Amid increased scrutiny after a recent report highlighted an unusual spike in the number of options-to-purchase (OTPs) being reissued in December, an investigation by PropNex found that this came about as a majority of HDB upgraders found it difficult to stump up cash for the higher additional buyer's stamp duty (ABSD).
Following last July's cooling measures, Singaporeans upgrading to a private property worth, say, $1 million, will have to raise an additional $170,000, if they have not sold their flat. That comprises $120,000 for the 12 per cent ABSD payable for the second property, plus $50,000 as loan-to-value (LTV) limits were tightened by five percentage points for all housing loans granted by financial institutions.
Although they can qualify for ABSD refund if they sell their flat within six months from the issue date of the new project's temporary occupation permit, the initial cash outlay is still quite hefty for most.
As a result, many buyers are asking developers to delay exercising their sale and purchase agreements - leading to a rise in the reissuance of OTPs for units, or an apparent increase in the number of implied "returned units" from new launches after the cooling measures.
To address this issue, PropNex, Singapore's largest listed real estate agency, has proposed three key recommendations to the Ministry of National Development (MND) and the Ministry of Finance. These are to lift ABSD for HDB upgraders, revert the LTV limits to 80 per cent for first-time private property buyers, and lower the ABSD rate for the purchase of a second property.
An MND spokesman yesterday told The Straits Times the ministry is studying the recommendations.
"The Government monitors the property market closely, and intervenes where necessary to maintain a stable and sustainable property market," he said.
PropNex has proposed that HDB upgraders buying their first private home, whether resale or a new launch, should get remission from ABSD, subject to their undertaking to sell their HDB flat within six months of exercising OTP or upon completion of the new launched project, or suffer penalties.
It cited declining new mortgage loan applications, an increasing supply of new private homes, a lack of new executive condominiums (EC) for upgraders, and a rising number of HDB flats reaching the minimum occupation period.
Its proposal also comes amid increased scrutiny from the authorities following a report by Credit Suisse's equity research arm that some developers, facing a limited pool of buyers and competition from multiple new launches this year, found a way to lock in potential buyers who may not be ready to commit to their purchases.
The report said some developers are "continually reissuing OTPs to buyers upon expiry of a three-week validity period, without any forfeiture of booking fees".
PropNex chief executive officer Ismail Gafoor told reporters yesterday: "Ever since the Credit Suisse report came out... the authorities started to call our agents asking why this is happening, and asking if we are conducting classes to do churning. But we are not."
Churning refers to agents pushing people who don't qualify, or are not ready, to commit to a purchase, he said.
PropNex proposed that HDB upgraders buying their first private home be allowed remission of ABSD, a benefit now enjoyed by those buying new ECs. It also asked for remissions to be extended to singles, single-parent families and singles living with their parents.
Mr Ismail called for LTV ratios to revert to 80 per cent instead of the current 75 per cent for a first housing loan, as the total debt servicing ratio (TDSR) framework is enough to prevent borrowers from being over-leveraged.
He also proposed lowering ABSD for second property purchases to either 5 per cent or 7 per cent to discourage Singaporeans from investing in real estate overseas.