Since the second half of 2009, the Government has came up with 7 rounds of cooling measures targeting the Singapore property market. On 11th January 2013, a joint press release from various ministries announced a comprehensive range of policy changes affecting buyers of residential properties, developers, and sellers of industrial properties.

These changes include:

1. Increasing the rates of the Additional Buyer’s Stamp Duty (ABSD) by 5% – 7%
2. Imposition of ABSD on two new groups of buyers
   • Singapore Citizens (SCs) purchasing their 2nd property
   • Permanent Residents (PRs) purchasing their 1st property
3. Reducing the Loan-to-Value (LTV) limit
   • LTV limit for individuals getting their 2nd housing loan is now 50%; or 30% if the borrower is above 65 years old at the end of the loan period or if the loan tenure is more than 30 years
   •  LTV limit for individuals getting their 3rd and subsequent housing loans is now 40%; or 20% if the borrower is above 65 years old at the end of the loan period or if the loan tenure is more than 30 years
   • LTV limits for non-individuals is now 20%
4. Minimum cash downpayment for individuals with existing housing loans is raised to 25%
5. Tightening of Mortgage Servicing Ratio (MSR) for HDB housing loans at 30% if granted by financial institutions
6. MSR for HDB housing loans capped at 35% if granted by HDB
7. PRs are now not allowed to sublet the entire HDB flat
8. PRs who buy private residential property in Singapore must sell their HDB flat within 6 months of the purchase
9. Executive Condominium (EC) developers must adhere to a list of measures
10. Imposition of Seller’s Stamp Duty (SSD) on industrial properties and land

Rationale behind the measures

The Government’s primary aim is to curb speculative buying so as to maintain the affordability of housing for the population. Hence this round of measures includes multiple policies targeted at reducing investment demands. Loan conditions have also been tightened to prevent home owners from over-borrowing. For industrial properties, SSD is implemented for the first time due to short-term speculation, most likely due to investors moving from the residential market because of previous rounds of cooling measures.

Impact

This round of property cooling measures will certainly dampen the investment demand in the residential and industrial property sectors, at least temporarily, resulting in a buyers’ market. This will lead to falling prices as the properties take a longer time to sell.

As such, first time home owners may be inclined to purchase from the resale market as opposed to waiting for new Built-to-Order (BTO) flats. Furthermore, as seen from previous rounds of cooling measures, the limited supply of residential properties and relatively lower interest rates continue to make Singapore an attractive location for real estate investments.

Viewing the above reasons with persistent high land cost, the long term impact of these latest measures may not be as effective and it will not be unexpected that a new round of property measures will be announced six months to a year from now.