Property Cooling Measures in Singapore Part 2 – Rent a Room, Property for Buy, Sale, Invest

In Singapore, the property cooling measures adopted by the Government in 2009-2013 are considered by economists “macroprudential measures,” because of their assistance in containing the property market bubble. The Singaporean Government showed real intrepidity by refusing to instate less drastic measures, such as interest rate increases, which, according to MAS Managing Director Ravi Menon, would have led to an inability to deal with the financial vulnerability arising from the large expansion of global liquidity since 2008, which resulted in increasing asset prices and huge capital inflows in Singapore’s economy. Menon made this statement at the inaugural Asian Monetary Policy Forum.

There is a large variety of cooling measures that have had a great impact on Singapore’s residential property market since their application, and some of the most important ones are:

14 September, 2009. The Interest Absorption Scheme is provided at project launches by property developers and banks, and allows deferment of the bulk of the purchase price until the TOP (Temporary Occupation Permit) of the project. This scheme, together with the interest-only housing loans, was dismissed in the case of all private properties as a cooling measure.

20 February, 2010. The Loan-to-Value limit was dropped from 90% to 80% for all home loans, with the sole exception of Housing and Development Board loans. On the same date, the SSD (Sellers’ Stamp Duty) was introduced for residential property sold within one year of purchase.

30 August, 2010. The Loan-to-Value limit was lowered from 80% to 70% for second properties. Minimum cash payments were raised from 5% to 10% for would-be home owners having one or more outstanding home loans, and the holding period for imposition of the SSD became three years, as opposed to the former one year.

14 January, 2011. The Loan-to-Value limit was lowered from 70% to 60% for second properties. In addition, the LTV limit for non-individual residential purchasers was lowered to 50%. Another cooling measure instated on the same date was the holding period for imposition of Sellers’ Stamp Duty, which was changed to four years.

8 December, 2011. On this date, the Additional Buyers’ Stamp Duty (ABSD) was introduced, with Singapore citizens purchasing a third or subsequent property paying 3%, Permanent Residents buying second and subsequent property paying 3%, and non-individuals and foreigners paying 10%. Furthermore, the ABSD is waived for developers that buy more than four residential units and follow through with the development of residential properties for sale. For eligibility, proof of development and sale within the last five years must be provided.

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Property Cooling Measures in Singapore Part 1 – Rent a Room, Property for Buy, Sale, Invest

In Singapore, the cooling measures instated by the Government beginning with 2009 have managed to contain the property market bubble. Below are some of these measures in detail:

Public Housing restrictions

In Singapore, approximately 80 % of the population lives in homes sponsored by the Government. These are flats provided by the Ministry of National Development’s Housing and Development Board (HDB). After the cooling measures, the Singaporean public housing has seen some restrictions:

Permanent Residents (PRs) owning an HDB flat are obliged sell it within six months of purchasing private residential property in Singapore.
The MSR (Mortgage Servicing Ratio) limits are:
30 percent in the case of the loan being granted by a private fnancial institution (e.g: bank);
35 percent in the case of the loan being granted by the Housing and Development Board.
The ABSD (Additional Buyer Stamp Duty)

Stamp duties are compulsory for anyone deciding to buy residential property in Singapore. These stamp duties represent roughly three percent of the valuation price or purchase price – whichever of the two is higher. A cooling measure that the Singaporean Government deemed necessary was the introduction of the Additional Buyer Stamp Duty (the ABSD) that varies according to the borrower’s immigration status, as follows:

If the borrower is a foreigner (whether living in Singapore or not) or buying under a company, the Additional Buyer Stamp Duty is 15 percent upon purchase of first or subsequent property, respectively.
If the borrower is a Singapore Permanent Resident, the ABSD is 5%/10% upon purchase of first or subsequent property, respectively.
If the borrower is a Singapore citizen, the ABSD is 0%/7%/10% upon purchase of first/second/third property, respectively.
Exemption from the ABSD

Nationals from the USA, Norway, Switzerland, Liechtenstein and Iceland are exempted from paying the ABSD for foreigners – they are subject to the same ABSD rule as Singapore citizens.
Married couples where at least one of the partners is a Singapore citizen are exempted from paying the ABSD if none of them owns a property or if they agree to dispose of their existing property six months after the purchase of the new property.
Seller Stamp Duty (SSD)

In order to preserve fairness and maintain a balance, sellers must pay the SSD (Seller Stamp Duty), which is basically a percentage of the valuation price or selling price – whichever of the two is higher. The SSD rate for properties purchased between 30 August 2010 and 13 January 2011 is roughly 1%. Beginning with 14 January 2011, the SSD rates are:

4%, if the property is sold between 3 and 4 years after purchase;
8%, if the property is sold between 2 and 3 years after purchase;
12%, if the property is sold between 1 and 2 years after purchase;
16%, if the property is sold less than 1 year after purchase.
We are a Singapore home loan and Compare Home Loan consultancy firm offering free expert advice on compare home loan mortgage financing packages using the most advanced loan analysis system.

SMS (65) 9782 8606

Email: [email protected]

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