Property stocks pick up as some curbs are eased

Seller's stamp duty tweaked; easier for some to borrow money against their property

Home owners selling within one year will pay 12 per cent instead of 16 per cent, moving down to 4 per cent instead of 8 per cent for sales by the third year. PHOTO: ST FILE

In a surprise move, the Government has eased some residential property curbs for the first time since imposing a raft of measures from 2009 - sparking a modest rally among real estate stocks.

The "calibrated adjustments" to the seller's stamp duty (SSD) and total debt servicing ratio (TDSR) unveiled yesterday came amid fairly solid demand for homes and after three years of falling home prices.

While the main curbs keeping the market in check - such as the additional buyer's stamp duty (ABSD) and the loan to value (LTV) limit - remained intact, industry players and home buyers saw the latest moves as positive.

The SSD, which has been paid on homes sold within four years of being purchased, will now apply for only three years. The SSD rate will also be cut by four percentage points.

Home owners selling within one year will pay 12 per cent instead of 16 per cent, moving down to 4 per cent instead of 8 per cent for sales by the third year.

These SSD changes apply to homes purchased from today.

Financial consultant Sanjay Ashok Wadhwani said: "I don't think the SSD changes will affect me so much. As a buyer, the ABSD and LTV would have a bigger impact, but those were not changed."

Others, like Dr Lee Nai Jia, head of South-east Asia research at Edmund Tie and Company, said the impact would be muted, though more units may be sold this year.

The Government also relaxed a rule under the TDSR - designed to prevent borrowers from over- extending themselves - on loans where owners borrow against their residential property.

If a home owner's total outstanding loans are 50 per cent or below of his property's value, the TDSR will no longer apply.

"This allows for greater flexibility by borrowers to monetise their properties, preventing the need for a distressed sale in the event of economic hardship," Credit Suisse said in a report yesterday.

The Real Estate Developers' Association of Singapore noted: "The adjustments will provide some relief and help to address the needs of some borrowers."

While the announcement brings cheer to many segments of the property market, analysts said the tweaks are unlikely to have a big impact and are not a bid to spur the sluggish housing market on the Government's part.

"Adjusting the SSD has the least impact on the property market. It does not change the availability of credit or liquidity, nor the cost of acquisition," said Mr Nicholas Mak, head of research and consultancy at SLP International.

The SSD and TDSR were among a raft of cooling measures imposed since 2009 to cool a then red-hot market. But the retention of the ABSD and other loan curbs is seen as necessary to maintain a more sustainable property market.

"While the growth in outstanding housing loans has moderated, it is prudent for households to further build up their financial buffers to protect against future interest rate increases or any losses in income," the Government said, in upholding other measures.

Even though most of the cooling measures stay firmly in place, the optimism from the adjustments in SSD and TDSR sent the benchmark FTSE ST Real Estate Index surging yesterday, up 1.35 per cent to close at a level not seen since July 2015.

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A version of this article appeared in the print edition of The Straits Times on March 11, 2017, with the headline Property stocks pick up as some curbs are eased. Subscribe