MAS Introduces Debt Servicing Framework for Property Loans

MAS introduces new property debt servicing framework for property loans
MAS introduces new property debt servicing framework for property loans

Just when property market picks up by a little notch, MAS introduced a new cooling measure by introducing debt servicing ratio framework. With effect from 29th of June 2013 (by tomorrow), the new rules will take effect to ensure that a property buyer’s monthly payments do not exceed 60 percent of his income.

This new TDSR (total debt servicing ratio) will apply to loans for the purchase of all types of property, loans secured and refinancing of all related property loans.

This is to encourage prudence on borrowing and refrain borrowers from overexposure to financial risk. Banks will also have to apply a specific medium-term interest rate, or prevailing market rate, whichever is higher, to the property loan that the borrower will be apply for.

This would definitely affect in particular for existing property owners who are seeking to purchase another property for investment, be it residential, commercial or industrial.

[block type=”alert”] You can read more about the framework from the official MAS website here.[/block]

Will the new TDSR affect the existing mortgages?

No. As all your contracts are inked in and approved, this definitely will not affect your existing mortgages. I suppose what MAS worry about is the possibility of interest rate increasing that might put borrowers who neglect the ratio and is overweight on any type of mortgage loans.

In all honesty, TDSR of 60% has always been the norm, but just not followed through strictly. Now with the framework that is in place, I guess stringent checks with proper documentations are needed before loan gets approved. That might mean that loan approvals might take longer than your usual.

Personal Thoughts

As of current since the framework was just released, our banker friends were not briefed yet on how this would impact their existing and new clients as well. More updates on Monday as soon as more case scenarios are being melted out. Look out for the space here.

My hunch is that MCL Land J-Gateway’s outstanding performance of 738-units selling out today probably triggered this new cooling measure which probably was already in the pipeline.

Singapore Property Loan Tenure Caps at 35 Years

Amidst the heating Singapore market, MAS has released an immediate press release which will take immediate effect from tomorrow,

The Monetary Authority of Singapore (MAS) will restrict the tenure of loans granted by financial institutions for the purchase of residential properties. MAS’ move is part of the Government’s broader aim of avoiding a price bubble and fostering long term stability in the property market.

2 The maximum tenure of all new residential property loans will be capped at 35 years. In addition, loans exceeding 30 years tenure will face significantly tighter loan-to-value (LTV) limits. This will apply to both private properties and HDB flats. The new rules will take effect from 6 October 2012.

[block type=”download”]Read the official press release from MAS here[/block]

These measures are somewhat expected and mirrored what Hong Kong has done after QE3 was announced by the Feds. Traditionally tenures over 30 years are not too popular, and shouldn’t affect the current property prices. This is especially a good move for home buyers whom might overestimate their affordability as well as investors who tend to stretch the loan tenures in case any volatility will to happen in the market.

New Cooling Measure – Additional Buyer’s Stamp Duty

Ministry of National and Development

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%)


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.

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. Continue reading “New Cooling Measures Yet Again – Seller Stamp Duty and Loan to Value Adjusted”

New Cooling Measures – Seller Stamp Duty Holding Period, Lower LTV, Minimum Cash Revised

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.

Facelift for ION Orchard’s & Tangs Plaza Underpass

Orchard Underpass to get a facelift. Source: Channel News Asia. Photo credit: costner_v, flickr
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.

Resale Home Prices Higher Than Previous Peak

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

Continue reading “Resale Home Prices Higher Than Previous Peak”

New Property Tax Computation for Home Owners from January 2011

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.

New Seller’s Stamp Duty & Lower Housing Loan Limit

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. Continue reading “New Seller’s Stamp Duty & Lower Housing Loan Limit”

Singapore Property Agents to be Regulated

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.