Ministry of National Development has released a heavy cooling measure to curb residential property investments or speculations, with updates as follow:-

The Government announced today an Additional Buyer’s Stamp Duty (ABSD)to be imposed on certain categories of residential property purchases. The ABSD will be imposed over and above the current Buyer’s Stamp Duty, and will apply to the purchase price or market value of the property (whichever is higher) for the following purchases:

a) Foreigners and non-individuals[1] (corporate entities) buying any residential property will pay an ABSD of 10%;

b) Permanent Residents (PRs) owning one[2] and buying the second and subsequent residential property will pay an ABSD of 3%; and

c) Singapore Citizens (Singaporeans) owning two2 and buying the third and subsequent residential property will pay an ABSD of 3%.

The ABSD will take effect on 8 Dec 2011[3]. Remission of ABSD will be given for options granted on or before 7 Dec 2011 and exercised within 3 weeks (i.e. on or before 28 Dec 2011) or the option validity period, whichever is the earlier.

Official Source: MND Website

In Summary

All foreigners buying 1st residential property in Singapore will have to pay 13% Buyer’s Stamp Duty instead of the previous 3% (Additional 10%)

All Permanent Residents 1st residential property will still remain 3% and the 2nd one will be 6% Buyer’s Stamp Duty (Additional 3%)

All Singaporeans 1st and 2nd residential properties will remain at 3% and the subsequent ones to be at 6% Buyer’s Stamp Duty (Additional 3%)

Outlook

This will dampen residential market strongly as foreign buying interest has always been very strong. That said, other property segments such as commercial and industrial should not be affected.

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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.

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The Singapore Government has recently released further measures today to curb the possibly speculative hot property market which will be in effect immediately (30th August 2010) as follows:-

• Seller’s Stamp Duty Holding period extended from 1 year to 3 years

For residential properties bought4 on or after 30 August 2010, SSD will be imposed if these properties are sold within three years of purchase. Specifically, the SSD levied on residential properties will be revised to as follows:

1. Sold within the first year of purchase, i.e. the property is held for 1 year or less from its purchase date – The full SSD rate (1% for the first $180,000 of the consideration, 2% for the next $180,000, and 3% for the balance) will be imposed.

2. Sold within the second year of purchase, i.e. the property is held for more than 1 year and up to 2 years – 2/3 of the full SSD rate.

3. Sold within the third year of purchase, i.e. the property is held for more than 2 years and up to 3 years – 1/3 of the full SSD rate.

No SSD will be payable by the vendor if the property is sold more than 3 years after it was bought. Please see Annex for examples of how the SSD will be computed.

• Cash Component Revised from Minimum 5% to 10% Loan to Value Limit for Property Owners with More Than One Outstanding Loan
• Loan to Value revised from 80% to 70% for Property Owners with More Than One Outstanding Loan

The LTV limit is lowered from 80% to 70% with effect from 30 Aug 20108 for borrowers who have one or more outstanding housing loans (whether from HDB or a financial institution regulated by MAS) at the time of applying for a housing loan for the new property purchase. Borrowers who do not have any outstanding housing loans continue to have an LTV cap of 80%. These rules apply to housing loans granted by financial institutions for private residential properties, Executive Condominiums, HUDC flats and HDB flats (including DBSS flats).

Loans granted by HDB for HDB flats (including DBSS flats) will still have an LTV cap of 90%. HDB loans are offered to eligible first-time flat buyers and second-timers who are right-sizing their flats to meet their housing needs. They are required to utilise all of their CPF Ordinary Account balance before HDB loans will be granted. Furthermore, those taking a second concessionary HDB loan must use the CPF refund and 50% of the cash proceeds from the sale of their previous flat before they are granted an HDB loan. This is in line with HDB’s home ownership policy of helping eligible buyers, especially first-time buyers, purchase public housing in a financially prudent manner.

Financial institutions’ lending standards have remained prudent and the asset quality of housing loans has stayed robust, with the non-performing loans ratio at less than 1% as at Q2 2010. Nonetheless, there are signs that more housing loans are originating at higher LTV bands of above 70%. In line with the objective of ensuring a stable and sustainable property market, lowering the LTV limit sends a clear signal to financial institutions to maintain credit standards, and encourages greater financial prudence among property purchasers already servicing one or more outstanding housing loans.

The reasons as exact given by Ministry of National Development,

While Singapore has enjoyed strong economic growth in the first half of 2010, our economic growth is expected to moderate in the second half of the year. There are also still uncertainties in the global economy. Should economic growth falter and the market corrects, property buyers could face capital losses, with implications on their own finances and the economy as a whole. Moreover, the current low global interest rate environment will not continue indefinitely, and higher interest rates could have severe implications for buyers who have overextended themselves. Therefore, the Government has decided to introduce additional measures now to temper sentiments and encourage greater financial prudence among property purchasers.

Huge impact should follow with such, and we could very likely see the property transactions drop drastically.

We’ll have to wait out for more details from each relevant government agencies on how the changes should impact your usual property transactions.

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Orchard Underpass to get a facelift. Photo credit: costner_v, flickr

Sun Hong Kai and Capitaland will join hands together to give the underpass a face lift.

A spokesperson from ION Orchard said the pedestrian passageway will be widened to double the existing width, and there will be shops on both sides of the underpass. According to the CEO of Orchard Turn Developments, Soon Su Lin, there will be a facelift which will be similar to the underpass connecting Orchard ION and Wheelock Place.

The last time any major work was done there was in 1988. The move is expected to inject vibrancy to the old tunnel. Details of the upgrading will be out at a later stage.

Also, if you are unfamiliar with Sun Hong Kai and Capitaland’s joint ventures, Orchard ION and The Orchard Residences Orchard most highest and iconic residential building as of present, are championed by the two developers.

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Resale prices has shot up higher than its previous peak in 2007,

The latest price rises for this segment, dominated by upgraders, were relatively modest, but enough to push average prices past the previous high.

PRICES of private, leasehold resale homes have now shot past their previous peak in late 2007, according to a new report by property consultancy DTZ.

The latest price rises for this segment, dominated by upgraders, were relatively modest, but enough to push average prices past the previous high.

The more elite segment of landed resale homes saw the biggest price rises in the first quarter of the year to reach another new high while prime freehold prices edged nearer their previous peak.

more in The Straits Times

More hyped up news from Channel News Asia as well,

SINGAPORE : Demand for new homes in the first quarter of this year more than doubled that of the fourth quarter of 2009.

Property consultancy CB Richard Ellis (CBRE) said response to new projects launched in the first three months of the year chalked up close to 4,000 homes compared to only 1,860 in the previous quarter.

This is despite the introduction of another set of property curbs in February.

The property consultancy firm said this showed the resilience of residential demand from both owner-occupiers and investors.

Nevertheless, CBRE said the property measures seemed to be effective in weeding out short term speculators.

More on Channel News Asia

The market has indeed been moving and the property cycle has proven to be shorter and shorter. The 7-years property cycle myth has no more basis with this good run on the 1st quarter of the year.

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With the latest Budget released for 2010 by Financial Minister Tharman Shanmugaratnam, property tax computation for home owners will be on a 3-tier progressive scheme.

Based on Annual Value (AV) of your owner occupied home, the tiers are as follows:-

1. 0% on your first $6,000 of AV
2. 4% on the next $59,000 of AV
3. 6% on anything above $65,000 of AV

There is already a new online calculator available based on the new tax tier on IRAS website for you to computate your 2011 property tax should you be able to know the latest AV of your home.

Rationale for New Property Tax Tier

Mr Tharman explains that with a moderately progressive property tax system, together with an income tax system that collects more taxes from better-off individuals and a flat GST rate that everyone pays, will form a fair system of taxes as a whole.

And with such, this tax system will benefit most Singaporeans.

Related posts:

1. IRAS – No Changes to Tax for Property Gains
2. Singapore Budget 2009 – What It Means To Us
3. HDB Annual Value Raised

With immediate effect, the Government has introduced two new measures to cool down the property market.

Introducing Seller’s Stamp Duty (SSD) for Properties Sold Within a Year

Properties that were bought before 20th February 2010 will not be subjected to the SSD. The SSD will be levied on sellers of residential properties and lands bought on or after today.

HDB flats are exclused from the SSD as they do already have a minimum occupancy period of at least one year.

The objective is to discourage possible speculation in the market and is not meant for purchase of properties for owner-occupation or longer term investment.

Calculation of the SSD will be of the same manner as the stamp duty when the purchaser bought the property.

The seller will have to pay the stamp duty fees immediately after the buyer exercises the option or sales & purchase agreement within 14 days.

Download the official IRAS e-Tax Guide on both BSD (Buyer’s Stamp Duty) and SSD

Lowering Loan-To-Value (LTV) Limit to 80% for Housing Loans

The LTV limit will be lowered from 90% to 80% for all housing loans provided by financial institutions (FIs) regulated by MAS. This is applicable to all housing loans granted by FIs to private residential properties, ECs, HUDCs and HDBs.

Loan from HDB will still be capped at 90% to assist first time home buyers and second upgraders. Since HDB has already many criteria to prevent speculations, the LTV cap will only be limited to FIs.

Most FIs have already been practicising 80% LTV since the last measures from the Government to cool down the market.

This move will ensure that the FIs have a better credit standing and practice prudence when granting loans to property purchasers.

Pumping Supply of Housing in the Pipeline

The Government will ensure that there is adequete supply of housing to meet demand.

In the statistics, they have already released 8 residential sites, the highest ever potential supply since the GLS (Government Land Sales) has started in 2001.

Read the official statement from URA here.

Related posts:

1. Calculating Stamp Duty for Sale of Property in Singapore
2. Government Takes Measure To Cool Property Market – IAS Abolished

It’s confirmed. The Government will be stepping in to regulate the pool of real estate agents in Singapore.

The Straits Times announced and understands that an independent body will be formed and chaired by a neutral party appointed by the Government. It will also house a dispute resolution centre for agents and consumer mediation.

The intiative was hasten with the old ERA agent case of flipping an apartment in Riverside Piazza.

It’s about time as mentioned before that this would happen. Like Nicholas Mak mentioned, the only wish I had was that the independent body will not have any agency heads involve in the process as this will have conflicting of interest within the party.

Public consultation on the proposed reforms is due to begin this month with the findings due by December.

What Should Property Agents Do Now?

To fellow colleagues who’s rushing to take your CES or CEHA at this point, I don’t see the point of speeding up. It would be an added bonus to have the qualifications.

If you see these papers as added or refreshment to your real estate knowledge, the papers would be much easier to clear.

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With immediate effect, Minister for National Development (MND) Mr. Mah Bow Tan has announced 3 main measures to cool the current speculative property market:-

1. Removal of the Interest Absorption Scheme (IAS) and Interest Only Housing Loans (IOL) with effect immediately (14th September 2009)
2. Reinstatement of Confirmed List for 1st Half 2010 Government Land Sales (GLS) Programme
3. Non-extension of the January 2009 Budget assistance measures when it expires.

What is IAS?

Interest Absorption Scheme. Details can be found here.

What it means for the property market?

Speculative property buyers will not be able to opt for IAS with immediate effect, bringing them to service their mortgage as soon as the construction of the new project begins according to the stage it is built (Normal Payment Scheme – NPS).

This will stop a huge number in terms of speculation; though it shouldn’t stop genuine buyers who is looking to buy a place of their own stay.

The reintroduction of GLS also means that the Government is preparing to insert fresh supply of land to curb the excessive speculation in this current market.

Simple equation – More supply, less demand.

What happens to new project launches after today?

Official quote:

The Monetary Authority of Singapore will disallow the IAS and IOL with immediate effect from today, i.e. 14 Sep 2009. This measure will apply to all private residential projects. The only exception will be uncompleted private residential projects where the units had already been offered for sale under the IAS before 14 Sep 2009. The IOL will be disallowed with immediate effect.

So projects that has offered IAS before 14th September is still eligible.

Where can I get the official source?

Download a copy of the official press release jointly from Ministry of National Development (MND), Ministry of Finance (MOF), Ministry of Law (MOL) and Monetary Authority of Singapore (MAS) and Question and Answer on how these changes will work in detail.

Related posts:

1. Caspian & Alexis Sells Well – Singapore Property Mid Tier Market Still Strong
2. New Seller’s Stamp Duty & Lower Housing Loan Limit

Nothing new is springing up from Inland Revenue Authority of Singapore (IRAS), after a period of uncertainty especially to property investors with the recent speculations of government measures to firm up the possible taxation of property owners selling their assets for capital yield.

Previously it was proposed that an individual who sells a property would not be taxed on the profit if he had not sold any other property in the preceding four years.

The public consultation process for the proposal attracted 64 responses with 60 opposing the change. This rule would be confusing to sellers amidst the economy which seems to start finally picking up pieces.

The gray area of how IRAS actually goes after property owners who transacts property on a regularly basis will still persist, but its still better than punishing long term investors who deem investing in property as a financial tool to hedge inflation over a long period.

Related posts:

1. New Property Tax Computation for Home Owners from January 2011