Refinancing of Residential Properties Loan made easier

Owner-Occupied Res­id­en­tial Properties

Mon­et­ary Author­ity of Singa­pore (MAS) has announced to exempt owner-occupied own­ers from the Total Debt Ser­vi­cing Ratio (TDSR) of 60% when they refin­ance the prop­erty loan from bank, as long as they bought the prop­erty before 29 June 2013.

Also, the Mort­gage Ser­vi­cing Ratio  (30% of borrower’s gross monthly salary) will also not apply to HDB flats and Exec­ut­ive Con­domin­i­ums (ECs) when own­ers refin­ance the loan, as long as these homes were pur­chased before 12 Janu­ary 2013 and 10 Decem­ber 2013 respectively.

A sim­ilar con­ces­sion will apply with regard to loan ten­ures, for res­id­en­tial prop­er­ties pur­chased before the respect­ive imple­ment­a­tion dates for the new loan ten­ure lim­its of 30 years for HDB flat and 35 years for oth­ers. For HDB, the imple­ment­a­tion date was 28 August 2013 and for other owner-occupied res­id­en­tial prop­er­ties, the date was 6 Octo­ber 2012. In such cases, bor­row­ers will be allowed to main­tain the remain­ing ten­ures of their loans at the point of refinancing.

Invest­ment Res­id­en­tial Properties

The TDSR threshold of 60 per cent will con­tinue to apply to the refin­an­cing of all invest­ment prop­erty loans. How­ever, MAS will allow a trans­ition period until 30 June 2017, dur­ing which a bor­rower may refin­ance his invest­ment prop­erty loans above the 60 per cent threshold, provided he meets the fol­low­ing conditions:

(a) the prop­erty was bought before 29 June 2013;

(b) the bor­rower com­mits to a debt reduc­tion plan with the fin­an­cial insti­tu­tion (FI) at the point of refin­an­cing; and

© the bor­rower ful­fills the FI’s credit assessment.

 

Property Tax to increase for both Owner-occupied and Investment Residential Properties

In the latest Budget 2013 announced by the Fin­ance Min­is­ter, the prop­erty tax rate for invest­ment prop­erty will increase pro­gress­ively for those prop­er­ties with Annual Value (AV) above $30,000, instead of flat rate of 10% cur­rently. The new tax rates range from 10% to 19% in 2014 and 10% to 20% in 2015. Please see table below.

Invest­ment  Res­id­en­tial Prop­erty Tax Rate

Annual Value Tax Rates
from 1 Jan 2014
Tax Rates
from 1 Jan 2015
First $30,000 10% 10%
Next $15,000 11% 12%
Next $15,000 13% 14%
Next $15,000 15% 16%
Next $15,000 17% 18%
In excess of $90,000 19% 20%

So it seems that if you want to invest in res­id­en­tial prop­erty to earn the rental income, it is bet­ter to get a small unit with AV less than $30,000. Then your tax rate will still stay at 10% bracket.
There is one more risk now. Even if the prop­erty is left vacant, you are still liable for the prop­erty tax from 1 Jan 2014, instead of seek­ing prop­erty tax refund for vacant prop­erty.
And for owner-occupied res­id­en­tial prop­er­ties, the tax rate will increase sub­stan­tially for the top 1% of the house­holds. The cur­rent max­imum tax rate is only 6% but will become 16% in 2015. Please see table below.

Owner-Occupied Res­id­en­tial Prop­erty Tax Rate

Annual Value Tax Rates
from 1 Jan 2014
Tax Rates
from 1 Jan 2015
First $80,000 0% 0%
First $47,000 4% 4%
Next $5,000 5% 6%
Next $10,000 6% 6%
Next $15,000 7% 8%
Next $15,000 9% 10%
Next $15,000 11% 12%
Next $15,000 13% 14%
In excess of $130,000 15% 16%

With all the many rounds of cool­ing meas­ures on prop­er­ties and the new tax rate, it is prob­ably good to diver­sify your invest­ment to over­seas prop­er­ties or REITS that are lis­ted in Singa­pore Exchange. REITs are not sub­ject to the hassle of enga­ging agent to find ten­ant, main­tain­ing the prop­er­ties and also pay­ing higher prop­erty tax.

Seventh Round of Cooling Measures to Residential Property

The Singa­pore Gov­ern­ment has again intro­duced meas­ures, this time major, to cool the res­id­en­tial prop­erty mar­ket, which took effect on 12 Janu­ary 2013.

The Loan-to-Value (LTV) is now lowered fur­ther for indi­vidual with second and third hous­ing loans and also for non-individuals. The min­imum cash down pay­ment will also be increased from 10% to 25% for indi­vidu­als who are get­ting their second and sub­sequent hous­ing loans.

The sum­mary of changes is as shown in the table below:

Hous­ing Loan 1st Loan 2nd Loan From 3rd Loan
Exist­ing Revised Exist­ing Revised Exist­ing Revised
LTV Limit 80%; or 60% if the loan ten­ure is more than 30 years or extends past age 65 No change 60%; or 40% if the loan ten­ure is more than 30 years or extends past age 65 50%; or 30% if the loan ten­ure is more than 30 years or extends past age 65 60%; or 40% if the loan ten­ure is more than 30 years or extends past age 65 40%; or 20% if the loan ten­ure is more than 30 years or extends past age 65
Min­imum Cash Down Payment 5% (for LTV of 80%)
10% (for LTV of 60%)
No change 10% 25% 10% 25%
Non-Individual Bor­row­ers 40% 20% 40% 20% 40% 20%

How­ever, a bor­rower will not be sub­ject to the lower LTV limit and higher min­imum cash down pay­ment require­ment when he obtains another hous­ing loan for the pur­chase of a prop­erty which is an Exec­ut­ive Con­domin­ium (EC) pur­chased dir­ectly from a prop­erty developer or a HDB flat.

Next, Addi­tional Buyer’s Stamp Duty (ABSD) will be raised and also imposed on Per­man­ent Res­id­ents (PRs) pur­chas­ing their first res­id­en­tial prop­erty and Singa­por­eans buy­ing their second res­id­en­tial prop­erty.
The new ABSD struc­ture is as follows:

ABSD Rate 1st Purchase 2nd Pur­chase 3rd and Sub­sequent Purchase
Exist­ing Revised Exist­ing Revised Exist­ing Revised
Singa­pore Citizens NA NA NA 7% 3% 10%
Per­man­ent Residents NA 5% 3% 10% 3% 10%
For­eign­ers and non-individuals (cor­por­ate entities) 10% 15% 10% 15% 10% 15%

Singa­por­ean first-time buy­ers of HDB flats will not be affected by the new meas­ure. How­ever, ABSD can be remit­ted for pur­chase of HDB flat/new EC by a Singa­pore Cit­izen house­hold only, upon the dis­posal of the first prop­erty. Mar­ried couples with at least one Singa­por­ean spouse will also be eli­gible for the refund of ABSD when the exist­ing prop­erty is dis­posed of.

An addi­tional meas­ure will take effect on 1 July 2013 to tighten the terms for grant­ing HDB loans and the use of CPF funds for the pur­chase of HDB flats with remain­ing leases of less than 60 years.

Source : http://www.mas.gov.sg/News-and-Publications/Press-Releases/2013/Additional-Measures-To-Ensure-A-Stable-And-Sustainable-Property-Market.aspx

Maximum Loan Tenure for Residential Property Capped at 35 years

The Mon­et­ary Author­ity of Singa­pore (MAS) has announced the latest round of Prop­erty Cool­ing meas­ures on the ten­ure on home loan, with effect from 6 Octo­ber 2012.

Now, the max­imum loan ten­ure is 35 years for res­id­en­tial prop­erty, to both indi­vidual and non-individual bor­row­ers, even for refin­an­cing loans.

The Loan-to-Value (LTV) for indi­vidual is fur­ther tightened for loans that exceed 30 years or  if it past the retire­ment age of 65 years old. For these loans, the LTV limit will be 40% for a bor­rower with one or more out­stand­ing res­id­en­tial prop­erty loans; and 60% for a bor­rower with no out­stand­ing res­id­en­tial prop­erty loan. This rule is applic­able to both HDB flats and private properties.

The LTV ratio for non-individual bor­row­ers is lowered from 50 per­cent to 40 percent.

 For those ind­vidu­als who are 35 years old or below, they are NOT affected by this new measure.

 

Changes to Housing Refund Policy and Nomination

Changes to Hous­ing Refund Policy

Cur­rently, mem­ber who sells his prop­erty after age 55, he will refund either his Min­imum Sum short­fall or the Prin­cipal amount that he had with­drawn for the pur­chase of the house plus the pre­vail­ing OA interest that would have accrued on this amount (P+I), whichever is lower. Remain­ing pro­ceeds from the sale of his prop­erty is received in cash.

From 1 Janu­ary 2013, the full P+I will have to be returned to the member’s account first. The refun­ded amount will first be used to set aside the required Min­imum Sum in his RA and the required Medis­ave amount in his MA, and the excess can be with­drawn as cash.
The above change will at least ensure that the member’s con­tri­bu­tion to the pur­chase of the house will be fairly returned to him upon the sale, espe­cially when there are two or more co-owners. Pre­vi­ously, when only the short­fall of MS needs to be met, co-owners may have prob­lem on the pro­por­tion of cash to be dis­trib­uted among them. And mem­ber who has the full MS in his account may be disadvantaged.

Min­imum Age for Mak­ing CPF Nom­in­a­tion
Cur­rently, there is no min­imum age for mak­ing CPF nom­in­a­tion.  How­ever, a min­imum age of 16 years old will be set later this year to effect this change.

Source : http://mycpf.cpf.gov.sg/CPF/News/News-Release/N_10Sept2012_MF.htm

Additional Buyers Stamp Duty from 8 December 2011

More cool­ing meas­ure is being intro­duced to sta­bil­ize the prop­erty mar­ket in Singapore!

From 8 Decem­ber 2011, Addi­tional Buyer’s Stamp Duty (ABSD) of the pur­chase price or the mar­ket value of the prop­erty, whichever is higher, will apply to the fol­low­ing cat­egor­ies of res­id­en­tial prop­erty purchases:

  • For­eign­ers and non-individuals (cor­por­ate entit­ies) buy­ing any res­id­en­tial prop­erty will pay an ABSD of 10%;
  • Per­man­ent Res­id­ents (PRs) own­ing one and buy­ing the second and sub­sequent res­id­en­tial prop­erty will pay an ABSD of 3%; and
  • Singa­por­eans own­ing two and buy­ing the third and sub­sequent res­id­en­tial prop­erty will pay an ABSD of 3%.

This is on top of the cur­rent Buyer’s Stamp Duty of 1% of the first $180,000, 2% of the next $180,000 and 3% of the remainder prop­erty price.
As long as options are gran­ted on or before 7 Dec 2011 and exer­cised within 3 weeks (i.e. on or before 28 Dec 2011) or the option valid­ity period, whichever is the earlier, this ABSD will not apply.

This addi­tional rul­ing will plug the remain­ing holes in the rising prop­erty prices. For­eign­ers buy­ing act­ively into Singa­pore Prop­erty Mar­ket, Singa­pore Cit­izens and PRs register a com­pany to buy prop­erty to avoid the Seller’s Stamp Duty, and oth­ers who are cash rich in buy­ing 3 or more res­id­en­tial properties.

Protect Your Money in Property Transaction from 1 August 2011

From 1 August 2011, law­yers will be pro­hib­ited from receiv­ing and hold­ing any con­vey­an­cing money, unless the con­vey­an­cing money is depos­ited:
- Into a new type of account called a con­vey­an­cing account that can only be opened with any of the five Appoin­ted Banks, namely the Bank of China, DBS Bank, Oversea-Chinese Bank­ing Cor­por­a­tion, The Bank of East Asia, and United Over­seas Bank;
- With the Singa­pore Academy of Law (SAL) under its Con­vey­an­cing Money Ser­vice; or
- Into an escrow account jointly opened by law­yers act­ing for the respect­ive parties.

You can deposit the con­vey­an­cing money  into the law firm’s con­vey­an­cing account by adding “-CVY” to the law firm’s name when mak­ing pay­ment for prop­erty trans­ac­tion. This ensures that the money will be depos­ited in the spe­cified account and being pro­tec­ted for only the prop­erty trans­ac­tion. Law­yers for both buyer and seller must jointly sign before any money can be withdrawn.

Sources:
1) The Straits Times, 1 August 2011, Page A7
2) www.conveyancing.sg

 

Housing affordability and accessibility in Singapore

On 14 July 2011, The Straits Times pub­lished the research stud­ies by NUS Singa­pore for Applied and Policy  Eco­nom­ics (Scape) on a dif­fer­ent per­spect­ive of cal­cu­lat­ing the hous­ing afford­ab­il­ity in Singapore.

Tra­di­tion­ally, the pro­por­tion of monthly income that goes into pay­ing the mort­gage, called Debt-Service-Ratio is used to indic­ate the afford­ab­il­ity of a house pur­chase. If the ratio is less than 30%, or 0.3, it is con­sidered as affordable.

Con­tinue read­ing

New Retail bonds from CapitaMall Trust

Cap­it­aMall Trust (CMT) is offer­ing sub­scrip­tion of $200 mil­lion worth of bonds from today till 23 Feb 2011. The min­imum  invest­ment is $2000 and it attracts a fixed interest rate of 2% per annum for the two-year bonds. $50 mil­lion is offered to the pub­lic, with $150 mil­lion reserved for insti­tu­tional and other investors. CMT is pre­pared to raise the issue as high as $300 mil­lion if the response is strong. 

Property Cooling Measures from 14 January 2011

Singa­pore Gov­ern­ment has announced another round of major cool­ing meas­ures that has sur­prised many includ­ing the experts in the field. The main reason is that the last cool­ing meas­ures were just imple­men­ted less than 5 months ago on 30 August 2010.

If you register your pur­chase of prop­erty from 14 Janu­ary 2011 onwards, the fol­low­ing rules apply to you. If you have pur­chased the prop­erty before this date, they are not applic­able. How­ever, do also take note of those meas­ures that were intro­duced on 30 August 2010 if you bought your prop­erty on or after this date.

Con­tinue read­ing