New property measures for Singapore home owners

New property measures for Singapore home owners

The government announced its fourth installment of private housing measures to maintain long-term stability of the property market.These measures aim to further protect the interests of genuine Singapore home-owners.

 

Buying a home: The new measures are more targeted at those looking into investment rather than first-home buyers or those without any existing loans. These measures aim to further safeguard the interests of Singaporeans  whose property purchase is primarily for residence, rather than financial investment.

Buying a home

Measures taking place from 14 January 2011 will include:

  • The holding period for Seller’s Stamp Duty (SSD) is increased from its current 3 years to 4 years for residential properties.
  • In addition, New Seller Stamp Duties will be raised to 16%, 12 %, 8% and 4 % for properties sold within 1 to 4 years of purchase respectively. The rates apply for residential properties bought on and after 14 January 2011.
  • The LTV (Loan-to-Value) limit for property buyers who are not individuals (corporations, trusts and collective investment schemes) will be cut from 60% to 50%.
  • The down payment requirements for 2nd homebuyers will increase due to a cut on the LTV limit. According to a government statement yesterday, individuals with one or more outstanding housing loans can now only borrow up to 60% of a property’s value. The previous limit allowed stood at 70%.
  • The reminder Buyer Stamp Duty will remain at 3%.

The government said its objective is to ensure a stable and sustainable property market where prices move in line with economic fundamentals. Analysts said they believe such measures could further curb speculation in the market.

Previous measures have, to some extent, moderated the market, but sentiments remain buoyant. Low-interest rates plus excessive liquidity in the financial system, both globally and locally, could cause prices to rise beyond sustainable levels based on economic fundamentals.

Moreover, when interest rates eventually rise, it could strain purchasers who have overextended themselves financially.

This is why the government has decided to introduce additional targeted measures to cool the property market and encourage greater financial prudence among property purchasers.

Property buyers are assured of ample supply of private residential units, and buyers need not rush to buy now. The government also said it would continue to monitor the property market closely and take further steps to promote a stable and sustainable property market if necessary.

Impact of measures

Research Consultancy SLP International executive director Nicholas Mak said: "This is going to basically drive another nail into the coffin of anybody who has thoughts of short-term investments -- in other words speculation in the property market.”

"This is quite a drastic measure to try to drive out short-term investors because by raising the Seller's Stamp Duty to a very punitive rate of 8 percent and above basically creams off all the profits that a short-term investor hopes to gain".

More transactions led to new measures

Private residential sales in November rose the most in 7 months. Property transactions reached an unprecedented level in the first 11 months of 2010 as developers sold 15,025 properties, according to preliminary data from the government.
That exceeded the high of 14,811 homes in 2007. According to Donald Han, Singapore-based managing director at Cushman & Wakefield, the world's largest closely held real estate services company, "December sales would be as aggressive as the November numbers.” "The tide is coming to the shores of places like Singapore, China and Hong Kong, and it's hard to stop the tide with low-interest rates. The only way is to pump in regular measures like what we've seen." Singapore's 3-month inter-bank rate fell to 0.43751 percent on Jan. 3, the lowest since Bloomberg began compiling the data in 1999. It was at 0.43779 percent yesterday.

More on Seller’s Stamp Duty

 

"The seller's stamp duty rates sharp increase is to provide a strong disincentive for investors looking to make short term gains," the government said. "The impact of the seller's stamp duty is especially significant as it is payable regardless whether the property is eventually sold at a gain or loss."
Singapore in February last year said it will levy a seller's stamp duty on all residential properties and land that are sold within one year from the date of purchase. That was increased to 3 years in August, when the government also raised down payments for second mortgages.
"This new round of cooling measures will adversely affect sentiments in the property market in the coming months," said Nicholas Mak, an executive director at SLP International Property Consultants in Singapore. "They could also catch many investors who had bought residential properties in the last two years by surprise. Some of the buyers could be investors who are banking on rising property prices to make a quick profit."

Source: Goldman Sachs, Bloomberg.net

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