Cooling Singapore’s Property Market
Singapore’s private and industrial property markets continue to rise despite several rounds of “cooling” measures by the government. According to the Straits Times , private property prices rose another 2.8% in 2012 compared with 2011, making property a continually attractive investment. An expected 200,000 Housing Development Board (HDB) and Executive Condominium (EC) are projected to hit the market by 2016 in order to meet the future housing demand.
However, earlier this year, the government released its seventh round of cooling measures aimed at reining in speculation. This time, the measures are providing even tighter restrictions on the private and public housing markets with an Additional Buyer’s Stamp Duty (ABSD), stringent Loan-to-Value limits and larger loan down payments. PRs are affected in particular with greater restrictions on rental and ownership. In addition, the government is imposing a Seller’s Stamp Duty (SSD) on industrial properties. An overview of the government’s cooling measures is as follows:
In regards to public housing, the government’s cooling measures are:
• Tighter loan eligibility for HDB flat purchases
- The Mortgage Servicing Ratio (MSR) will be capped at 30% of the borrower’s gross monthly income. For loans granted by HDB, the MSR will be lowered from 40% to 35%.
• PRs owning an HDB flat must sell it within six months of purchasing a private residential property.
• PRs who own an HBD flat cannot sublet their entire flat.
In regards to ECs, the government’s cooling measures involve the following:
• All new EC units will have floor areas capped at 160 square metres.
• New dual-key EC units can only be purchased by multi-generational families.
• EC developers involved in the Government Land Sales (GLS) programme can only launch the sale of units 15 months from either the date of award or completion of foundation works–whichever comes first.
• Private enclosed spaces and roof terraces will be considered as part of the gross floor area (GFA). The GFA of the aforementioned spaces in ECs will be subject to payment of charges as “bonus” floor area.
All Residential Properties
In addition to the specific measures above, all residential properties will face the following measures:
• An Additional Buyer’s Stamp Duty (ABSD) between five and seven percentage points that will be imposed on PRs who are first-time residential property buyers and Singaporeans purchasing their second residential property.
• Loan-to-Value limits will become more stringent for individuals with an outstanding loan and non-individuals such as businesses.
• The minimum cash down payment for housing loans will rise from 10% to 25%.
Industrial properties have grown tremendously over the last few years, making for very attractive investment opportunities. However, the government hopes to reign in speculation with the introduction of a new Seller’s Stamp Duty (SSD) to discourage short-term speculators. The SSD rates are as follows:
• SSD of 15% for all industrial properties sold within a year or less from the date of purchase.
• SSD of 10% for all industrial properties held for more than a year but sold within two years of purchase.
• SSD of 5% for all industrial properties held for more than two years but sold within three years of purchase.
Looking Into the Future of the Property Market
While the abovementioned measures are the most stringent to date, the flow of capital into the property market will likely continue. However, it is still too early to tell if property sales volumes and prices will decrease as a result of the government’s cooling measures, or if prices will increase as sellers incorporate the ABSD and SSD into their rates. It will also be interesting to see the effects of the cooling measures on rental prices as PRs raise rates to compensate for the inability to rent their entire flat. This will be a plus for Singaporean flat owners who are not hindered by this restriction and will benefit from higher rental rates.