Guide to Singapore’s Property Cooling Measures: Impacts on the Property Market, & Singapore Government Regulations

by | Jun 7, 2023

Table of Contents

Latest Launches

New Launch Condo Banner

cooling measures intro

In this article, we’ll delve into cooling measures and their influence on Singapore’s property landscape.¬†

Designed to maintain affordability and stability, these policies aim to prevent housing bubbles and regulate property ownership.

Let’s uncover the rationale behind these measures, their impact on mortgage and interest rates, and how buyers can navigate the evolving property market.¬†

Key Takeaways

Topic Key Takeaways
What are cooling measures? Cooling measures are policies the Singapore government implements to regulate the property market and prevent housing bubbles. These measures restrict property developers, limit access to property financing, and regulate property purchases by foreign investors.
Why were cooling measures introduced? Cooling measures were introduced to curb rising property prices and ensure housing affordability for Singaporeans. They also aimed to reduce high demand from foreign investors, driving up property prices.
Impact on buying property in Singapore Cooling measures make purchasing property in Singapore more challenging for first-time buyers and foreign investors. Buyers may have to pay more upfront to meet Loan-to-Value (LTV) and Additional Buyer’s Stamp Duty (ABSD) requirements, making property ownership more difficult.
Impact on property prices Property prices in Singapore have remained relatively stable since the introduction of cooling measures. Measures like ABSD have significantly impacted property prices, increasing costs for foreign investors and second-time homebuyers.
Demand for new property The demand for new property remains strong, but the number of transactions has reduced due to the tightening of cooling measures. Demand exceeds supply, creating a reserved housing market.
Moderate demand of property Despite cooling measures, the demand for property in Singapore remains high. Policies like ABSD moderate demand for subsequent properties, especially for foreign entities and Singapore citizens looking to purchase multiple properties.
TDSR and its impact Total Debt Servicing Ratio (TDSR) sets a limit on monthly debt repayment expenditure based on income and existing debts. TDSR reduces property financing available to buyers, making it harder to obtain loans and purchase property. This measure helps maintain manageable property prices and reduces the risk of a property price bubble.
Impact on property loan eligibility TDSR has made obtaining property loans more stringent. Those who don’t meet the TDSR limit may find it harder to secure a loan. This negatively affects the property market as potential buyers may choose not to purchase due to difficulties in obtaining financing.
Timeline of cooling measures In December 2021, cooling measures were introduced, including increased ABSD rates, reduced LTV limits, and an interest rate floor. As of September 2022, no further cooling measures have been introduced. There are currently no proposed cooling measures for 2023.
Effects of rising interest rates on the Market Rising interest rates increase borrowing costs, reducing affordability for buyers and decreasing loan demand. This leads to lower buying power and potentially slower property market activity.
Impact of rising interest rates on mortgage loans Rising interest rates increase monthly mortgage payments, making it harder to service loans. This negatively impacts the property market as fewer people can afford to borrow and purchase homes.
Property prices amid cooling measures Property prices have remained stable in both public and private residential sectors. Demand for private residential property is more robust than public housing. Cooling measures have impacted the HDB resale flat market, but HDB housing loans remain unchanged, allowing Singapore citizens to obtain 90% financing for their first HDB flat.
Response of financial institutions Financial institutions have tightened loan-granting processes due to cooling measures, making it harder to obtain property loans. They have also introduced fixed-rate mortgage loans to address the challenges posed by cooling measures.
Impact on HDB loans and financing Cooling measures have limited financing available for HDB loans

Introduction to Cooling Measures in Singapore

Introduction to Cooling Measures in Singapore

What are cooling measures?

Cooling measures refer to a set of policies introduced by the Singapore government to safeguard the country’s property market from fluctuations.

These policies aim to prevent housing bubbles and keep property prices within affordable limits.

The measures involve processes that constrain the capacity of property developers, restrict access to property financing and regulate the purchase of property by foreign investors.

 

Why were cooling measures introduced in Singapore?

Cooling measures were introduced in Singapore as a response to rising property prices, which threatened to make homeownership unattainable for Singaporeans.

Besides, the government wanted to curb the high demand for property by foreign investors, which was driving the property prices up.

 

What is the impact of cooling measures on buying property

in Singapore?

Cooling measures impact the process of buying property in Singapore.

They make the process more stringent and difficult, especially for first-time buyers and foreign investors.

With cooling measures in place, buyers may have to pay more money upfront to meet the Loan-to-Value (LTV) limit and Additional Buyer’s Stamp Duty (ABSD) requirements, making it challenging to own a property in Singapore.

Impact of Cooling Measures on the Property Market

How have property prices been affected since the

introduction of cooling measures?

Since the introduction of cooling measures, property prices in Singapore have remained relatively stable, with occasional fluctuations.

Cooling measures like the ABSD significantly impacted property prices as it increased the cost of owning a property in Singapore for foreign investors and second-time home buyers.

 

What is the demand for new property after the

cooling measures?

The demand for new property after the cooling measures has remained strong, but the number of transactions has reduced significantly.

The government’s tightening of cooling measures means that the housing market is currently more reserved, leading to the demand exceeding supply.

 

What is the moderate demand of property in

Singapore after the cooling measures?

Despite cooling measures, the demand for property in Singapore remains high.

This demand is moderated by policies like the ABSD, which constrains the demand for subsequent properties, specifically for foreign entities and Singapore citizens who wish to purchase multiple properties in Singapore.

The Role of TDSR (Total Debt Servicing Ratio) in Cooling Measures

The Role of TDSR (Total Debt Servicing Ratio) in Cooling Measures

What is TDSR?

TDSR is a framework that limits monthly debt repayment expenditure for an individual based on income and existing debts.

It impacts the amount a person can borrow for property, as banks in Singapore must calculate the TDSR limit before granting a loan.

 

How does TDSR contribute to cooling measures?

TDSR is a tool for implementing cooling measures as it reduces the amount of property financing available to buyers.

Property buyers who do not meet the TDSR limit are restricted from obtaining loans, making it more difficult for them to purchase the property.

This measure has helped to keep property prices manageable and reduce the risk of a property prices bubble in Singapore.

 

What is the impact of TDSR on property loan eligibility?

TDSR has made the process of obtaining a property loan more stringent.

Individuals who do not meet the TDSR limit find it harder to obtain a property loan.

This has impacted the property market negatively as potential buyers may decide not to purchase a property due to difficulties in obtaining financing.

Timeline of Cooling Measures: December 2021 to 2022

What were the cooling measures introduced in December

2021?

In December 2021, the Singapore government introduced cooling measures in the residential property market.

The measures included increased ABSD rates for purchasing residential properties by foreigners and corporate entities.

The Government also lowered the validity period for ABSD remission for developers, reduced LTV limits for those buying their second property, and introduced an interest rate floor for residential property loans.

 

What were the latest cooling measures introduced in

September 2022?

In September 2022, no further cooling measures were introduced by the Singapore government, and the existing policies remained unchanged.

 

What are the proposed cooling measures for 2023?

As of now, there are no proposed cooling measures for 2023.

However, the Singapore government continually reviews property cooling measures to ensure a sustainable and resilient property market.

Understanding the Effects of Rising Interest Rates on Property Market

Understanding the Effects of Rising Interest Rates on Property Market

How do rising interest rates affect the property market?

Rising interest rates can have a substantial effect on the property market as they increase the cost of borrowing.

They make property repayments more expensive, leading to lower affordability for property buyers, and consequently reduce loan demand, resulting in lower buying power.

 

What is the impact of rising interest rates on mortgage

loans?

Rising interest rates have a direct impact on mortgage loans.

Higher interest rates mean that the monthly payments increase, making it more challenging to service the loan.

This impacts the property market negatively as it reduces the pool of eligible homebuyers.

 

How can property owners prepare for rising interest rates?

Property owners can prepare for rising interest rates by opting for fixed-rate mortgage loans instead of floating-rate loans.

By doing so, they protect themselves from rising interest rates, ensuring they have predictable monthly payments.

Analysis of Property Prices Amid Cooling Measures

How have property prices changed in the public and private

residential property sectors?

Property prices have remained relatively stable in both public and private residential properties since the introduction of cooling measures.

However, the demand for private residential property has been more robust than that of public housing.

 

What is the impact of cooling measures on HDB resale flats

and HDB housing loans?

The cooling measures have impacted the HDB resale flat market but have been less stringent than private residential property.

HDB housing loans remain unchanged, and Singapore citizens can still obtain 90% financing for their first HDB flat.

 

How have financial institutions responded to cooling

measures?

Financial institutions have responded to cooling measures by tightening their loan-granting processes for property buyers, making it harder for individuals to obtain a property loan.

However, they have also introduced financial products like fixed-rate mortgage loans to address the issues brought about by the cooling measures.

In conclusion, cooling measures have significantly impacted the Singapore property market since their introduction.

The government’s measures have made the market more sustainable, but the tight housing market challenges property buyers.

However, the resilient demand for property ownership in Singapore continues to drive the property market forward, and the government continues to review cooling measures to ensure a fair and sustainable property market.

 

How Cooling Measures Affect HDB Loans and the Limit for HDB Financing

How Cooling Measures Affect HDB Loans and the Limit for HDB Financing

Understanding HDB Loans and Financing

Regarding residential property transactions in Singapore, HDB housing is popular among Singaporeans.

The Housing & Development Board (HDB) provides affordable housing for owner-occupation to eligible families through various housing schemes.

HDB loans are offered to Singaporeans to finance the purchase of HDB flats.

The HDB loan scheme allows buyers to pay for their homes through monthly installments over a period of up to 25 years.

 

The Impact of Cooling Measures on HDB Loans and

Financing

One of the ways cooling measures affect the Singapore property market is by limiting the amount of financing available for HDB loans.

Recently, the Ministry of National Development (MND) announced a limit on the loans granted by financial institutions to purchase second residential properties and non-subsidized HDB resale flats.

Private residential property owners, Singapore permanent residents, and foreigners are affected by this new policy.

The limit for HDB housing loans has also been reduced from 25 years to 30 months.

 

Exploring Alternatives to HDB Financing

Given the tighter restrictions on HDB loans, exploring alternatives to HDB financing is worth exploring.

One option is to consider private housing as a choice for housing for owner-occupation.

Purchasing a non-subsidized HDB resale flat is another alternative, but buyers must pay cash for the purchase.

Executive Condominium (EC) housing is another affordable housing option for Singaporeans.

However, eligibility depends on the income ceiling and other criteria the government decides.

Evaluating the State of the Housing Market Under Cooling Measures

Recent Changes in Residential Property Transactions

The pandemic has had a significant impact on the residential property market.

The latest round of cooling measures, introduced on 16 December 2021, aims to further cool the market.

The new measures include an interest rate floor of 3% for non-subsidized HDB resale flats and a Mortgage Servicing Ratio (MSR) of 30%.

Private property owners also face a higher ABSD rate.

These measures are expected to reduce investment demand and prevent property prices from rising too quickly.

 

The Relationship Between Housing Demand and Cooling

Measures

Assessing housing demand and residential property completions can help us determine whether cooling measures are having the desired effect on the property market.

Despite the cooling measures, housing demand from locals purchasing homes for owner-occupation has been steady.

However, demand from foreign buyers has declined since introducing the latest round of cooling measures, which aim to reduce investment demand.

 

Assessing Residential Property Completions

Residential property completions in Singapore have been increasing since 2017.

However, the supply of new properties has been decreasing this year.

This is due to a decrease in the number of new units being launched for sale, as developers are taking a cautious stance in light of the uncertain economic climate.

The demand for higher-value properties, such as industrial properties, has also increased, and it remains to be seen whether cooling measures can moderate these trends.

The Relationship Between Moderate Demand and Cooling Measures

The Relationship Between Moderate Demand and Cooling Measures

The Definition of Moderate Demand

Moderate demand refers to the demand that is neither excessive nor insufficient.

This equilibrium state is ideal for maintaining a healthy property market.

When demand is too high, the market can become overheated, and prices rise too fast.

When demand is too low, the market can stagnate, and prices can fall too low.

 

The Impact of Cooling Measures on Demand and Supply

Cooling measures are designed to regulate demand and supply by controlling the level of demand and supply in the market.

Cooling measures can maintain moderate demand levels by keeping demand and supply in balance.

However, they can also have a negative impact on demand levels depending on the severity of the measures implemented.

 

Predictions for Future Moderate Demand Levels

With Singapore’s property market slowing down, it is uncertain what the future holds for moderate demand levels.

However, the government remains committed to keeping the property market healthy and stable by implementing sensible cooling measures and careful market analysis.

The situation is constantly evolving, and it is worth watching for future policy developments.

Exploring the Rationale Behind Rising Property Prices Despite Cooling Measures

The Role of the Monetary Authority of Singapore in

Property Market Regulation

The Monetary Authority of Singapore (MAS) regulates the property market.

It ensures that the market remains stable and property prices do not rise too rapidly.

The MAS does this by introducing cooling measures that target specific areas of the market and by monitoring market trends to detect any potential issues before they become problems.

 

The Applicable ABSD Rate for Private Housing

The Additional Buyer’s Stamp Duty (ABSD) is another government tool to regulate the property market.

The ABSD is a tax levied on private property purchases made by buyers, not Singaporean citizens or permanent residents.

The ABSD rate for private housing has been increased in recent years to discourage speculation and curb investment demand.

 

The Impact of Foreign Buyers on Property Prices

Foreign buyers can significantly impact property prices, especially in the luxury market.

However, cooling measures like the ABSD can discourage foreign buyers and reduce investment demand.

This means that foreign buyers are less likely to affect property prices significantly, and the market can remain more stable.

Examining the Latest Measures Introduced in the Property Market

Examining the Latest Measures Introduced in the Property Market

Transitional Provisions for Properties Affected by Cooling

Measures

The government has introduced transitional provisions for properties affected by cooling measures to provide some relief for affected property owners.

For example, those surprised by the introduction of cooling measures may have been unable to sell their immovable properties in time.

The transitional provisions provide more flexibility for affected individuals and allow them more time to dispose of their properties.

 

Changes in Borrower Eligibility for HDB Loans

Recently, the total debt servicing ratio (TDSR) framework was introduced, which requires borrowers to stay within their borrowing limits and avoid taking on excessive debt.

This has impacted the eligibility for HDB loans; some borrowers may be unable to secure the loans they need.

The changes in eligibility could impact the property market, and it remains to be seen whether demand levels will be affected.

 

The Impact of Higher Tangible Assets on Property Market

Demand

Tangible assets, such as cash and immovable property, can impact demand levels in the market.

The government has set the limit for HDB financing based on the borrower’s tangible assets.

For those with higher tangible assets, the limit for HDB financing has been revised to ensure they have skin in the game and invest in the HDB flats they purchase.

This could impact demand levels for HDB flats in the future.

Impact of Cooling Measures on Mortgage and Interest Rates

What are the recent cooling measures implemented by the

Singapore government, and how do they affect mortgage

and interest rates?

In September 2022, Singapore’s Minister for National Development, Desmond Lee, announced a set of cooling measures to moderate the property market’s growth.

These measures include revising the Seller’s Stamp Duty (SSD) rate and rate hikes for housing loans granted by the Housing Board (HDB), among other provisions.

 

The SSD rate for properties sold within the first year of purchase has been raised by 0.

5%, while the rate revisions for holding periods ranging from one to three years remain unchanged.

On the other hand, the interest rate floor for HDB housing loans granted to Singapore Citizens and Permanent Residents has been set at 3%, up from the previous rate of 2.

This measure affects buyers purchasing their first residential property and resale HDB flats with outstanding housing loans, with a wait-out period of 15 months for those looking to sell their properties within six months of purchase.

 

What can property buyers and investors do to navigate the

changes in the property market?

The latest cooling measures ensure that property prices grow with economic fundamentals and buyers purchase homes within their means.

Therefore, while the new measures may dampen market sentiment in the short term, they offer more sustainable growth in the long run.

Buyers and investors can respond to these measures by staying informed about market trends and being flexible with purchasing decisions.

Additionally, working with experienced real estate agents like OrangeTee & Tie can help them navigate the intricacies of the market.

 

What are the forecasts for mortgage and interest rates in

the next few years following the implementation of cooling

measures?

The new cooling measures have effectively increased the cost of borrowing for homebuyers, which can lead to a slowdown in housing demand.

However, Singapore’s ample supply of housing stock and the sufficient housing supply from public housing projects aim to ensure that the market’s equilibrium is maintained.

Furthermore, the government regularly reviews and adjusts these measures to ensure that market conditions remain favorable for long-term growth, and rate increases are expected to be proportional to economic fundamentals.

Insights into the HDB Loan Limit for Residential Property Purchases

Insights into the HDB Loan Limit for Residential Property Purchases

What is the HDB loan limit, and how does it impact housing

purchase decisions?

The HDB loan limit is the maximum amount granted by HDB to finance the purchase of HDB flats by eligible buyers.

The loan limit is typically set by considering the prevailing market conditions and buyers’ loan eligibility.

The limit exists to ensure that buyers do not overstretch their finances and that they are mindful of the financial obligations that come with property ownership.

 

What are the recent changes to the HDB loan limit, and how

do they affect homebuyers in Singapore?

In line with the latest set of cooling measures, the HDB loan limit for buyers purchasing HDB flats under the Public Scheme has been raised by up to 10%, while properties for housing development have been increased by up to 5%.

The move aims to help buyers with less cash upfront access a wider range of properties and should help improve market sentiment by offering buyers more financing alternatives.

 

What alternative financing options are available to those

exceeding the HDB loan limit?

For homebuyers who find that they have exceeded the HDB loan limit, alternative financing options are available in the form of bank loans or non-HDB housing loans.

However, these loans may come with higher interest rates and stricter eligibility criteria, which should be considered when making purchasing decisions.

Additionally, Minimum Cash Payment (MCP) rules apply, whereby buyers must pay a minimum cash amount based on the valuation of the property purchased.

Market Reaction to Cooling Measures: Trends and Predictions

What is the market reaction to cooling measures imposed

in the Singapore property market?

The latest round of cooling measures has led to a temporary slowdown in property transactions and slowed down price increases.

Still, the market is expected to adjust and stabilize over time.

As the measures aim to help homebuyers purchase homes within their financial means, the market is expected to become more sustainable in the long term.

 

What are the predictions for property prices and market

demand in 2022 and beyond?

Implementing cooling measures and the Covid-19 pandemic has strained Singapore’s property market.

However, with the government’s increased focus on public housing projects and the presence of a resilient economy, market demand is expected to remain steady in the coming years.

While property prices may fluctuate, sustainable growth in the long term is forecasted.

 

How can private property sellers and developers respond

to the changes in the market?

Private property sellers and developers can respond to the changes in the market by pricing their properties reasonably and working with experienced real estate agents to adapt their marketing strategies.

Additionally, offering attractive absorption schemes and timely responses to market changes can help developers remain competitive in a dynamic marketplace.

The Future of Singapore’s Property Market in Light of Latest Measures

The Future of Singapore's Property Market in Light of Latest Measures

What are the latest measures and trends shaping

Singapore’s property market?

The latest cooling measures aim to ensure that Singapore’s property market remains sustainable and offers long-term growth for buyers and investors.

The government’s commitment to increasing housing supply and public housing projects and measures to prevent speculation and overleveraging indicates a commitment to a stable and fair market for all.

 

What is the impact of developments such as an increase in

housing supply and public housing projects on the market?

The increase in housing supply and public housing projects aims to ease the pressure on the private housing market and offer more affordable and accessible options for homebuyers.

Additionally, by promoting homeownership and offering appropriate financing options, these developments can improve market sentiment and offer buyers more long-term stability in their housing purchases.

 

What role do economic fundamentals and the Covid-19

pandemic play in shaping the property market?

Economic fundamentals such as GDP, inflation, and the Covid-19 pandemic play a crucial role in shaping the property market.

Uncertainties regarding global economic conditions and the realization of structural changes in the workforce and property demand are expected to continue to impact the market in the coming years.

However, the government’s proactive measures and support should help minimize these factors’ impact and stabilize the market in the long term.

 

What is the outlook for the Singapore property market in

2023 and beyond?

Despite the short-term challenges, the outlook for Singapore’s property market remains positive in the long term.

Housing supply and public housing projects should help ensure that a sufficient supply of affordable housing remains available, while government interventions will ensure that buyers purchase homes within their financial means.

While the market may face fluctuations due to economic or global conditions, the underlying strength of Singapore’s economy and property market should help ensure sustainable growth in the years ahead.

Conclusion

In conclusion, the introduction of cooling measures in Singapore has significantly impacted the property market.

These measures have aimed to control property prices, regulate demand, and ensure a sustainable market.

While they have made it more challenging for buyers, especially first-time buyers, and foreign investors, to purchase property, they have helped maintain stability and affordability in the market.

Despite the cooling measures, Singapore’s demand for property ownership remains strong.

The government continues to review and adjust these measures to ensure a fair and resilient property market.

If you want to learn more about cooling measures and their effects, check out our other blog articles.

They provide further insights into specific aspects of cooling measures, such as the role of TDSR, the timeline of measures, the impact on HDB loans, and the rationale behind rising property prices.

Stay informed and make well-informed decisions in the ever-evolving Singapore property market.

Frequently Asked Questions

What are cooling measures?

Cooling measures in the context of housing refer to government policies or regulations aimed at stabilizing or slowing down the growth of property prices.

These measures can include restrictions placed on home buying, stricter loan regulations, or tax penalties on foreign buyers.

What is the latest round of cooling measures in Singapore?

The latest round of cooling measures announced on July 5, 2018, raised the Additional Buyer’s Stamp Duty (ABSD) rates and tightened Loan-to-Value (LTV) limits on residential property purchases.

These measures were implemented to slow down the increase in residential property prices.

What is the interest rate floor used in cooling measures?

The interest rate floor used in Singapore’s cooling measures is a measure introduced by the government to ensure borrowers can service their loans in the long term.

Since October 2012, the interest rate floor of 3% has been used for mortgage servicing ratio (MSR) calculations of housing loans that HDB and financial institutions granted.

 

Can I buy a non-subsidized HDB resale under the cooling measures?

Yes, you can buy a non-subsidized HDB resale under the cooling measures.

However, you will be subject to higher ABSD rates if you own one residential property and want to buy another.

How long will the cooling measures last?

The cooling measures are implemented as a set of measures and do not have a fixed expiration date.

The government will review the measures regularly and adjust them to maintain a stable property market.

What is the purpose of the enhanced CPF housing grant?

The enhanced CPF housing grant is a government scheme that provides financial assistance to first-time homebuyers.

This grant is designed to help these buyers with their initial down payment and is part of the government’s efforts to make housing more affordable.

Are private and public housing treated differently under the cooling measures?

Yes, private and public housing are generally treated differently under the cooling measures.

This is because public housing, such as HDB apartments, is designed to provide affordable housing for Singaporeans, while private housing caters to those with higher incomes.

As such, different rules may apply to each housing type in some cases.

What is the timeline for the cooling measures implementation?

The latest round of cooling measures was announced on 5 July 2018 and took effect immediately.

The measures have been ongoing since 2010, and the government will review them regularly to assess their effectiveness.

Can I use a housing grant and enhanced CPF to buy a resale property?

Yes, you can use the housing grant and enhanced CPF to buy a resale property.

However, restrictions and eligibility criteria must be met to qualify for these benefits.

How do the cooling measures affect those moving from a private property to a 4-room HDB flat?

Those moving from private property to a 4-room HDB flat are subject to the same cooling measures as any other homebuyer.

However, if you are eligible to buy a non-subsidized HDB resale, you may be able to reduce the impact of these measures.

You May Also Like