Just last Friday, the Singapore government has announced a collection of measures to cool the republic’s industrial and residential property markets.
The measures, ranging from stamp duties to property loan ceilings, came into effect on 12 January 2013, and include the following:
FOR INDUSTRIAL PROPERTY MARKET
The Seller’s Stamp Duty (SSD) has been introduced on industrial properties that are bought or acquired after 12 January 2013 and sold or disposed of within 3 years. The SSD aims to discourage short-term speculative activities which distort the price of industrial properties and raise costs for businesses unnecessarily.
Property with a holding period of 1 year will be charged an SSD of 15% of price or market value. Consequently, property with a holding period of 2 and 3 years will be charged SSDs of 10% and 5% of price or market value respectively.
FOR RESIDENTIAL PROPERTY MARKET
ALL RESIDENTIAL PROPERTY
The following Additional Buyer’s Stamp Duty (ABSD) rates will apply to:
- foreigners or entities who purchase a residential property (15%)
- Singapore Permanent Residents (SPR) who already own one residential property and are purchasing an additional one (10%)
- Singapore Citizens (SCs) who already own two or more residential properties and wish to purchase another (10%)
- SCs who are purchasing their second property (7%) and
- SPRs purchasing their first residential property (5%)
Tighter Loan-to-Value (LtV) limits by financial institutions on housing grants to individuals who or non-individuals that already have at least an outstanding loan has also been introduced.
In addition, the minimum cash down payment for individuals applying for a subsequent housing loan will also be raised to 25% (from 10%).
SPECIFIC TO PUBLIC HOUSING
To further moderate the demand for public housing or HDB flats, and promote greater financial prudence among buyers, the following measures will take effect on 12 January 2013:
MAS will require financial institutions to limit the Mortgage Servicing Ratio (MSR) for housing loans at 30% of a borrower’s gross monthly income. The MSR of loans granted by the HDB will be lowered to 35% (from 40%).
- In addition, SPRs who own a HDB flat will no longer be allowed to sublet their entire flat.
- Within six months of purchasing a private residential property in Singapore, SPRs who own a HDB flat must sell their flat.
Related Article: Learn more about the HDB resale market.
SPECIFIC TO PRIVATE HOUSING
The Government has also introduced measures specific to new executive condominium (EC) developments to ensure that they continue to remain affordable for middle-income Singaporean families.
According to the Monetary Authority of Singapore, the following measures take effect on 12 January:
- The maximum strata floor area of new EC units will be capped at 160 square metres.
- Sales of new dual-key EC units will be restricted to multi-generational families only.
- Developers of future EC sale sites from the Government Land Sales programme will only be allowed to launch units for sale 15 months from the date of award of the sites or after the physical completion of foundation works, whichever is earlier.
- Private enclosed spaces and private roof terraces in ECs will be treated as gross floor area (GFA). Hence, they will be counted as part of the ‘bonus’ GFA of a residential development, subject to payment of charges.
Analysis by Singapore company registration Rikvin shows that although these measures appear to be very strict, they are to be considered in view of Singapore’s existing nationhood and population issues. Ultimately, these measures aim to rein in runaway property prices and regulate them so that residential and industrial property can be consumed and enjoyed by the ordinary worker and employer in Singapore.
On one level, the measures pertaining to residential properties will have little impact on Singaporeans who are buying their first homes. More so, these measures further distinguish the level of benefits conferred to citizens vis-a-vis SPRs. This can be parallelled to the healthcare benefits that were introduced last year to further differentiate benefits that are exclusive to citizens vis-a-vis SPRs.
Secondly, while the measures are stricter on foreigners and SPRs, they do not leave said parties on the losing end. According to Minister for National Development Mr. Khaw Boon Wan, up to 200,000 units of public and private housing will be completed in the coming years. This higher supply of houses, coupled with these new measures, will help ensure that housing remains affordable to Singaporeans and SPRs.
Thirdly, these measures come close on the heels of the white paper on population due this month and upcoming Budget statement. Analysis by Rikvin shows that these property measures are indicators of a national strategy to encourage and enforce a more prudent and fairer approach towards asset acquisition.
In a status-conscious society such as Singapore, this pill may not go down well for property owners who are looking to profit from the overheating market. However, for middle- and low-income earners and for the general citizen, this set of measures may be a welcome respite. The announcement, coming ahead of the Budget and White Paper, also indicate the urgency of maintaining sound financial health and curbing excess as the country undergoes economic restructuring.