AT Law Practice LLP

Month: December 2021

The latest round of residential property cooling measures effective from 16 December 2021 – Part Two

This is the second part of a two-part article on the recent residential property cooling measures implemented by the government to put some brakes on the heating residential property market in Singapore. Part one of this article includes the details of the new measures introduced in relation to additional buyer’s stamp duties. 

Let us now take a look at the new changes introduced in relation to Loan-To-Value limit and Total Debt Servicing Ratio respectively. 

Loan-To-Value limit

LTV serves as a safeguard against over-leveraging by requiring financial institutions to restrict home loans to a certain percentage of the value of the property purchased. The new LTV limit  directly affects only those HDB flat buyers who are taking loans from HDB. LTV limit for HDB residential property loans from HDB was lowered from 90 percent to 85 percent.

 

Total Debt Servicing Ratio

TDSR limits the amount of money a person can borrow from a financial institution to purchase property. The threshold for TDSR was lowered from 60 percent to 55 percent. This effectively means that a buyer cannot borrow an amount for the purchase of property that would raise his/her total debt repayments, including any other loan and credit card debts beyond 55 percent of his/her monthly income. 

In any case, most of the new measures have little to no effect on first time buyers. Also, some private property owners may choose to decouple in light of the new measure i.e an owner transfers his/her share of the home to another co-owner. This would then allow the transferor to buy a ‘first’ property under his/her name. However, owners of HDB flats cannot decouple, except under special circumstances (e.g. divorce). 

Some analysts in the market feel these new measures will be ‘harder hitting’ compared to earlier rounds of cooling measures implemented by the government especially because of the greater ABSD rates. Others feel it would merely arrest the upward price momentum of both private and HDB properties. 

It remains to be seen how these new measures will impact the market. Only time will tell.

Read part one of this article which includes the recent measures introduced in relation to additional buyer’s stamp duties.

This is the second part of a two-part article on the recent residential property cooling measures implemented by the government to put some brakes on the heating residential property market in Singapore. Part one of this article includes the details of the new measures introduced in relation to additional buyer’s stamp duties. 

Let us now take a look at the new changes introduced in relation to Loan-To-Value limit and Total Debt Servicing Ratio respectively. 

Loan-To-Value limit

LTV serves as a safeguard against over-leveraging by requiring financial institutions to restrict home loans to a certain percentage of the value of the property purchased. The new LTV limit  directly affects only those HDB flat buyers who are taking loans from HDB. LTV limit for HDB residential property loans from HDB was lowered from 90 percent to 85 percent.

Total Debt Servicing Ratio

TDSR limits the amount of money a person can borrow from a financial institution to purchase property. The threshold for TDSR was lowered from 60 percent to 55 percent. This effectively means that a buyer cannot borrow an amount for the purchase of property that would raise his/her total debt repayments, including any other loan and credit card debts beyond 55 percent of his/her monthly income. 

In any case, most of the new measures have little to no effect on first time buyers. Also, some private property owners may choose to decouple in light of the new measure i.e an owner transfers his/her share of the home to another co-owner. This would then allow the transferor to buy a ‘first’ property under his/her name. However, owners of HDB flats cannot decouple, except under special circumstances (e.g. divorce). 

Some analysts in the market feel these new measures will be ‘harder hitting’ compared to earlier rounds of cooling measures implemented by the government especially because of the greater ABSD rates. Others feel it would merely arrest the upward price momentum of both private and HDB properties. 

It remains to be seen how these new measures will impact the market. Only time will tell.

Read part one of this article which includes the recent measures introduced in relation to additional buyer’s stamp duties.

 Copyright © 2021 ATLaw Practice LLP. All Rights Reserved.

The latest round of residential property cooling measures effective from 16 December 2021 – Part One

This is the first part of a two-part article on the recent residential property cooling measures implemented by the government to put some brakes on the heating residential property market in Singapore.

The latest round of property cooling measures effective from December 16, 2021 was introduced by the government to put some brakes on the heating property market in Singapore.

Although most people will have to agree that there were clear signs that the market was heating up, the timing of the new measures was unexpected and the gap between their announcement and their implementation – a mere 25 minutes – was even more unexpected.

For buyers of residential property, the new measures include the following:

  1. higher Additional Buyer’s Stamp Duties (ABSD);
  2. lower Loan-To-Value (LTV) limit; and
  3. lower Total Debt Servicing Ratio (TDSR).

Additional Buyer’s Stamp Duties

ABSD is levied on buyers who purchase residential property.

The new cooling measures impose a flat 30 percent tax on foreign buyers for any residential property (up from 20 percent).

There has been no change for Singapore citizens (0 percent ABSD) and permanent residents (5 percent ABSD) buying their first property.

With the new measures Singapore citizens will now have to pay 17 percent (up from 12 percent) for a second residential property and 25 percent (up from 15 percent) for a third and subsequent properties. PRs on the other hand will now have to pay 25 percent (up from 15 percent) for a second residential property and 30 percent (up from 15 percent) for a third.

Entities (company or association) are looking at 35 percent ABSD (up from 25 percent) plus 5 percent non-remissible if the entity is a housing developer and the ABSD deadline is five years regardless of the size of the development.

Read part two of this article which covers the recent changes to the Loan-To-Value Limit, the Total Debt Servicing Ratio and the views of analysts about their impact on the market.

 Copyright © 2021 ATLaw Practice LLP. All Rights Reserved.

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