After many recent comments from the government that the raft of property cooling measures introduced since 2009 won’t be lifted anytime soon, yesterday’s sudden announcement of some tweaking caught many in the property industry by surprise. Even though it was a very limited and targeted tweak it is indeed welcome news given the tough talk from the ministers in public and in parliament in recent months.
Property stocks surged to its highest in almost 2 years even though the impact on property sales would be muted at best. The consensus out there is that the government is at least responding to feedback however limited it might seem. Which is a hugely positive sign as evidenced by the huge rise in property stocks.
The main cooling measures that had been keeping prices and sales volume in check like the Additional Buyer’s Stamp Duty (ABSD) and the Loan-to-Value (LTV) limit remains unchanged. There are only slight modifications to the Seller’s Stamp Duty (SSD) and Total Debt Servicing Ratio (TDSR).
Seller’s Stamp Duty (SSD) Reduced
SSD was introduced 6 years ago to prevent rampant flipping of residential properties. It is payable on all residential properties and land that are bought on or after 20 Feb 2010 and sold within 4 years. No SSD is charged if you hold the property for more than 4 years as this period deems you to be a genuine home buyer for own stay.
The SSD will now apply for only three years. The SSD rate will also be cut by four percentage points. Home owners selling within one year will pay 12 per cent instead of 16 per cent, moving down to 4 per cent instead of 8 per cent for sales by the third year. This provides more options and flexibility when an urgent sale of the property can’t be avoided due to unforeseen circumstances or economic hardship.
For the full details of SSD please refer to the IRAS site here.
Total Debt Servicing Ratio (TDSR) Relaxed
TDSR was introduced in 2013 to prevent home buyers from over-extending themselves. Total debt obligations cannot exceed 60% of total income.
From today, if a home owner’s total outstanding loans are 50 per cent or below of his property’s value, the TDSR will no longer apply. Some retirees have given feedback that because of the TDSR they are unable to borrow against their properties to obtain more cash, according to the official release. In these cases any refinancing should not be more than 50% of the property value, otherwise TDSR will kick in.
The joint press release by the Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore yesterday said:
“Transaction volumes in the private residential property market remain healthy. There is firm demand for private housing, in part because of current low interest rates and continued income growth. While the growth in outstanding housing loans has moderated, it is prudent for households to further build up their financial buffers to protect against future interest rate increases or any losses in income. The Government is therefore retaining the current ABSD rates and loan-to-value limits.”