The resilience of the property market in the face of the pandemic has not gone unnoticed by the government. As resale prices increase and more HDB properties cross the one million dollar mark, the government is intervening to cool the heated property market.
As of 30 September 2022, Monetary Authority of Singapore (MAS), Ministry of National Development (MND) and Housing & Development Board (HDB) have announced the latest round of property cooling measures:
- for housing loans granted by financial institutions, the interest rate floor used to compute the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) is raised by 0.5%
- for housing loans granted by HDB, a new interest rate floor of 3% is used for computing the eligible loan amount
- Loan-to-Value (LTV) limit for HDB housing loans is lowered from 85% to 80%
- wait-out period of 15 months is imposed for private residential property owners (PPOs) and ex-PPOs to buy a non-subsidised HDB resale flat. The wait-out period will not apply to seniors aged 55 and above who are moving from their private property to a 4-room or smaller resale flat.
Aside from these measures, here are the different types of property cooling measures that have been implemented in the past.
#1 Additional Buyer’s Stamp Duty (ABSD)
A property cooling measure introduced in 2011, the Additional Buyer’s Stamp Duty (ABSD) was last raised in 2018 to further dampen the demand from property investors. Aside from Singapore Citizens and Permanent Residents (PRs) purchasing their first home, ABSD rates were increased by 5% for all individuals and 10% for entities. Additionally, an additional ABSD was introduced for developers purchasing residential properties for housing development (i.e. en bloc purchases).
In 2013, ABSD was increased by 5 to 7% across the board for all buyers. In particular, Singapore Citizens buying their second residential property and PRs buying their first property were shocked by the overnight imposition going from no ABSD to 7% or 5% increase in the cost of acquiring their properties.
This was adjusted again on 16 December 2021.
| Residential Property Purchase | ABSD rates on 8 December 2011 | ABSD rates on or after 12 January 2013 | ABSD rates on or after 6 July 2018 | ABSD rates on or after 16 December 2021 | |
| Singapore Citizens (SCs) | 1st | 0% | 0% | 0% | 0% |
| 2nd | 0% | 7% | 12% | 17% | |
| 3rd and subsequent | 3% | 10% | 15% | 25% | |
| Permanent Residents (PRs) | 1st | 0% | 5% | 5% | 5% |
| 2nd | 3% | 10% | 15% | 25% | |
| 3rd and subsequent | 3% | 10% | 15% | 30% | |
| Foreigners | Any | 10% | 15% | 20% | 30% |
| Entities | Any | 10% | 15% | 25% additional 5% for developers (non-remittable) |
35% additional 5% for developers (non-remittable) |
Read Also: How Much Buyer’s Stamp Duty And ABSD Singaporeans, PRs And Foreigners Need To Pay – And When
#2 Seller’s Stamp Duty (SSD)
The Seller’s Stamp Duty was last adjusted in 2017 to reduce the holding period from 4 to 3 years and lower the SSD by 4% for each tier. This was a moderation of the SSD after the severe imposition in 2011.
Seller’s stamp duty has a longer history than the ADSB and is a major property cooling measure. SSD was first introduced in 1996 and then suspended in 1997. It was then reintroduced in 2010 and the Stamp Duties (Amendment) Bill 2010 was put into force to allow the government to introduce, vary or remove the SSD without having to pass through Parliament. This allowed the government to respond in a more timely manner to changes in the property market.
| Holding Period For Residential Properties | SSD rates on or after 20 February 2010 | SSD rates on or after 30 August 2010 | SSD rates on or after 11 Jan 2011 | SSD rates on or after 11 March 2017 |
| Up to 1 year | 1% on first $180,000 2% on next $180,000 3% on the balance |
1% on first $180,000 2% on next $180,000 3% on the balance (full SSD rate, 2010) |
16% | 12% |
| More than 1 year and up to 2 years | No SSD payable | 2/3 of full SSD rate, 2010 | 12% | 8% |
| More than 2 years and up to 3 years | No SSD payable | 1/3 of full SSD rate, 2010 | 8% | 4% |
| More than 3 years and up to 4 years | No SSD payable | No SSD payable | 4% | No SSD payable |
| More than 4 years | No SSD payable | No SSD payable | No SSD payable | No SSD payable |
Additionally, in 2013, the government introduced SSD on industrial properties for the first time to curb property speculation.
| Holding Period For Industrial Properties | SSD rates on or after 12 January 2013 |
| Up to 1 year | 15% |
| More than 1 year and up to 2 years | 10% |
| More than 2 years and up to 3 years | 5% |
| More than 3 years | No SSD payable |
Read Also: What Happens To Your Money After You Sell Your Flat In Singapore
#3 Loan-To-Value (LTV) Limit And Minimum Cash Down Payment
The Loan-To-Value (LTV) limit is possibly the most frequently adjusted property cooling measure that is used to moderate Singapore’s property market. The changes to LTV limit also tend to happen concurrently with changes to the minimum cash down payment required for housing purchase. In 2018, the LTV was tightened in 2018 by 5% for all housing loans granted by financial institutions. This was tightened again in December 2021 by 5% for HDB-issued housing loans and again on 30 September 2022, by another 5%.
As of 30 September 2022, the LTV limit is 80% for HDB-issued housing loans and 75% for bank-issued housing loans.
Prior to 2010, housing loans were subject to an LTV limit of 90% for loans granted by financial institutions and HDB. However, this changed in 2010 when housing loans granted by financial institutions were tightened by 10% and this has been gradually tightened over the years. HDB housing loans granted by HDB were unaffected by the LTV changes and retained their LTV limit of 90% throughout the LTV changes listed below until 2021.
For Individual Borrowers Taking Housing Loans From Financial Institutions:
| On or after 20 February 2010 | On or after 30 August 2010 | On or after 14 January 2011 | On or after 6 October 2012 | On or after 12 January 2013 | On or after 6 July 2018 | ||
| 1st housing loan | LTV Limits | 80% | 80% | 80% | 80%; or 60% if loan tenure is more than 30 years (25 years for HDB flats) or extends past age 65 | 80%; or 60% if loan tenure is more than 30 years (25 years for HDB flats) or extends past age 65 | 75%; or 55% if loan tenure is more than 30 years (25 years for HDB flats) or extends past age 65 |
| Minimum Cash Down Payment | 5% | 5% | 5% | 5% (for LTV of 80%) or 10% (for LTV of 60%) | 5% (for LTV of 80%) or 10% (for LTV of 60%) | 5%; or 10% if the loan tenure is more than 30 years* or extends past age 65 | |
| 2nd housing loan | LTV Limits | 80% | 70% | 60% | 60%; or 40% if loan tenure is more than 30 years (25 years for HDB flats) or extends past age 65 | 50%; or 30% if loan tenure is more than 30 years (25 years for HDB flats) or extends past age 65 | 45%; or 25% if loan tenure is more than 30 years (25 years for HDB flats) or extends past age 65 |
| Minimum Cash Down Payment | 5% | 10% | 10% | 10% | 25% | 25% | |
| 3rd and subsequent housing loan | LTV Limits | 80% | 70% | 60% | 60%; or 40% if loan tenure is more than 30 years (25 years for HDB flats) or extends past age 65 | 40%; or 20% if loan tenure is more than 30 years (25 years for HDB flats) or extends past age 65 | 35%; or 15% if loan tenure is more than 30 years (25 years for HDB flats) or extends past age 65 |
| Minimum Cash Down Payment | 5% | 10% | 10% | 10% | 25% | 25% |
For Individual Borrowers Taking HDB Issued Housing Loans
| Before 16 December 2021 | On or after 16 December 2021 | On or after 30 September 2022 | |
| LTV Limits | 90% | 85% | 80% |
For Non-Individual / Entity Borrowers
| On or after 14 January 2011 | On or after 6 October 2012 | On or after 12 January 2013 | On or after 6 July 2018 | |
| LTV Limits | 50% | 40% | 20% | 15% |
#4 Total Debt Servicing Ratio (TDSR)
While home buyers today are familiar with the Total Debt Servicing Ratio (TDSR), this is a relatively new framework that was introduced in the 2013 property cooling measures. Under the TDSR framework, borrowers cannot exceed 60% of their monthly income in debt obligations for all kinds of loans (including mortgage, car loans, student loans and credit card loans).
Since its introduction, it has been adjusted once in 2017 to give more flexibility to borrowers who want to monetise their properties in their retirement years by removing the TDSR requirement to mortgage equity withdrawal loans with LTV ratios of 50% and below.
Since its introduction in 2013, the higher of the medium-term interest rate floor or the thereafter interest rate is applied when financial institutions compute a borrower’s monthly property loan instalment for TDSR. As of 30 September, this medium-term interest rate floor is raised by 0.5%.
Read Also: Understanding Total Debt Servicing Ratio (TDSR) – And How It Affects Your Personal Finance Decisions
#5 Mortgage Servicing Ratio (MSR)
Even before the introduction of TDSR, housing loans for HDB flats were limited to the Mortgage Servicing Ratio (MSR). On and after January 2013, HDB housing loans offered by HDB were limited to a MSR of 35%, a reduction from 40%. Additionally, HDB housing loans offered by financial institutions were limited to a MSR of 30%.
On 30 September 2022, HDB introduced a interest rate floor of 3% p.a. to compute a borrower’s eligible housing loan amount. The higher of 3% p.a. or 0.1%-point above the prevailing CPF Ordinary Account (OA) interest rate will be the interest rate used to compute the eligible loan amount for HDB’s concessionary housing loan. This does not change the actual interest rate charged for HDB concessionary housing loans.
#6 Restriction Of Loan Tenure
Another way to restrict loans is to restrict the loan tenure which was what happened in 2012. The maximum loan tenure for all new residential property loans offered by financial institutions was capped at 35 years. Loans exceeding 30 years also had tighter LTV limits.
HDB housing loans offered by HDB remain capped at 25 years.
#7 Restrictions on Private Property Owners
In August 2010, a major change in HDB and private property ownership happened. To reinforce the principle that HDB flats are meant for owner-occupation, private property owners must sell off their private property after purchasing a HDB non-subsidised flat (i.e. a resale flat bought without CPF grant). HDB flat owners must also wait out the minimum occupation period (MOP) before they are allowed to buy private residential property.
Prior to this, it was possible to concurrently own a non-subsidised HDB flat and a private property, as long as the HDB flat was the primary residence. It was also possible to buy a non-subsidised HDB flat first and then immediately purchase a private residential property. Buyers of subsidised flats were not allowed to own private property within the 5-year MOP, even before the change.
On 30 September 2022, an additional restriction on private property owners is applied to moderate demand for resale flats. Private property owners and ex-private property owners (ex-PPOs) will have to wait out 15 months after the disposal of their private properties before they are eligible to buy a non-subsidised resale flat.
This will not apply to seniors aged 55 and above (and their spouses) who are moving from their private property to a 4-room or smaller resale flat. The wait-out period for private property owners who are first-timers and wish to apply for the CPF Housing Grant and Enhanced CPF Housing Grant for their resale flat purchase, remains unchanged at 30 months.
#8 Extension Of Minimum Occupation Period (MOP)
Along with the changes to private property ownership, the minimum occupation period (MOP) for non-subsidised flats was extended from 3 years to 5 years. This applies for the resale of the flat as well as subletting the whole flat. Subsidised flats were already subject to the 5-year MOP.
#9 Restrictions on Developer Schemes
Developer schemes also have a history of being cut off by the government as part of property cooling measures.
In 2007, the government disallowed the deferred payment schemes (DPS) for uncompleted private residential properties. DPS allowed buyers to not make payments, aside from down payment, until 2 to 3 years later. Currently, deferred payment schemes for completed private residential properties are still allowed.
In 2009, the government disallowed interest absorption schemes and interest-only loans. Under these schemes, buyers only need to pay the down payment and make interest payments on the loan (without repaying the principal), until the property was completed. These schemes were seen to encourage property speculation as they minimise payments that buyers have to make until the completion of the property.
#10 Estate Duty
While not exactly a property cooling measure, we would be remiss to not mention estate duty, especially since it was brought up during the 2021 Budget Debate Round-Up.
Estate duty was abolished in 2008. About $75 million per year on average was collected from estate duty. However, it was seen to affect the middle- and upper middle-income group more than the wealthy. This disproportionate effect was attributed to the fact that the exemption limit for non-residential assets was set at $600,000 while the exemption limit for residential properties was set at $9 million. Instead of adjusting the limits, the government decided to abolish estate duty entirely as it was likely to continue to affect the middle- and upper-middle income groups disproportionately compared to the wealthy, who were better able to avoid the estate duty through tax planning.
Read Also: 6 Ways You Can (Legally) Reduce Your Income Tax For YA 2021
These property cooling measures are not exhaustive, there have been minor measures such as restrictions on renting and PRs’ eligibility to purchase HDB flats. However, the above-mentioned measures are the major policy levers that the Singapore government have used in the past to moderate the property market.
When and if they will be used in the future is not something that we can foresee but do note that when these announcements were made, they were usually made with immediate effect on the following day.
Property Cooling Measures:
- 2022, MAS
- 2021, MAS
- 2018, MAS
- 2017, MAS
- 2013, MAS
- 2013, MAS
- 2012, MAS
- 2011, MAS
- 2011, MAS
- 2010, HDB
- 2010, MAS
- 2010, MAS
- 2009, MAS
The post 10 Types Of Property Cooling Measures That Singapore Government May Introduce (Based On Past Track Record) appeared first on DollarsAndSense.sg.
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