Have you felt uneasy since the Singapore government broke the news about the latest property cooling measures last December 15, 2021? Like most of my clients, you may be asking, “what’s going to happen to my properties, and should I be worried?” Or perhaps you are in the process of buying a property, and suddenly this news dropped like a bomb? What will happen to your purchase, then? How will these measures affect your properties in the long run?
But what if I tell you that there are winners in this round of cooling measures? There are three significant changes to the cooling measures to help curb the red hot property market. Let’s have a quick review before we proceed with the winners.
3 Significant Property Cooling Measures Changes
1. Higher Additional Buyer’s Stamp Duty (ABSD)
You will need to pay a few taxes when you purchase a property. They are:
- The Buyer’s Tax Duty upon acquiring a property
- The Additional Buyer’s Stamp Duty (ABSD) which is a tax on top of the previously mentioned BTD. ABSD is computed based on either the valuation of the property or its selling price. You get taxed on whichever is higher. This tax is imposed with varying rates:
- Singapore citizens (17% on the second property, 25% on the next)
- Permanent Residents (5% on the first purchase, 25% for the second, then 30% for the next one)
- Foreigners (30% for every purchase)
- Other entities such as companies (35%).
2. Lower TDSR from 60% to 55%
The Total Debt Servicing Ratio (TDSR) will be tightened from 60% to 55%, which means that mortgages shall not exceed 55% of the buyer’s monthly income, and you as an investor will need to shell out a bigger sum of down payment.
3. Reduced Loan to Value (LTV) limit to HDB loans from 90% to 85%
The Loan to Value limit sets the amount of funds a property buyer can loan. That being said, you can only take out a loan up to 85% of the value of the property you intend to purchase. This is implemented to protect buyers from carrying too much debt, more than they can pay.
“The measures undertaken in this cooling package will help promote a stable and sustainable property market. The Government remains vigilant to the risk of a sustained increase in prices relative to income trends.”
-Issued by: Ministry of Finance, Ministry of National Development, and Monetary Authority of Singapore
So, who are the winners of the latest cooling measures? There are three buyer profiles, in fact.
First-Time Buyers
The Government’s property cooling measures will ensure that home prices do not rise rapidly, eventually becoming more stable. Therefore, properties in Singapore will remain affordable for future buyers. First-time buyers like you, who are looking to start a family in a new home, whether it’s private property or a resale property, can take advantage of the 2022 cooling measures.
Buyers Who are Looking to Buy Properties in the Core Central Region (CCR)
As a domino effect of the tighter cooling measures, you will face lesser competition against foreigners for the units you have been eyeing. There’s also a probability that developers could adjust their prices to attract local buyers for their new launches. This could also be an excellent time to negotiate prices during the transaction!
Upgraders Entering the Resale Market
Now, sellers will be less aggressive with the asking prices due to the reduced TDSR. As I mentioned earlier, TDSR is lowered from 60% to 55%. This will help home buyers secure a property at a favorable price and avoid a hefty amount for COV (Cash Over Valuation).
There you have it! These are my three buyer profiles who can take advantage of these measures and emerge as winners in the property market.
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Disclaimer: All information presented is based on personal opinions. Singapore Real Estate Insider is not liable for any losses and expenses whatsoever related to investment decisions made by the audience. The ideas presented are here for reference and educational purposes only.
