More property cooling measures announced – 11Jan2013

SINGAPORE: The Singapore government on Friday announced additional measures to cool the property market.

The measures, which will take effect on January 12, include higher buyer’s stamp duty, tighter loan-to-value limits, higher minimum cash downpayment for second and subsequent housing loans, as well as an introduction of seller’s stamp duty for industrial properties.

The package of measures is the seventh round of property cooling measures introduced since 2009.

Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said it is the most significant set of measures undertaken by the government so far.

The government said previous measures had helped to dampen speculative buying, but demand for residential property remained firm and prices have continued to rise.

Mr Tharman said investment demand from Singaporeans has been strong and those who are buying their second or more property accounted for half of the buyers for new units in the private residential market.

He added: “I would say prices are running away from the fundamentals. Had we not intervened previously, I think we would be in serious trouble now, we would be in a real bubble now.

“But what we are seeing is a continued gradual rise in prices and we don’t intend that to continue because it will only be that you get a more serious fall further down the road.”

The measures tighten property ownership for investment, as well as on foreign buyers, the government said.

To discourage over-borrowing, financing conditions for housing have also been tightened.

In addition, structural measures have been implemented to strengthen the policy intent of public housing and executive condominiums.

The government said the additional buyer’s stamp duty (ABSD) will be increased between 5 and 7 percentage points across the board.

The ABSD will now be extended to permanent residents buying their first residential property and on Singaporeans buying their second residential property.

Permanent residents will have to pay a 5 percent stamp duty on their first property, and foreigners 15 percent.

For Singaporeans, they will have to pay an additional stamp duty of 7 percent for their second property.

Potential buyers who already have at least one existing loan will also have to pay more cash upfront for their purchases and face tighter loan-to-value limits.

The minimum cash downpayment for individuals applying for a second or subsequent housing loan will be raised from 10 percent to 25 percent.

The government said the new ABSDs and loan rules are temporary and will be reviewed in future, depending on market conditions.

To further moderate the demand for HDB flats, the government has also introduced several new measures.

It will tighten eligibility for loans to buy HDB flats. The Mortgage Servicing Ratio (MSR) for housing loans granted by financial institutions will be capped at 30 percent of a borrower’s gross monthly income.

For loans granted by HDB, the MSR cap will be lowered from 40 percent to 35 percent.

To target the increasing number of permanent residents (PRs) buying property in Singapore, there will be an owner occupation requirement for those who buy resale public housing.

Permanent residents who own an HDB flat will not be allowed to sublet their entire flat. Currently, there are about 2,300 PRs subletting their whole flat.

PRs who own an HDB flat must also sell their flat within six months of purchasing a private residential property in Singapore.

National Development Minister Khaw Boon Wan explained that this is because the privilege of buying subsidised flats should be kept for owner occupation.

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