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How will Singapore’s Latest Property Cooling Measures Affect Your Investment Strategy?
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- March 13, 2022
Nearing midnight on 15th December 2021, the government dropped news of new property cooling measures that would take effect the next day on 16th December 2021.
The new cooling measures are:
1) Increase in Additional Buyer’s Stamp Duty (ABSD)
2) Decrease in Loan-To-Value (LTV) limits
3) Tighter Total Debt Servicing Ratio (TDSR) threshold.
These new cooling measures are applicable to all transactions whose Option to Purchase (OTP) was granted on or after 16 Dec 2021.
The new TDSR threshold rule, however, does not apply to those with existing loans granted before 15 Dec 2021, regardless whether they exercised their OTP at the time they applied for the loan.
In this case study, we will cover all the new cooling measures so you will be well informed.
Higher ABSD
The purpose of the Additional Buyer’s Stamp Duty (ABSD) is to moderate demand for residential property in Singapore. It covers everyone from Singaporean citizens (SC), Permanent residents (PR) and Foreigners.
This new ABSD rate will only affect Singaporeans and PRs buying their second and subsequent residential properties as well as foreigners on all residential property in Singapore.
The purpose of the spike in the ABSD rates is to curb Singapore investors from purchasing investment properties and to reduce the demand from foreigners who want to invest or speculate on the Singapore property market.
| Higher Additional Buyer Stamp Duty (ABSD) Rates*only applicable to residential properties in Singapore | ||
| Buyer’s profile | Rates from 6 July 2018 to 15 Dec 2021 | Rates on or after 16 Dec 2021 |
| SC (1st Property) | 0% | 0% (No Change) |
| SC (2nd Property) | 12% | 17% (Revised) |
| SC (3rd Property) | 15% | 25%(Revised) |
| PR (1st Property) | 5% | 5% (No Change) |
| PR (2nd Property) | 15% | 25% (Revised) |
| PR (3rd Property) | 15% | 30% (Revised) |
| Foreigners | 20% | 30% (Revised) |
| Entities | 25% (Plus additional 5% for housing developers non-remittable) | 35% (Revised) (Plus additional 5% for housing developers non-remittable) |
Decrease in LTV limit (HDB granted loans)
Financial institutions will restrict home loans to 55% instead of 60% of the property value to reduce over-leveraging. HDB loans are also reduced to 85% from 90% for the maximum amount that one can take.
This new cooling measure will affect those buying new properties launched from 16 Dec 2021 onwards, as well as complete resale flat applications received from 16 Dec 2021 onwards.
| Previous LTV limit (HDB) | Revised LTV limit on/after 16 Dec 2021 |
| 90% | 85% |
Tighter TDSR threshold
The Total Debt Servicing Ratio (TDSR) is a limit set on the borrower on the amount of loan he/she can take.
A reduction in TSDR means financial intuitions are now prohibited from lending borrowers an amount that would exceed 55% instead of the previous 60% of their gross monthly income.
The new TDSR limit will not affect buyers who have been issued an Option to Purchase (OTP) on or before 16 Dec 2021.
Refinancing of loans granted before 16 Dec 2021, and those who are refinancing owner-occupied housing loans are not affected as well.
| Previous TDSR limit | Revised TSDR limit on/after 16 Dec 2021 |
| 60% | 55% |
In conclusion, the implementation of these new cooling measures will certainly discourage Singapore citizens and PRs from purchasing more residential properties for investment purposes as well as reducing the influx of foreign buyers.
