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.

1. If you want to buy a second prop­erty while still ser­vi­cing an exist­ing mortgage

a)      You must pay 40% of the valu­ation, with at least 10% using cash, the rest from CPF

b)     You can only take a max­imum loan of 60% of valuation.

Pre­vi­ously, the upfront pay­ment was min­imum 30%, includ­ing at least 10% in cash.

Implic­a­tion: This will curb spec­u­la­tion activ­it­ies on the private prop­erty as you will need to own more cash and CPF before you are allowed to pur­chase another private prop­erty while still ser­vi­cing an exist­ing mortgage.

2. If you are a seller of private res­id­en­tial prop­erty within 4 years of purchase,

a)      the Seller’s Stamp Duty (SSD) is raised to as high as 16% as indic­ated below

Year of Purchase Seller’s Stamp Duty
First Year 16%
Second Year 12%
Third Year 8%
Fourth 4%

Pre­vi­ously, the SSD was only for 3 years and the stamp duty was 3%, 2% and 1% respectively.

Implic­a­tion: This meas­ure will present a strong instant dis­in­cent­ive for spec­u­lat­ive investors look­ing to make short term gains. The impact of the SSD is espe­cially sig­ni­fic­ant as it is pay­able regard­less whether the prop­erty is even­tu­ally sold at a gain or loss. This meas­ure will most adversely affect those look­ing to make a quick buck on “flip­ping” a property.

3. If you are not indi­vidu­als (i.e. cor­por­a­tions, trusts and col­lect­ive invest­ment schemes etc),

a)      The Loan-To-Value (LTV) limit is lowered to 50% on hous­ing loans gran­ted by fin­an­cial insti­tu­tions reg­u­lated by MAS for prop­erty purchases.

Pre­vi­ously, you must pay 20% upfront and bor­row 80% if it is the first hous­ing pur­chase. If you have an out­stand­ing hous­ing loan, you must pay at least 30% upfront and bor­row 70% of the pur­chase price.

Implic­a­tion: This will pre­vent indi­vidual from regis­ter­ing a com­pany to make the prop­erty pur­chase in order to get the higher loan amount.

You may refer to the offi­cial announce­ment at http://www.mnd.gov.sg/newsroom/newsreleases/2011/news13012011.htm

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