Saturday, 12 January 2013

Government brings out Big Chiller to freeze property prices

Sweeping cooling measures take in several sectors, expected to dampen speculation across the board

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Guanyu 道 said...

Government brings out Big Chiller to freeze property prices

Sweeping cooling measures take in several sectors, expected to dampen speculation across the board

Kalpana Rashiwala
12 January 2012

The government yesterday announced its seventh and most sweeping package of property cooling measures in over three years.

Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam described the package as the “most significant to date” and stronger than those introduced in previous rounds. Some measures will be temporary and will be reviewed later, once prices soften, while others are likely to stay for the long term.

“We’re not intending to engineer a market crash,” he added.

Effective today, residential property buyers are being slapped with steeper additional buyer’s stamp duty (ABSD) rates to tighten property investment as well as foreign buying, while loan-to-value limits are being lowered and minimum cash downpayment raised on housing loans to discourage excessive borrowing.

For the first time, the authorities have introduced a seller’s stamp duty (5 to 15 per cent) for those who sell industrial properties within three years of purchase - to discourage speculation in this market segment which has heated up from a diversion of monies from the residential sector.

In addition, curbs have been announced for executive condo (EC) developments with a maximum unit size specified for the first time for an EC unit at 160 sq metres (1,722 sq ft).

Private enclosed spaces and private roof terraces will be counted as part of the 10 per cent bonus gross floor area (GFA) for all non-landed residential developments including ECs and private condos, and subject to payment of development charges/differential premium. Currently, such spaces are excluded from GFA computation and hence considered “free area” for developers to sell.

As for strata commercial and industrial projects, the private enclosed space and private roof terrace will be computed as part of the maximum gross floor area stipulated under the Master Plan.

In the public housing sphere, tighter loan eligibility for the purchase of HDB flats has been introduced.

In addition, permanent residential households will be disallowed from subletting their entire HDB flats. PRs owning HDB flats must sell their flats within six months of buying a private residential property in Singapore.

The finance minister also grouped the measures into two sets.

The first group, which are temporary, counter-cyclical measures - comprising the increase in ABSD rates, tighter LTV and higher cash downpayment on housing loans - are aimed at calming the property cycle and will be reviewed once the market has cooled.

The second group are more permanent, structural measures - such as those pertaining to ECs and rules for PRs’ owner-occupation of HDB flats - and are likely to be retained.

“Both groups of measures work in the same direction in the short term - to cool the market. But the measures which are cyclical and temporary will be reviewed once the market softens,” he said.

From today, ABSD rates will be raised between 5 and 7 percentage points across the board. Only Singapore citizens buying their first residential property will be spared the ABSD.

Singaporeans previously did not pay ABSD even on their second home purchase. But now they will have to pay 7 per cent ABSD.

For their third and subsequent home purchase, they previously paid 3 per cent ABSD, which has now been raised to 10 per cent.

PRs will no longer be exempt from ABSD even on their first home purchase. The rate is set at 5 per cent for the first purchase, and 10 per cent on the second and subsequent purchase. Previously they paid 3 per cent on their second and subsequent purchase. For non-PR foreigners and corporate entities, ABSD on any residential property purchase has been upped from 10 per cent to 15 per cent. The move comes despite a decline in foreign buying share of private home purchases last year, note market watchers.

Guanyu 道 said...

The revised ABSD structure will take effect on residential properties bought from today. Buyers granted options to purchase on and before Jan 11 and who exercise them on or before Feb 1 (without any extension of the option validity period) may apply to the taxman for remission so that the old ABSD rate will apply.

LTV limits on housing loans granted by financial institutions will be tightened for individuals who already have at least one outstanding loan, as well as non-individuals such as companies.

Specifically, LTV ratios will be lowered by 10 percentage points for second housing loans and by 20 percentage points on third and subsequent housing loans.

In addition, minimum cash downpayment for individuals applying for second or subsequent home mortgages has been raised from 10 per cent to 25 per cent.

These measures will not impact most Singaporeans buying their first home, the Government said.

For non-individual borrowers such as corporates and funds, their LTV limit has been lowered again, from 40 per cent to 20 per cent.

Mr Tharman also noted: “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 further down the road.”

National Development Minister Khaw Boon Wan highlighted the sizeable pipeline of housing. “A large supply of public and private housing - up to 200,000 units in total - will be completed in the coming years. Coupled with the new measures, we will be better placed to ensure that housing remains affordable to Singaporeans.”

Real Estate Developers’ Association of Singapore (Redas) said last night: “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. Redas remains confident that Singapore’s property market will continue to be underpinned by sound economic fundamentals and a favourable business environment.”

DTZ SE Asia chief operating officer Ong Choon Fah said: While the Government is addressing asset inflation on both supply and demand fronts, a lot of things are beyond Singapore’s control - chiefly excess liquidity and low interest rates, and the weak global economic climate. Consequently Government has been very calibrated in its move so as not to destabilise the property market.”

Knight Frank chairman Tan Tiong Cheng described the package as “very encompassing”, addressing a range of hot-button topics such as making a greater distinction between PRs and citizens when it comes to HDB flats, to ECs, and even industrial properties - in one fell swoop. “It’s designed to have maximum impact.”