Sunday 13 January 2013

New property cooling measures announced - 11 Jan 2013

Tough action to cool property market
Steps include higher stamp duties, rules limiting buyers' borrowing
By Lee Su Shyan, The Straits Times, 12 Jan 2013

NEW property cooling measures were announced yesterday - the seventh in recent years - as the Government moves yet again to rein in the red hot market.

The steps include higher stamp duties and rules limiting buyers on how much they can borrow, in some cases as little as 20 per cent of the purchase price.

The hard-hitting measures, most of which take effect today, cover the private and public residential markets, executive condominiums (ECs) and the industrial property sector.

The aim is to curb investor demand, reduce speculation in industrial property, be stricter on foreign buyers and increase lending limits to fend off over-borrowing amid rock-bottom interest rates.

Deputy Prime Minister Tharman Shanmugaratnam told a briefing last night: "The reality we face is that interest rates are extraordinarily low, globally and in Singapore, and continue to add fuel to our property market.

"We have to take this further round of measures now, to check recent market trends and avoid a more serious correction in prices down the road."

Most Singaporeans buying their first home will not be affected.

The steps include raising the Additional Buyer's Stamp Duty (ABSD) by between 5 and 7 percentage points across the board.

The duty will also now apply to more people, such as permanent residents (PRs) buying their first home and Singaporeans investing in their second residential property. For example, a Singaporean buying a second property will now have to pay 7 per cent ABSD - that's $70,000 on a $1 million home. Previously no ABSD would have been payable.

Mr Tharman also noted that some of the measures are temporary and will be reviewed "once markets cool and prices soften".

He said the heightened ABSD and the tighter loan-to-valuation limits are "exceptional measures, imposed for cyclical reasons, they are not permanent". On the other hand, measures affecting the PR owner-occupation of HDB flats and ECs are structural and for the long term.

The changes for HDB flats are aimed at moderating demand and ensuring buyers do not over-commit. Stricter loan eligibility such as capping a mortgage service ratio at 30 per cent for loans from banks is one example. Another rule bars PRs from sub-letting their entire HDB flat.

The size of each EC unit can now be no larger than 160 sq m. This will address concerns raised recently over whether the sale of mega penthouses and other luxurious units are in line with the policy of keeping them as an affordable option for middle- income Singaporeans.

A seller's stamp duty has been introduced on industrial property for the first time, at rates ranging from 5 per cent to 15 per cent.

Mr Tharman was also asked if the measures had been timed to coincide with the by-election.

He said: "We've been studying this for a few months now as we were concerned about the way the market was moving over the course of the year. We had a package ready several weeks ago, but waited for the last quarter's numbers to come out. Once the numbers came out last week, we felt we had to move.

"We were quite concerned about the re-acceleration in prices that we've seen in both the private market and the HDB resale market."

The latest flash estimates from the Urban Redevelopment Authority showed private home prices rose 1.8 per cent in the fourth quarter, the fastest rise in six quarters, while HDB flat prices surged 2.5 per cent.

The Real Estate Developers' Association of Singapore said it will "evaluate the impact. It is in the interest of the market to have a gradual trend in growth and value for home owners and investors in the long term".

Mr Jason Lee, 29, a management associate eyeing to invest in property, said: "I'll just hold on to my cash... the prices won't go up that much any more."

HDB restrictions to 'instil financial prudence'
Minister Khaw advises buyers to be patient, with 200,000 homes expected to be completed over the next four years
by Sumita Sreedharan and Wong Wei Han, TODAY, 12 Jan 2013

The Government yesterday introduced fresh measures to moderate the rise in prices of re-sale Housing and Development Board (HDB) flats and instil financial prudence among buyers, while giving the assurance that there are enough homes in the pipeline for Singaporeans.

Only last week, estimates from the HDB showed prices of resale flats rose by 2.5 per cent in the last three months of 2012, and at their fastest pace for the year.

Starting today, eligibility for loans to buy HDB flats will be tightened. Bank loan repayments for public housing - known as the Mortgage Servicing Ratio (MSR) - will be capped at 30 per cent of the buyer's monthly income. For loans granted by the HDB, they will now be capped at 35 per cent of a flat buyer's gross monthly income, instead of the current 40 per cent.

At a press conference yesterday, National Development Minister Khaw Boon Wan said that the enhanced restriction on borrowing is aimed at instilling greater financial prudence among buyers. "Excessive credit doesn't do anybody any good," he said.

The MSR can be as high as 60 per cent in some loan applications for HDB flats and private residential properties, noted Mr Lee Sze Teck, DWG's Senior Manager for Training, Research and Consultancy.

PropNex Chief Executive Mohamed Ismail felt the move could further moderate HDB resale prices.

"With the new MSR, people will be exposed to a lesser amount of loans. And that means people will be cautious about the amount of COV (Cash-Over-Valuation) they want to pay. Against this backdrop, the HDB (resale) market is heading for greater moderation of prices," he said.

Ownership rules for Permanent Residents (PRs) would also be tightened starting today. PRs will be barred from subletting their whole flat, even though they will continue to be able to sublet rooms. Previously, a PR could sublet his whole flat after meeting the minimum occupation period.

PRs who have been approved by the HDB to sublet their whole flats prior to today will be allowed to continue with their subletting arrangement for the remainder of the approved duration.

Under the new measures, PRs who purchase private property must now sell their HDB flats within six months of the completion of the purchase of the new property or after they are granted their Temporary Occupation Permit or Certificate of Statutory Completion.

These moves will help "restrain some of the demand", Mr Khaw said, as PRs can currently only purchase resale units and make up a significant proportion of buyers. 

"If we are able to dampen it, the demand should ease," he added.

The minister also advised home buyers to be patient, noting some 200,000 units - both public and private housing - are expected to be completed over the next four years.

"Unless you are desperate for a home, desperate for a room, you can hold on for a while. I think it's better for you, otherwise you jump in high and the market corrects itself, you'll regret your decision," said Mr Khaw.

Tighter loan limits, more cash upfront
Curbs 'temporary, to protect home buyers from destabilising correction'
By Esther Teo, The Straits Times, 12 Jan 2013

HOME buyers will now have to stump up even more cash upfront after the Government moved to cool the property market in an environment of "extraordinarily low" interest rates.

The additional buyer's stamp duty (ABSD) - first introduced in December 2011 - will be raised between 5 and 7 percentage points across the board.

And the proportion of a home's value that a buyer can borrow, known as the loan-to-value (LTV) limit, will be slashed to as low as 20 per cent for certain buyers.

The minimum down payment for some buyers will also be hiked to 25 per cent. These changes affect those with at least one outstanding housing loan.

They were part of the seventh round of measures unveiled by Finance Minister Tharman Shanmugaratnam and National Development Minister Khaw Boon Wan at a press conference yesterday.

The measures are intended to help Singaporean couples buy their first home, which is the Government's first objective, and to protect all property owners from a price correction down the road, Mr Tharman said.

But he emphasised that measures such as the revised ABSD and tighter loan limits were "exceptional" ones put in place as counter-cyclical measures and are not permanent. Once the market has cooled, these measures will be reviewed, he added.

"Interest rates are abnormally low, abroad and in Singapore. That's why we've had to take this additional set of measures that we would not normally take, because we're not in a normal situation.

"So it's better that we calm the market now and get some softening of prices now than wait for a more destabilising correction later," he added.

For individuals getting a second housing loan on top of an outstanding one, the LTV limit will be cut to 50 per cent from 60 per cent. It will fall to 30 per cent if the loan term is more than 30 years or extends past the age of 65 of the buyer.

Those taking a third or subsequent housing loan will see their LTV slashed to 40 per cent or to 20 per cent if the loan term is more than 30 years or extends past age 65 of the buyer.

The LTV limit will also be lowered to 20 per cent from 40 per cent before for non-individual borrowers such as companies.

In addition, the minimum cash down payment required for borrowers who have one or more outstanding housing loans will be raised to 25 per cent from 10 per cent previously.

The ABSD will also be raised further and imposed on two new groups of buyers. Permanent residents purchasing their first home will now be slapped with an ABSD of 5 per cent while Singaporeans buying their second property will be charged a 7 per cent ABSD.

Certain reliefs will be provided, for instance, to eligible couples who have bought a second home but will dispose of the first.

Mr Lee Sze Teck, senior manager of training, research and consultancy at Dennis Wee Group, said it is worth noting that the Government said the ABSD measures and LTV regulations are temporary and will be reviewed later depending on market conditions.

"The Government is probably trying to reassure the market that they are not against foreigners and PRs investing in Singapore's property market. They imposed these measures because of extenuating factors in the market."

Permanent residents hit by changes
By Rachel Chang, The Straits Times, 12 Jan 2013

PERMANENT residents (PRs) now face unprecedented limits on their ability to buy property in Singapore.

To buy a first property, whether a private unit or a Housing Board resale flat, PRs must pay an additional 5 per cent stamp duty.

If they buy a second or subsequent property, the stamp duty is an extra 10 per cent, up from the current 3 per cent more.

Also, PRs who own an HDB flat can no longer sub-let their entire flats, although they may still rent out individual rooms.

Those already sub-letting their flats can do so only until the end of the current approved period.

Finally, while Singaporean flat owners can buy a private property and keep their HDB flats too, PRs will no longer be allowed this dual ownership: On buying a private property, they must sell off their flats within six months.

The changes take effect today.

PRs were stunned by the severe measures, which the Government, said Deputy Prime Minister Tharman Shanmugaratnam yesterday, had "thought hard about".

Although PRs have never been given access to new, subsidised HDB flats, this is the first time they are being "taxed" for all property purchases, private or public.

Mr Tharman said the move was "necessary, particularly because of the HDB resale market, where PRs are taking up a larger share of new buying".

While PRs own only a small proportion of HDB flats, they formed "a rising component of demand in the last year" for all forms of housing, he said.

There are 49,190 PR households that own HDB flats. Latest data show 2,142 PR-owned flats are rented out - about 5 per cent of flats approved for sub-let.

PRs last night were dismayed.

"It's not fair," said Chinese national Thomas Feng, on the new sub-let ban.

"In this case, why let PRs buy flats at all?"

The accountant, a Henan native in his early 30s, has been a PR since 2007 and owns a four-room flat in Kallang.

Myanmar software developer Zarni Win said she could accept the policy last year that set the duration of the sub-let limit at five years.

"But this new change is too much. What if we have a job posting overseas, then we have to continue paying a mortgage without staying in the flat?" said the 34-year-old.

Briton Francis Chandler, 41, an IT professional, who has been a PR since 2010 said: "The PRs I know are all living in their property. Whereas I know a lot of Singaporeans who have multiple properties for investment."

Others were resigned.

"Of course it is unfair," said Filipino architect Ram Poyaoan, 48, who owns a five-room flat in Pasir Ris. "But what can we do? It's like living in your uncle's house. You don't get the same treatment."

- Additional 5 per cent stamp duty to buy first property, whether private unit or HDB flat
- Not allowed to sub-let whole HDB flat
- Must sell HDB flat after buying a private residential property

Curbs imposed on loans for HDB flats
By Daryl Chin, The Straits Times, 12 Jan 2013

NEW rules governing loans for HDB flats have been rolled out to ensure buyers do not overstretch their finances.

There were no caps on this previously and banks were known to grant loans even if the repayments took up as much as 60 per cent of the monthly income, as long as the borrower was credit-worthy.

The new rules also state that if a buyer takes up an HDB loan, his mortgage servicing ratio is now reduced to 35 per cent, down from 40 per cent previously.

Although this new rule applies to both new flats bought directly from the Housing Board and resale units, National Development Minister Khaw Boon Wan said yesterday that it was the latter he was intent on targeting.

"Resale buyers tend to get their loans from commercial banks. Greater restrictions on lending are welcome because excessive credit doesn't do anybody any good, and it's always good to let go of some air from the market," he added.

SLP International's head of research Nicholas Mak said the new rules will force buyers to go for cheaper flats which are smaller or not as centrally located, simply because their purchasing power has been curbed.

Dennis Wee Group spokesman Lee Sze Teck said those who use up to 60 per cent of their monthly income to service their home loans are typically earning decent wages and have a good credit rating.

"But this is not considered prudent, particularly if an emergency crops up or if someone loses his job," he said.

Mr Timothy Kua, director of, cited an example of a buyer who takes up a 30-year loan for a $700,000 flat. The loan is assumed to be 80 per cent of the flat's value, and the interest rate pegged at 1.5 per cent.

Based on a 40 per cent mortgage servicing ratio in the past, he would need to have a gross monthly income of $4,830.

For the same property, now at a 30 per cent ratio, he would need to make $6,440 a month.

"In short, someone making $4,830 could buy a $700,000 property in the past but can technically afford only a $525,000 property now," he said.

House hunters yesterday were taken aback by the stringent rules imposed.

Engineer James Leow, 26, had plans to buy a five-room resale flat near his parents' place in Ang Mo Kio this year.

"It's back to the drawing board for me. I need to rework my finances and see if I can even afford the area in the first place," he lamented.

Another measure, to tighten terms for granting HDB loans, will take effect on July 1. Buyers who go for a flat with less than 60 years remaining in its lease could be disallowed from using their Central Provident Fund savings if the lease is too short, and be forced to take shorter-term loans.

No more massive EC units with new cap on maximum size
By Magdalen Ng, The Straits Times, 12 Jan 2013

ENORMOUS executive condominium (EC) units are now a thing of the past, after new measures to curb their sizes were unveiled yesterday.

The maximum size of EC units - a hybrid of public and private housing attracting government subsidies - will be capped at 160 sq m, or 1,722 sq ft.

The size and prices of some EC units have been hot topics of late, after the sale of vast, swanky ECs.

One 4,349 sq ft penthouse unit, including a 1,600 sq ft roof terrace, at CityLife@Tampines went for $2.05 million last month.

Previously, developers of nonlanded private projects and ECs did not have to pay development charges for sky terraces as they were not treated as gross floor area (GFA).

With the new measures, taking effect from today, private enclosed spaces and private roof terraces will be counted as "bonus" GFA of a project and subject to development charges.

Also, developers of future EC sites from the Government Land Sales programme will be allowed to launch units for sale only 15 months from the date of award of the sites, or after the physical completion of the foundation works, whichever is earlier.

Minister for National Development Khaw Boon Wan said this would help to moderate bids.

On larger EC units, he said: "This is a very recent trend. EC units' sizes and pricing have been quite moderate and very much in keeping with what the market thinks the target buyers can afford but when they start exceeding 200 sq m and start charging $2 million, one should ask how can a $12,000 income group family afford such a unit."

The sale of new dual-key EC units will also be restricted to multi-generational families only. The units have two separate entrances, allowing grandparents, for instance, to live separately.

However, some dual-key owners had been renting out space.

Developer Qingjian Realty, which recently won a bid for an EC site in Punggol Way/Punggol Walk, is dismayed at the rules.

Qingjian deputy general manager Li Jun told The Straits Times it had planned about 100 dual-key units in the upcoming project, but will now have to consider reducing the numbers.

"There will definitely be some impact on demand," he said.

R'ST director of research Ong Kah Seng said: "The most evident measures for ECs address the recent controversies surrounding supersized units."

Mr Don Poh, who missed out on a dual-key unit at CityLife and settled for a four-bedroom unit instead, does not expect much to change with the move.

The self-employed 25-year-old said: "Many people will still want to live with their families. The appeal that you can do so, and still retain your privacy, remains."

New seller's stamp duty to curb speculation in industrial property
By Melissa Tan, The Straits Times, 12 Jan 2013

STAMP duty will now be levied on sales of industrial property - a first in Singapore as the Government moves to clamp down on short-term speculation.

The measure was welcomed by industrialists, who said the sky-high prices and rents of recent years have sent business costs soaring.

The seller's stamp duty takes effect today and applies to industrial property and plots that are sold within three years of the date of purchase.

Property sold within the first year will be levied 15 per cent; 10 per cent if sold in the second year and 5 per cent in the third year.

The aim is to discourage short-term speculation which could distort property prices and raise business costs, the Government said yesterday.

"Traditionally we have not wanted to intervene in this fashion in the industrial segment. But ... the evidence of flipping is very clear," Deputy Prime Minister Tharman Shanmugaratnam told a briefing. "We are doing this to help genuine industrialists and also to prevent a rise in industrial property prices feeding through to consumer prices."

Industrial property prices have doubled over the last three years, outpacing rent increases.

Speculative activity has also shot up. About 15 per cent of all transactions of multiple-user factory space in 2011 were resales carried out within three years of purchase. This percentage rose to 18 per cent over the first 11 months of last year - nearly twice the average of about 10 per cent from 2006 to 2010.

Bosses welcomed the stamp duty, saying they hoped it would lower costs for industrialists.

"This measure will bring some sanity to the whole industrial market," said Mr Douglas Foo, chief executive of Sakae Sushi, which bought its own 200,000 sq ft industrial building in Paya Lebar iPark in the mid-2000s.

Mr Foo said that though firms need their own premises to operate, it has been hard for many genuine industrialists to afford space as their bottom lines have not grown in tandem with the astronomical rise in industrial prices.

DWG analyst Lee Sze Teck said the seller's stamp duty will make people think twice about investing in industrial property.

Anaemic growth in the manufacturing sector means bosses are already unlikely to expand operations, which will reduce rental demand this year.

More than 10 million sq ft of multi-user industrial space is also expected to go on the market in the next few years.

"If the industrial space cannot be absorbed, it means that investors will have to bear the mortgage instalments for at least one year. Investors are likely to reassess their options," Mr Lee said.

* No stamp duty relief for singles switching homes
By Esther Teo, The Straits Times, 30 Mar 2013

A SINGLE person who buys a home to live in will be hit with the additional buyer's stamp duty (ABSD) if he does not dispose of his existing residence first.

That means a single person might have to find accommodation in between selling the old home and completing the purchase of the new one.

The clarification came from the Ministry of Finance (MOF) on Thursday, following uncertainty over whether stamp duty concessions for married people would also apply to singles.

Some married couples will get a refund of the ABSD if they dispose of their first property within six months of buying a resale home or the completion of an uncompleted one.

This relief is provided for joint purchases by married couples with at least one Singaporean spouse. Both parties must also not own any other property at the time of purchase to qualify.

But these do not extend to singles, the ministry told The Straits Times.

This means singles will have to sell their existing home first before buying another - even if the new unit is meant for occupation and not investment.

If they do not comply with this rule, they will be hit with a hefty additional tax in the form of the ABSD.

Experts say the rule could mean much inconvenience, with single people having to find a rented place for the short term, bunk in with a family member temporarily or secure an extension of stay with the buyer between the transactions.

The new levy was part of the seventh and most extensive set of property cooling measures that were unveiled in January.

These slapped a 7 per cent ABSD on Singaporeans buying their second home.

An MOF spokesman said that the Government raised the ABSD rates to moderate demand for properties and help cool the market.

It limited ABSD concessions to a narrow group of buyers, namely Singaporean married couples, to help them acquire and upgrade their matrimonial homes.

The MOF spokesman said that if more groups, such as singles, were able to qualify for ABSD concessions, it would defeat the purpose of the cooling measures.

"As such, Singaporeans will need to dispose of their first residential property if they wish to avoid ABSD on their next purchase. Singaporeans, including Singaporean singles, can buy their first residential property without any ABSD," he added.

"The ABSD measures announced in January are significant, but they are temporary. They will be reviewed in future depending on market conditions."

Some experts disagree with the policy, noting that all Singaporeans should be treated equally, regardless of their marital status.

Mr Chris Koh, director of Chris International, said singles should not be penalised as long as they will own just one house eventually.

The ABSD relief offered to married couples should be extended to them as well, as long as they commit to selling their current home within six months of the purchase, he said.

"The ABSD tax should apply to just investment homes, and if a single is buying a home for owner occupation, he should be eligible for the refund," he added.

Most singles The Straits Times spoke to said they were unaware of the policy, but felt that it was unfair.

Real estate agent Isabella Lim, 36, said she was surprised to find out that she had to sell her home first if she wanted to upgrade to a bigger flat without paying the ABSD.

"If I'm not investing in another home, I'm not sure why I would need to pay more in taxes. But this will probably make me stay put for a while," she added.

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