Singapore Property Cooling Measures 2021
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The new cooling measures undertaken by the Singaporean government includes changes in their ABSD rates, TDSR and LTV limits as well as in the supply of housing properties.
Introduction
In a historic decision, the Government of Singapore announced a cooling measures package for all resale flats and private residential housing through the housing board of Singapore at the end of 2021 to combat the economic crunch that the world is currently undergoing since the pandemic of 2020.
Singapore’s public and private housing prices have experienced an all-time high of at least 9% since 2020; subsequently, the HBD market’s resale prices have experienced a sharp recovery and rose over 15% since the past 6-year decline.
With market prices following this upward trend, the concern is raised that if this upward momentum is left unchecked, it could mean devastating economic growth with a risk of correction destabilization.
In recent news, the Monetary Authority of Singapore (MAS) warned all its citizens of a possible hike in mortgages, which may lead to higher housing debts in many Singaporean households.
While ABSD taxes remain unchanged for first-time buyers, citizens buying the second, third, or subsequent properties have to pay higher ABSD tax amounts, up to 35% depending on different scenarios.
When did cooling measures start in Singapore?
Additional Buyer’s Stamp Duty (ABSD) was introduced in Singapore on the 7th of December, 2011, to help cool down the rising prices of housing markets.
There was a revision of ABSD on the 12th of January, 2013, which took place due to the residential market prices experiencing a surge, yet again.
The latest ABSD revision took place on the 16th of December, 2021, after which the Government introduced a new cooling measure package to aid in the price surge of all housing markets in Singapore.
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What are the Measures to Cool the Property Market?
The different measures undertaken by the Government of Singapore for cooling down the housing properties were made so with a mission aimed at promoting a sustainable and stable property market.
According to the latest cooling measures package announced by the Government of Singapore on the 16Th of December, 2021, the following changes are to be in effect in the Singapore housing market:
Additional Buyer’s Stamp Duty (ABSD) rate changes:
- For second property SC buyers: increased to 17%
- For second property SPR buyers: increased to 25%
- For third and subsequent property SC buyers: increased to 25%
- For third and subsequent property SPR buyers: increased to 30%
- For foreigners buying any residential property: increased to 30%
- For entities (Company/association) purchasing any residential property: increased to 35%
- For Housing developers purchasing any residential property: increased to 35%
Total Debt Servicing Ratio (TDSR) changes:
The TDSR threshold is to be tightened to 55% from 60%, which will apply to all loans used for purchasing properties.
Loan-To-Value Changes:
The limit for LTV limit in HDB housing loans is to be tightened to 85% from the previous 90% but is not applicable for loans granted by financial institutions. For this, the LTV limit is still left at 75%.
Housing supply:
The Government of Singapore increased the rate environment for all housing, both private and public, to moderate the supply of properties and meet the people’s demands, including tackling the land supply problems.
What is Higher ABSD Means for You?
ABSD is a tax charged to all property owners, be it residential or public, to balance out the demand for both the public and private housing market in Singapore.
Higher ABSD means that the charges for buying second and third properties for both SC and PR Singaporeans are higher. It increased the rate for entities and foreigners as well
If you are a Singaporean citizen (SC), you will have to start paying your ASBSD rates from the second property you are on
At the same time, as Singapore Permanent residents (PR) or a foreigner living in Singapore, you need to pay the revised ABSD process for all the residential properties you own.
The hike in the ABSD rates is likely set in place to discourage all Singaporeans from buying properties for investment and cool down the demand from foreigners.
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What is Tighter TDSR Means for You?
Total Debt Servicing Ratio (TDSR) is a threshold that limits the amount of money that any financial institution can grant to a borrower.
This amount was 60% before the new cooling measures revision of 2021, which is now at a 5% decrease and is 55%.
The new TDSR limit rate prohibits the lending of more than the set amount to their borrowers which would otherwise increase the borrower’s debt, sometimes beyond their credit limit.
With the new TDSR limit set in action, there will be less debt since the limit is less, reducing the number of housing debts that Singaporeans are experiencing currently.
What is Lower LTV Means for You?
The revised Loan to value limit is lowered from 90% to 85%, which is a total 5% decrease, intending to restrict home loans to protect buyers from over-leveraging.
The new LTV limits are targeting HDB housing buyers who use the loan for the HDB to buy properties.
With the reduced LTV limit, financial institutions are restricted from granting home loans up to a specific percentage of the value of the property they are looking to buy
Summary of New Cooling Measure Adjustments
Since the mid of December 2021, Singaporeans have been hit with a new cooling measure for all their housing properties which are reflected in hiked ABSD rates, including tightened LTV and TDSR charges.
The mission behind this change is to combat the economic fundamentals caused by property curbs that impact the financial living standards of Singaporeans in terms of income ratio in recent years.
This new set of measures affects all kinds of buyers, Singapore citizens, permanent residents, foreigners, and companies.
The goal is to make housing more accessible for the rise in demands from the people while also helping safeguard the over-leveraging of many home loans from different financial institutions.
Implements New Property Cooling Measures
The Government of Singapore announced that a new package of cooling measures would be implemented in the Singaporean housing marketing in the mid of December 2021.
The Ministry of National Development (MND) also announced that after scrutiny of the property market in Singapore, it had concluded that the real estate picture in Singapore seems to have adapted to a bull market even though the impact of the pandemic on their economic impact was catastrophic.
Seeing as how citizens were finding it harder to cope with the increasing momentum of home loans and mortgages, the Government has finally stepped in and implemented a new system that will help in the cooling down of the market to make way for more accessibility and affordability in the later years.
Is seller stamp duty a cooling measure?
Seller Stamp Duty is a Major property cooling measure older than ABSD because it was introduced to the world in 1996.
After a year, it was dismissed by the Government, but then it came beach in 2010.
The following years after its reintroduction, it was mainly used to keep property speculations in control, specifically for industrial properties.
The latest readjustment to this bill was done in 2017, which was set up to reduce the holding period to 3 years from the previous 4-year plan; hence, the SSD was lowered by 4 % in each tier.
Will Government introduce cooling measures?
The Singaporean Government decided to implement a cooling measures package towards the end of 2021 and is now in action.
The changes brought about by this implementation are seen in the increase of ABSD rates and the tightening of TDSR and LTV limits.
The Government is using this implementation as a preventive measure for the worst-case scenario when the hike surpasses the country’s economic fundamentals in property prices.
How might fresh cooling measures affect Singapore’s property market?
With the new cooling measures in action, the property market in Singapore is looking forward to a cool down so that the housing market does not impact the financial situation of Singaporeans.
According to many experts, ever since implementing the new measures, Singapore is ready to see some moderation in the property sales rates by 2022.
