS) for remission so that the old ABSD rate will apply.

Lowering the Loan-to-Value (LTV) Limit and Raising the Minimum Cash Down Payment on Housing Loans Granted by MAS-Regulated Financial Institutions for the Purchase of Residential Property

LTV Limit

The current LTV limits for individuals who currently have one or more outstanding housing loans and are obtaining second or subsequent housing loans are 60%, or 40% if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65.

The following measures will take effect on 12 January 20135:

(i) For individuals obtaining a second housing loan, the LTV limits will be lowered to 50%, or 30% if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65;

(ii) For individuals obtaining third or subsequent housing loans, the LTV limits will be lowered to 40% or 20% if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65; and
(iii) For non-individual borrowers, the current LTV limit of 40% will be lowered to 20%.

There is no change to the existing LTV limit for individual borrowers who have no outstanding housing loans6.

Minimum Cash Down Payment

The current minimum cash down payment required of individual borrowers who have one or more outstanding housing loans and are obtaining second or subsequent housing loans is 10% of the valuation limit7.

With effect from 12 January 2013, the minimum cash down payment required for such individuals will be raised to 25%8. There is no change to the existing minimum cash down payment requirement for individual borrowers who have no outstanding housing loans and are applying for a housing loan9.

Editor
Investments Singapore