Singapore’s new property cooling measures: Higher ABSD rates, tighter LTV limit

SINGAPORE: The Government announced on Wednesday, December 15 a new round of cooling measures. These measures were introduced to cool both the private and public residential housing market and are meant to “promote continued housing affordability”. Despite the Covid-19 pandemic, the property market was thriving which saw a spike in private residential housing prices and HDB resale flats. This prompted the new round of cooling measures.

Additional Buyer’s Stamp Duty (ABSD)

ABSD is a tax charged on the purchases of second and subsequent properties for Singaporean Citizens and for all property purchase for Permanent Residents and Foreigners in Singapore.

Current rate for first residential property for Singaporean Citizens remain unchanged at 0 per-cent and 5 per-cent for Permanent Residents. The new ABSD rate would mean Singaporean Citizen would now pay a tax of 17 per-cent for their second residential property and 25 per-cent for their third and subsequent property purchase. This is up from the previous 12 per-cent and 15 per-cent respectively. For Permanent Residents, ABSD rates for second property has increased to 25 per-cent and 30 per-cent for third and subsequent property purchase.

Foreigners will now pay an ABSD rate of 30 per-cent for all property purchases, up from the previous 20 per-cent. Entities now pay a rate of 35 per-cent, up from 25 per-cent.

The revised ABSD rates will apply to Option-To-Purchase (OTP) granted on or after December 16. The higher ABSD rate will apply to property purchases jointly made by two or more parties of different profiles. Married couples can continue to apply for ABSD remission if they jointly purchase a second residential property, subject to certain criteria.

Tighter Total Debt Servicing Ratio (TDSR) And Loan Limits

TDSR is a threshold which limits the amount a person can utilise for debt repayments resulting in lower home loans for borrowers. The TDSR threshold will be tightened from 60 per-cent to 55 per-cent. This means new mortgages cannot cause borrower’s total monthly loan repayment to exceed 55 per-cent of their monthly income. For OTP issued on or before December 15, the previous 60 per-cent TDSR will apply.

For HDB buyers, housing loan limit will be lowered from 90 per-cent to 85 per-cent of the property purchase price. This reduces the amount a potential homeowner can borrow from HDB and will apply to homeowners buying a new flat from HDB sales’ launch and complete resale applications from December 16 onwards. For owners taking a home loan from financial institutions, the loan limit remains at 75 per-cent.

The new TDSR does not apply to borrowers of existing property who are refinancing their home loans.

These cooling measures are implemented to help promote a stable and sustainable property market. The measures to tighten financing conditions for both public and private housing “will encourage greater financial prudence”.

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