What you need to know about Singapore's new property cooling measures

The new round of cooling measures will affect the buoyant property market, which has been thriving despite the economic fallout from the Covid-19 pandemic. ST PHOTO: LIM YAOHUI

SINGAPORE - Spikes in private housing prices and Housing Board resale flat prices in Singapore have prompted the authorities to introduce a new round of cooling measures.

The move, announced at close to midnight on Wednesday (Dec 15), will affect the buoyant property market, which has been thriving despite the economic fallout from the Covid-19 pandemic.

Here is what you need to know:

1. What are the measures?

- The additional buyer's stamp duty (ABSD) on purchases of residential properties will be raised. ABSD is a tax charged on second and subsequent residential property purchases for Singapore citizens, and on all residential property purchases for permanent residents and foreigners.

- The total debt servicing ratio (TDSR) threshold, which limits the amount that a person can spend on monthly debt repayments, will be tightened, making for smaller home loans for borrowers.

- HDB loan limits will also be lowered.

2. When do they kick in?

- The measures kicked in on Thursday. They are applicable to all residential property transactions where the option to purchase (OTP) was granted on or after Dec 16.

- For the higher ABSD, buyers with OTPs granted before Dec 16 will not be affected. But they must exercise their OTP on or before Jan 5 or within the OTP validity period, whichever is earlier. The terms of the OTP must also not have been changed on or after Dec 16.

- For the revised TDSR, borrowers with mortgages granted before Dec 16 will not be affected when refinancing their loans.

3. How will higher stamp duties affect buyers?

- 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.

- For permanent residents buying their second residential property, the ABSD rate will rise from 15 per cent to 25 per cent. This will increase from 15 per cent to 30 per cent if they buying their third and subsequent properties. There is no change to the 5 per cent rate for PRs buying their first property.

- For foreigners buying any residential property, the ABSD rate will be 30 per cent, up from 20 per cent.

- The ABSD rate for entities, including housing developers, will go up from 25 per cent to 35 per cent.

4. How will tighter loan limits affect private home buyers?

- The TDSR threshold will be tightened from 60 per cent to 55 per cent. This means new mortgages cannot cause borrowers' total monthly loan repayments to exceed 55 per cent of their monthly income.

- For buyers who have been issued with an OTP on or before Dec 15, the previous 60 per cent TDSR will apply whether or not they have exercised their OTP at the point of applying for a home loan.

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5. How will tighter loan limits affect HDB buyers?

- HDB loans will be lowered from 90 per cent to 85 per cent of a property's purchase price.

- This will apply to those buying a new flat in HDB's sales exercises launched from Dec 16 onwards.

- It will also apply to resale flat buyers, specifically for complete resale applications that are received by HDB from Dec 16 onwards. A complete application is one where HDB has received both sellers' and buyers' portions of the resale application.

- For those taking housing loans from financial institutions rather than HDB, the loan limit remains at 75 per cent.

6. Will refinancing of home loans be affected?

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

- The TDSR also does not apply to refinancing of owner-occupied housing loans.

- The TDSR does apply to existing investment property loans, but borrowers affected by Covid-19 have been given a temporary TDSR waiver. Otherwise, the previous 60 per cent TDSR will apply.

Note: This story has been edited for clarity.

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