Singapore raises additional buyer's stamp duty, tightens HDB loan limit to cool property market

The ABSD rate will go up from 12 to 17 per cent for citizens buying their second residential property, and from 15 to 25 per cent for those buying their third and subsequent ones. ST PHOTO: LIM YAOHUI

SINGAPORE - A sustained rise in property prices despite the Covid-19 pandemic has prompted the authorities to introduce cooling measures, in a surprise move that will lead to property buyers paying higher stamp duties.

From Thursday (Dec 16), the additional buyer’s stamp duty (ABSD) that must be paid for purchases of residential properties will be raised.

The total debt servicing ratio (TDSR) for borrowers will also be tightened, while Housing Board loans will be lowered from 90 per cent to 85 per cent of a property’s purchase price.

“The private residential measures are calibrated to dampen broad-based demand, especially from those purchasing property for investment rather than owner-occupation,” said the Finance Ministry, National Development Ministry and Monetary Authority of Singapore in a joint statement late last night.

“Measures to tighten financing conditions for both public and private housing will encourage greater financial prudence.”

The ABSD rate will go up from 12 per cent to 17 per cent for citizens buying their second residential property, and from 15 per cent to 25 per cent for those buying their third and subsequent properties.

Permanent residents buying their second residential property will see the ABSD rate rise from 15 per cent to 25 per cent. If they are buying their third and subsequent properties, the rate will increase from 15 per cent to 30 per cent.

Foreigners buying any residential property will pay an ABSD rate of 30 per cent, up from 20 per cent now.

The ABSD rate for entities, including housing developers, will go up from 25 per cent to 35 per cent. Housing developers can have this sum waived if they abide by certain conditions, but will still have to abide by the existing rule under which they must pay an extra 5 per cent of ABSD that cannot be waived.

These measures are being taken because the property market has been buoyant despite the economic impact of Covid-19, the authorities said.

Private housing prices have risen by about 9 per cent since the first quarter of last year, while HDB resale flat prices are also recovering sharply after a six-year decline, rising about 15 per cent in the same time period.

“If left unchecked, prices could run ahead of economic fundamentals, and raise the risk of a destabilising correction later on,” said the authorities. “Borrowers would also be vulnerable to a possible rise in interest rates in the coming years.”

The revised ABSD rates will apply where the option to purchase (OTP) is granted from Dec 16 onwards.

But the old rates will apply in cases where the OTP was granted on Dec 15 or earlier. In addition, the OTP must be exercised on or before Jan 5 or within the OTP validity period, whichever is earlier. The terms of this OTP must also not have been varied on or after Dec 16.

In another move to cool the market, the TDSR threshold will be tightened from 60 per cent to 55 per cent. The TDSR limits the amount that a person can spend on monthly debt repayments. 

This will apply where the OTP is granted from Dec 16, as well as for mortgage equity withdrawal loan applications made starting Dec 16.

Borrowers with existing property loans granted before Dec 16 will not be affected by the revised TDSR threshold when refinancing their loans.

Separately, the new loan to value limit will apply to new flat applications for sales exercises launched after today and complete resale applications received by the Housing Board from today. 

The revised limit does not apply to loans granted by financial institutions where the ratio remains at 75 per cent.

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The authorities also pledged to increase the supply of both public and private housing to meet demand, with more details expected to be released on Thursday.

“The measures undertaken in this cooling package will help promote a stable and sustainable property market,” they said. “The Government remains vigilant to the risk of a sustained increase in prices relative to income trends.”

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