The Best Property Cooling Measure for Singapore

Today, the Singapore government announced a slew of measures to cool the residential property market. It also introduced a Seller’s Stamp Duty on industrial properties for the first time, to discourage speculative activity in the industrial market.

Measures Applicable to all Residential Property
The following measures will take effect on 12 January 2013:
a)      Additional Buyer’s Stamp Duty (ABSD) rates will be:
i)       Raised between five and seven percentage points across the board.
ii)      Imposed on Permanent Residents (PRs) purchasing their first residential property and on

Singaporeans purchasing their second residential property.
b)      Loan-to-Value limits on housing loans granted by financial institutions will be tightened for individuals who already have at least one outstanding loan, as well as to non-individuals such as companies.
c)      Besides tighter Loan-to-Value limits, the minimum cash down payment for individuals applying for a second or subsequent housing loan will also be raised from 10% to 25%.

Measures Specific to Public Housing
The following measures will take effect on 12 January 2013:
a)      Tighter eligibility for loans to buy HDB flats:
i)      MAS will cap the Mortgage Servicing Ratio (MSR) for housing loans granted by financial institutions at 30% of a borrower’s gross monthly income.
ii)      For loans granted by HDB, the cap on the MSR will be lowered from 40% to 35%.

b)      PRs who own a HDB flat will be disallowed from subletting their whole flat.
c)      PRs who own a HDB flat must sell their flat within six months of purchasing a private residential property in Singapore.

Measures for Executive Condominium Developments
The following measures will take effect on 12 January 2013:
a)      The maximum strata floor area of new EC units will be capped at 160 square metres.
b)      Sales of new dual-key EC units will be restricted to multi-generational families only.
c)      Developers of future EC sale sites from the Government Land Sales programme will only be allowed to launch units for sale 15 months from the date of award of the sites or after the physical completion of foundation works, whichever is earlier.

Cooling Measure for the Industrial Property Market: Seller’s Stamp Duty
With effect from 12 January 2013, the following SSD rates will be imposed on industrial properties and land bought and sold within three years of the date of purchase: a)      SSD at 15% if the property is sold in the first year of purchase, i.e. the property is held for one year or less from the date of purchase.
b)      SSD at 10% if the property is sold in the second year of purchase, i.e. the property is held for more than one year and up to two years from the date of purchase.
c)      SSD at 5% if the property is sold in the third year of purchase, i.e. the property is held for more than two years and up to three years from the date of purchase.

My views on the recent cooling measure
In my view, this latest package of cooling measure for the residential and industrial properties is not going to dampen the demand and change market sentiment. Throughout history, the best form of cooling measure had always been a recession. During recession, there would be widespread retrenchment by companies. It is only when people lost their jobs, then they would be forced to sell their investment properties at cut throat prices. When this occurred, the market will correct itself and bring down property prices.

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