By Romesh Navaratnarajah: Singapore has introduced new property cooling measures which are set to take effect tomorrow. The government's aim is to control on-going speculation in the property market. This is the seventh and most extensive round of tightening measures and include higher buyer stamp duty, rules on permanent residents (PRs) buying their first home and size restrictions on executive condominium (EC) units. Most notably, curbs will also be introduced into the industrial sector. Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam said: "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 added: "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."Below is the full list of measures released in a joint statement by the government: Measures Applicable to all Residential Property
The following measures will take effect on 12 January 2013:
a) Additional Buyer's Stamp Duty (ABSD) rates will be:
i) Raised between five and seven percentage points across the board. ii) Imposed on Permanent Residents (PRs) purchasing their first residential property and on Singaporeans purchasing their second residential property.
b) Loan-to-Value limits on housing loans granted by financial institutions will be tightened for individuals who already have at least one outstanding loan, as well as to non-individuals such as companies.
c) Besides tighter Loan-to-Value limits, the minimum cash down payment for individuals applying for a second or subsequent housing loan will also be raised from 10% to 25%.
The measures listed above will not impact most Singaporeans buying their first home. Some concessions will also be extended to selected groups of buyers, such as married couples with at least one Singaporean spouse who are purchasing their second property and will sell their first residential property.
These new ABSDs and loan rules are significant, but they are temporary. They are being imposed to cool the market now, and will be reviewed in future depending on market conditions.
Measures Specific to Public Housing
The Government is also introducing measures to further moderate the demand for HDB flats, instil greater financial prudence among buyers, and require owner occupation by PR buyers. The following measures will take effect on 12 January 2013:
a) Tighter eligibility for loans to buy HDB flats:
i) MAS will cap the Mortgage Servicing Ratio (MSR) for housing loans granted by financial institutions at 30% of a borrower's gross monthly income.
ii) For loans granted by HDB, the cap on the MSR will be lowered from 40% to 35%.
b) PRs who own a HDB flat will be disallowed from subletting their whole flat.
c) PRs who own a HDB flat must sell their flat within six months of purchasing a private residential property in Singapore.
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.
Measures for Executive Condominium Developments
The Government will introduce measures specific to new EC developments to ensure that ECs continue to serve as an affordable housing option for middle-income Singaporean families.
The following measures will take effect on 12 January 2013:
a) The maximum strata floor area of new EC units will be capped at 160 square metres.
b) Sales of new dual-key EC units will be restricted to multi-generational families only.
c) 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.
d) Private enclosed spaces and private roof terraces will be treated as gross floor area (GFA). The GFA of such spaces in non-landed residential developments, including ECs, will be counted as part of the 'bonus' GFA of a residential development and subject to payment of charges. This is in line with the treatment of balconies under URA's current guidelines. Details of this measure are at www.ura.gov.sg/circulars/text/dc13-01.htm.
Cooling Measure for the Industrial Property Market: Seller's Stamp Duty
Prices of industrial properties have doubled over the last three years, outpacing the increase in rentals. In addition, there has been increasing speculation in industrial properties: in 2011 and the first eleven months of 2012, about 15% and 18% respectively of all transactions of multiple-user factory space were resale transactions carried out within three years of purchase. This is significantly higher than the average of about 10% from 2006 to 2010.
The Government is introducing Seller's Stamp Duty (SSD) on industrial property to discourage short-term speculative activity which could distort the underlying prices of industrial properties and raise costs for businesses.
The following SSD rates will be imposed on industrial properties and land bought and sold within three years of the date of purchase:
a) SSD at 15% if the property is sold in the first year of purchase, i.e. the property is held for one year or less from the date of purchase.
b) SSD at 10% if the property is sold in the second year of purchase, i.e. the property is held for more than one year and up to two years from the date of purchase.
c) SSD at 5% if the property is sold in the third year of purchase, i.e. the property is held for more than two years and up to three years from the date of purchase.
These SSDs will apply for industrial properties and land bought on or after 12 January 2013.
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