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Team MOGUL

How Will the Recent Property Cooling Measures Impact Homebuyers in 2022?


2021 was a spectacular year for the Singapore property market.


Despite the ongoing COVID-19 pandemic, prices for both public and private housing have hit record highs.

According to a report by Knight Frank Singapore, total property investment for 2021 was $25.8 billion, surpassing the $24.5 billion recorded in 2020.

This has led to the government “keeping a close watch” on the local property market.



There was talk of cooling measures circulating as early as Q1 2021. With HDB resale prices rising 12.5% and private properties prices rising 10.6% in 2021, it is little wonder that the government introduced new cooling measures on 15th December 2021.


The new cooling measures introduced are:

These measures are implemented in an effort to cool the private and public housing markets, so as to ensure that public housing remains affordable and to restrain private property investment in second and subsequent properties.


Increase in Additional Buyer's Stamp Duty (ABSD)


The ABSD for Singapore citizens buying a second residential property will go up by 5% to 17%.


Those buying a third or subsequent property will have to pay the ABSD rate of 25%, up from the previous 15%.


The increase of 10% will make the buying of a third or subsequent property a lot less attractive, considering that you will have to fork out $500,000 for the ABSD alone if you purchase a property that costs $2 million.



For Singapore permanent residents (PRs) buying their first property, the ABSD remains unchanged at 5%. The ABSD for a second property will increase to 25% from the previous 15%.


For the purchase of a third and subsequent property, the new ABSD is at 30%, up from the previous 15%.


The hardest-hit group is foreigners buying properties in Singapore, with the ABSD increasing to 30% from the previous 20%. This is likely to curb overseas interest in the local market as prices will have to appreciate more than 30% before seeing any positive return on investment.


For all changes in ABSD rates, please see the table below:

The ABSD increase will also affect developers of residential projects as they will have to pay a higher rate of 35% as compared to 25% previously.


The higher ABSD will hamper en-bloc activity, just as it is beginning to gather momentum after several successful deals transacted in the second half of last year. With fewer en-bloc projects, new launches are also expected to be fewer and in the process, dampen demand and curb property investment.


Tightening of Total Debt Servicing Ratio (TDSR) Threshold



The new TDSR threshold will be lowered to 55%, down from the current 60%.


The TDSR is the percentage of a borrower's gross monthly income that goes towards repaying monthly loan obligations such as car loans, study loans, personal loans etc, including the loan being applied for.


The TDSR threshold is to ensure that potential property buyers do not over-stretch their finances before committing.


A larger outstanding debt will lead to a smaller approved housing loan and more cash outlay. This will ensure that buyers do not find themselves mired in debts that they cannot repay.


Therefore, the TDSR threshold of 55% is to restrict financing options, especially for the second and subsequent properties. The TDSR reduction will also protect banks and lenders against excessive financial risks, especially those with high exposure to real estate debt.

Reduction of Loan-to-value (LTV) Limit


The new cooling measures also see the reduction of the LTV limits for loans taken with HDB.



Previously, you could take a loan of up to 90% from HDB when buying a BTO or resale flat. The percentage is now lowered to 85%.


This is to ensure that buyers buy a flat within their means and not pay excessively for a resale flat.


With HDB resale prices escalating to new heights, an additional 5% cash outlay is certainly no small sum.


Besides the new cooling measures, the government also looks to increase the supply of both public and private housing to meet housing demand and to ensure that the Singapore property market will remain affordable and also attractive for property investment.

 

Are you looking for a new home or the latest resale listings? Head to MOGUL.sg to browse your preference of properties for sale in Singapore.


Have a question? Let us know in the comments below or on our Facebook post.



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