New Cooling Measures Yet Again – Seller Stamp Duty and Loan to Value Adjusted

With the introduction of Seller’s Stamp Duty and lowering of Loan-to-Value ratio last year and being enhanced before, the Singapore Government steps in further to adjust the already heavy measures to cool down the property market by introducing the following:-

  • Increasing the holding period for imposition of Seller’s Stamp Duty(SSD) from three to four years
  • Raise the SSD rates to 16%, 12%, 8% and 4% of consideration for residential properties which are bought on or after 14 January 2011, and are sold in the first, second, third and fourth year of purchase respectively. You can see an example of the computation here.
  • Lower the Loan-To-Value (LTV) limit to 50% on housing loans granted by financial institutions regulated by MAS for property purchasers who are not individuals
  • Lower the LTV limit on housing loans granted by financial institutions regulated by MAS from 70% to 60% for property purchasers who are individuals with one or more outstanding housing loans at the time of the new housing purchase

The measures will take effect tomorrow on the 14th of January 2011.

What it means for property investors

There will be no effect on properties bought before 14th of January 2011. Do note that the Seller’s Stamp Duty is raised much sharply to 16% for 1st year, 12% for 2nd year, 8% for 3rd year and 4% for 4th year as compared to the previous tier of 3%, 2% and 1% for 3 years holding period.

  • Properties that were bought before 20th February 2010 will not be affected by SSD.
  • Properties that were bought between 20th February 2010 to 29th August 2010 will be affected by a 1-year holding period of 3% SSD.
  • Properties that were bought between 30th August till 13th of January 2011 will be affected by 3-years holding period of SSD tiered 3% for the 1st year, 2% for the 2nd and 1% for the 3rd.
  • Properties that were bought on 14th January 2011 onwards will be affected by this latest SSD rule of 16% on the 1st year of sale , 12% on the 2nd year, 8% on the 3rd year and 4% on the 4th.

This is heavy penalty if you were to sell your properties before the 4-year holding period.

You will also have lower loan-to-value ratio, which means the bank can only loan you up to 60% of the property valuation. 40% of the proceeds will have to come from cash and CPF OA funds which is pretty drastic.

What it means for home buyers

If you are buying for your own stay and this is your first home, these rules should not affect you unless you have an outstanding mortgage loan since the loan-to-value has been reduced drastically down from 70% to 60% for your 2nd property purchase. And should you be buying your first private property, these rules will be working towards your favor as they should be keeping speculators or cash poor investors out.

These are very serious measures indeed and property purchasers are advice to be prudent on their purchase should they be thinking in the speculation angle.

Written by Benson Koh
Benson is a professional real estate realtor with over 11 years of experience specializing in all forms of real estate consultancy and brokeraging of different segments from regal homes to commercial spaces. Also a boutique developer, he manages both SRI5000 Developments which concentrates on landed homes as part of his land bank segment and Singapore Realtors Inc (SRI), a real estate agency which has over 7 years of group experience. You can reach him here via various channels. [ Facebook | Linkedin | Twitter | RSS Feed ]