Taming the Singapore Housing Market

But help is still at hand for first-timers

Issue: Oct 2010

hdb
Among others, new rules seek to curb private property owners from investing and profiting from HDB resale flats

Singapore’s strong and sustained economic recovery and notable 2010 GDP growth forecast of 13% is not the only news making headlines. Residential property prices have surged by 38.2% from its trough in 2Q 2009 making it the fastest growing real estate market in the region, according to Global Property Guide. Sales volumes have also experienced a strong upswing in demand with 10,000 units transacted in the past seven months, which is more than double the 4,300 units sold in 2008.

Chart 1: Strong Growth in Residential Prices

URA & CapitaLand Research
Source: URA & CapitaLand Research

Though positive real estate demand is desirable, the massive recovery in the property market coupled with the rapid inflation of property prices has ignited fears of a housing bubble. This has led the Singapore government to implement a number of cooling measures over the past year. However, despite two previous legislative attempts to manage property market sentiments in September 2009 and February 2010, property prices have continued to soar. As a result, the Singapore government has recently unveiled a much more extensive slew of new property measures.

These new measures include restrictions on concurrent home ownership, changes to seller’s stamp duty charges, and the tightening of rules on second home purchases. While these measures are meant to dampen investment demand and speculative buying behaviour, the government is also providing additional assistance to first-time buyers and releasing new land for private housing development. These new rulings which came into effect as of 30 August 2010 are expected to have a substantial impact on the property market in the immediate and short-term.

Chart 2: Summary of Singapore Property Cooling Measures (2009-2010)

14 Sep 2009

19 Feb 2010

30 Aug 2010

  • Removal of Interest Absorption Scheme (IAS) and Interest-Only Housing Loans (IOL)
  • New seller’s stamp duty on residential properties sold within one-year
  • Lowering Loan-To-Value ratio (LTV) limit from 90% to 80%
  • Restrictions on Concurrent HDB Ownership
  • Increase of HDB Minimum Occupancy Period (MOP) to 5 years
  • Extension of seller’s stamp duty to properties sold within 3 years
  • Lowering of LTV limit to 70% for second home purchases
  • Increase of minimum cash deposit from 5% to 10% on second home purchases
  • Allowance of households with income between $8K-$10K to purchase HDB Design, Build and Sell Scheme (DBSS) subsidised housing
Source: URA, HDB


Concurrent HDB Ownership Restrictions

Of all the recent property measures introduced, the new restrictions on concurrent HDB ownership will have the greatest impact on the housing sector. Under new policies, ownership of both Housing Development Board (HDB) flats and private residential properties within a minimum occupation period (MOP) of five years has been disallowed. To add more severity, this measure does not only apply to concurrent ownership of local properties, but overseas properties as well. Previously, there was only a restriction of ownership on private residential property for those who purchased HDB flats under the subsidised scheme. With close to 40% of 1H 2010 private new sale residential transactions driven by buyers with a HDB address, these new measures could have a pronounced effect on housing demand in 2H 2010.

Another major development regarding concurrent HDB ownership concerns private property owners who are now effectively banned from buying HDB resale flats for investment purposes. HDB has implemented a new rule requiring private property owners who purchase a HDB flat to dispose of their private property within six months. Similarly, buyers of HDB flats who did not receive any subsidies may not purchase private property during the minimum occupation period (MOP), which has now been extended from three to five years. Aside from prolonging the “upgrading” cycle, these new restrictions will significantly impact investment demand, particularly in the private housing sector.

Extension of Holding Period on Seller’s Stamp Duty

The holding period of Seller’s Stamp Duty (SSD) on residential properties has now been extended to three years from one year, charged on a graduated scale. Under these new changes, sellers will only be fully exempted from paying stamp duty provided that they sell after more than three years of ownership. The imposition of this policy measure will reduce liquidity and increase costs for short-term investors/speculators.

Tightening of Rules on Second Home Purchases

Under the new measures, property buyers with more than one outstanding housing loan at the time of a new purchase are required to provide a minimum cash deposit of 10%, up from 5%. In addition, borrowers with more than one housing loan must also contend with lowered Loan-To-Value (LTV) limits, which have been reduced from 80% to 70%. These new measures are likely to affect the mass and mid-end market investors and speculators, since these new rulings will increase transaction costs for purchasers of housing units for investment purposes.

Help for First-Time Home Buyers

To ensure that housing continues to remain affordable for majority of Singaporeans, the government has provided additional assistance for first-time home buyers with monthly household incomes of between S$8,000 and S$10,000. As of 30 August 2010, this group of buyers is now permitted to buy subsidised HDB flats under the Design Build and Sell Scheme (DBSS), where previously they were restricted to Executive Condominiums.

In addition to widening the range of buyers qualified for subsidized housing, the government has committed to shortening the completion time of Build-To-Order (BTO) flats from 3 years to 2.5 years. Also, the government has announced that it will be increasing the supply of new HDB flats by close to 30% in 2011, adding 22,000 new units to the overall stock.

More Supply to Meet Demand

The government has also announced that it will release more land sites to ensure there continues to be an adequate supply of housing to meet demand. Through the GLS (Government Land Sales) programme, land sites which can yield around 13,900 private housing units have been made available with even more sites promised in 2011, should demand continue at high levels.

In summary, the government’s decision to introduce additional measures will have an impact on property market sentiments and investment demand in the short-term. However, since these measures are aimed at reducing speculative demand, first-time buyers and genuine home occupiers should not be adversely affected.

Article contributed by Dr Boaz Boon and Anna Chew of the Research Unit at CapitaLand

Comments
User UKB
203.116.39.X | 2012-10-24 11:54:17
Couple(Both PRs) Owns an HDB and the same under HDB loan, MOP ends June 2013.If they buying another private property how much they need to arrange upfront as per this oct 5th MAS loan-to-value (LTV)rule.....20 or 40 Percent.

As well if one of the PR is borrower and a Foreigner Mortgager and buying the property do they still have to pay the 10 % extra Stamp Duty.

Cheers,
UK
User Danry
59.189.188.X | 2012-10-13 15:41:56
Hi, I am writing to check whether my wife and I qualify to purchase a second private property for investment. My family already owned a private property more than 10 years ago and during April 2010, we bought a HDB unit for our own stay.

Best regards
Danry
User Urgent Buyer
220.255.104.X | 2012-10-24 09:15:11
Hi

Please advise what is the new rule in Singapore as of Oct 2012.
If we own a HDB flat, can we still buy a private condo?

If yes, can we rent out the private condo and still stay in our HDB flat?

We not find any updates by HDB on this.
Please please help answer our doubts.
We are in the midst of buying a private condo and are very worried.
User Dave
116.15.187.X | 2012-04-27 19:03:42
Hi,
my wife and I are singaporeans. we currently own a 4-room HDB still under HDB loan. our MOP ends July 2012.

we want to buy a private property and still keep our 4-room. what is the max loan from the bank can be borrow? do we need to the rest in cash upfront?
thanks for your advice.
Dave
User CapitaLand
202.79.215.X | 2012-05-03 06:05:09
Hi Dave

Pertaining to your query on the maximum loan amount, if you were to purchase a second property while you are still servicing an existing mortgage, the loan-to-value (LTV) limit on housing loans is 60%. This means that an upfront payment of 40% of the valuation of the second property must be placed (with at least 10% in cash and the rest from your CPF account). Kindly refer to the following press releases issued by Ministry of National Development:

13 January 2011 - http://app.mnd.gov.sg/Newsroom/NewsPage.aspx?ID=2488&category=Press%20Release&year=2011&RA1=&RA2=&RA3=
30 August 2010 - http://app.mnd.gov.sg/Newsroom/NewsPage.aspx?ID=2633&category=Press%20Release&year=2010&RA1=&RA2=&RA3=

We hope that we have provided a satisfactory reply to your query. Thank you for reading CapitaLand INSIDE Different Geographies!
User doreen yeo
218.186.10.X | 2012-03-09 04:12:06
Hi need help , pls advise what is the stamp Duty I'll need to pay if I purchase my pte residential property on Sep 2010 and want to sell now. kindly advise
User CapitaLand
202.79.215.X | 2012-03-12 06:16:22
Dear Doreen

As your property purchase was made in September 2010, your Seller Stamp Duty (SSD) calculation will follow the government's August 2010 policy. The amount of seller’s stamp duty is computed on the same rates as the buyer’s stamp duty. If you intend to sell this property in April 2012, your ownership of this residential property is less than two years and you will be subjected to two-thirds of the amount of buyer’s stamp duty, as stipulated on IRAS’s website (http://www.iras.gov.sg/irasHome/page04.aspx?id=10212). For a guide to the computation of SSD for your property, please refer to the stamp duty calculator: http://www.iras.gov.sg/irasHome/page04_ektid1832.aspx

We hope that we have provided a satisfactory answer to your query. Thank you for reading CapitaLand INSIDE Different Geographies magazine.
User doreen yeo
218.186.10.X | 2012-03-09 04:10:37
pls help me to understand how 30 aug 2010 new policy on stamp duty will affect me if I purchase after 30th Aug 2010 and want to sell now. what will be the amount of stamp duty that I'll need to pay as a seller. Thanks
User doreen yeo
218.186.10.X | 2012-03-09 04:08:48
HI, I'll like some help in understanding how the stamp duty policy affects me. I've exercise my OTP for a residential pte property on 30th Sep 2010 and I would like to sell by April 2012. What will the stamp duty I need to pay. Understand that with effect from Aug 2010 , there was a new policy that will affect my sale because of the purchase I mean after the 30th Aug 2010 ruling. Pls put up example of the calculation like the example you hv given for the SSD. That was a very good way to help us understand. Many thanks!
User Shalabh
171.161.48.X | 2011-11-16 14:16:19
Dear Dr Boaz Boon and Anna Chew,

Thanks for all the above information. This is very informative. May I kindly request you for your general view on my query.

I am a first time buyer, working here on an Employment Pass and looking to buy a private property (2 bedroom condo) for myself. As this will be used for my own stay, may I kindly request you for an opinion if this is the right time to buy a private condo.

Or, as you have mentioned above, due to high supply prices may come down a little, should I wait for half year or so before I put all my hard earned money in such purchase.

Thanks for all your help in this matter.

Regards,
Shalabh
User CapitaLand
116.14.134.X | 2011-12-01 03:04:12
Dear Shalabh

Generally speaking, the private residential housing market in Singapore is expected to see some downward pressure on overall prices over the short-term. This is a result of an anticipated slowdown in population growth, an increase in public housing income ceiling and the completion of a substantial number of public and private housing projects. But these factors may not necessarily affect prices for all private housing developments, particularly newer projects or projects in prime locations. That being said, your decision to purchase a home should primarily be based on your needs, means, housing preferences and current circumstances. Before you start your search, it is advisable that you discuss your profile with a bank or mortgage broker.

Kind Regards
Dr Boaz Boon and Ms Anna Chew
User CapitaLand
202.79.215.X | 2011-08-12 08:51:11
Dear Ms. Lek,

Thank you for your interest in this article. As requested, the latest government anti-speculation measures would be the increase in Sellers’ Stamp Duty (SSD) rates and lowered percentages of Loan-to-Value (LTV) allowed, imposed in January 2011. SSD rates were raised to 16%, 12%, 8% and 4% for the resale of first-hand private apartments within 1, 2, 3 and 4 years respectively; LTV has since been capped at 50% for non-individual buyers and 60% for individual buyers on second mortgages onwards. With regards to the changes in average prices of private properties, please refer to URA Residential Price Index
http://www.ura.gov.sg/pr/graphics/2011/pr11-95a7 .pdf

(Continued in next reply)
User CapitaLand
202.79.215.X | 2011-08-12 08:47:52
(Part 2 of reply)

To answer your question on whether there will be a dip given the current global situation: Yes, we expect there to be a deceleration in the total volume of private apartment sales in the second half of 2011. We have witnessed buyers becoming more selective when making decisions over purchasing private apartments in the first half of 2011. A watch-and-see attitude is common now due to two possible reasons: awaiting clearer directions after the recent announcement of aggressive supply in the second half of 2011, from Government Land Sales (GLS) programme and upcoming Build-to-Order (BTO) launches, as well as the dismal performance shown by the global economy and Asian stock market that have hit investor confidence.

Hope that we have provided a satisfactory answer to your query and thank you for reading the CapitaLand Inside magazine.

Best Regards,

Dr. Boaz Boon
Ms. Anna Chew
User Evelyn Lek
218.186.10.X | 2011-08-06 23:41:34
Hi Dr Boon and Miss Chew, thank you for the article. Can you please update the chart and new government regulations to reflect the latest restrictions? Will there be a dip in 2010/2011 given the current global situation? Thank you.
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