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New property cooling measures – the latest: 12 Jan 2013

New Property cooling measures

The new property cooling measures in Singapore which are set to take effect 12 Jan 2013. The government’s aim is to control on-going speculation in the property market.

This is the seventh and most extensive round of  new property cooling measures / tightening measures and include higher buyer stamp duty, rules on permanent residents (PRs) buying their first home and size restrictions on executive condominium (EC) units. Most notably, curbs will also be introduced into the industrial sector.

Deputy Prime Minister and Minister for Finance Tharman Shanmugaratnam said: “The reality we face is that interest rates are extraordinarily low, globally and in Singapore, and continue to add fuel to our property market. We have to take this further round of measures now, to check recent market trends and avoid a more serious correction in prices further down the road.”

National Development Minister Khaw Boon Wan added: “A large supply of public and private housing – up to 200,000 units in total – will be completed in the coming years. Coupled with the new measures, we will be better placed to ensure that housing remains affordable to Singaporeans.”

Below is the full list of measures released in a joint statement by the government:

New Property Cooling 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.

Citizenship 1st Purchase ABSD 2nd Purchase ABSD 3rd & subsequent Purchase ABSD
Singapore Citizens Existing: N/A

Revised: N/A

Existing: N/A

Revised: 7%

Existing: 3%

Revised: 10%

Permanent Residents Existing: N/A

Revised: 5%

Existing: 3%

Revised: 10%

Existing: 3%

Revised: 10%

Foreigners & non-individuals Existing: 10%

Revised: 15%

Existing: 10%

Revised: 15%

Existing: 10%

Revised: 15%

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. (refer to Chart A)

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%. (refer to Chart A)


The new property cooling measures listed above will not impact most Singaporeans buying their first home. Some concessions will also be extended to selected groups of buyers, such as married couples with at least one Singaporean spouse who are purchasing their second property and will sell their first residential property.

These new ABSDs and loan rules are significant, but they are temporary. These new property cooling measures are being imposed to cool the market now, and will be reviewed in future depending on market conditions.

New Property Cooling Measures Specific to Public Housing

The Government is also introducing new property cooling measures to further moderate the demand for HDB flats, instil greater financial prudence among buyers, and require owner occupation by PR buyers. The following new property cooling 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.

An additional property cooling measure will take effect on 1 July 2013 to tighten the terms for granting HDB loans and the use of CPF funds for the purchase of HDB flats with remaining leases of less than 60 years.

New Property Cooling Measures for Executive Condominium Developments

The Government will introduce new property cooling measures specific to new EC developments to ensure that ECs continue to serve as an affordable housing option for middle-income Singaporean families.

The following new property cooling 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.

d) Private enclosed spaces and private roof terraces will be treated as gross floor area (GFA). The GFA of such spaces in non-landed residential developments, including ECs, will be counted as part of the ‘bonus’ GFA of a residential development and subject to payment of charges. This is in line with the treatment of balconies under URA’s current guidelines. Details of this measure are at

New Property Cooling Measure for the Industrial Property Market: Seller’s Stamp Duty

Prices of industrial properties have doubled over the last three years, outpacing the increase in rentals. In addition, there has been increasing speculation in industrial properties: in 2011 and the first eleven months of 2012, about 15% and 18% respectively of all transactions of multiple-user factory space were resale transactions carried out within three years of purchase. This is significantly higher than the average of about 10% from 2006 to 2010.

The Government is introducing Seller’s Stamp Duty (SSD) on industrial property to discourage short-term speculative activity which could distort the underlying prices of industrial properties and raise costs for businesses.

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.

These SSDs will apply for industrial properties and land bought on or after 12 January 2013.


2013: Big Fall in Property Prices Unlikely

IT would take an interest rate shock, poor GDP growth, or both, to bring down private property prices here noticeably over the next five years, a study said.

The Credit Suisse report noted that analysts are anticipating that prices will fall as a record supply of land comes on stream and as the US Federal Reserve tightens monetary policy.

US Liquidity

But it forecast that prices will rise by about 8 per cent by the end of 2017, based on the central scenario from its modelling. The report also said that not all of the government’s cooling measures have been effective in bringing down prices, even if they have dampened transactions temporarily.

“Contrary to the view of many, our analysis shows that prices will only correct marginally by 2017, if the government pushes out the supply of property as aggressively as it has over the last three years through its Government Land Sales programme,” said Michael Wan, the analyst at Credit Suisse behind the report.

If government land releases stay at the same “rapid pace” of around 16,000 units each year, prices will come down around one per cent by 2017, the report said, which indicates that an oversupply is unlikely.

“However, if this scenario coincides with a meaningful GDP or interest rate shock, prices would obviously fall much more,” the report said.

Credit Suisse defines a GDP shock as a scenario where output expands by a total of 5 per cent over the next five years, and assuming that loans and the Straits Times Index grow at the same pace.

Property prices will drop 16 per cent under this scenario.

Describing such a development as “unlikely” but “not impossible”, Credit Suisse said the bank had predicted that GDP will shrink by more than 9 per cent in the scenario of a full-blown eurozone break-up.

But if nominal output can grow by 7 per cent each year, with the same assumptions, prices will surge 23 per cent by 2017.

As for interest rates, Credit Suisse expects prices to fall a cumulative 14 per cent between 2013 and 2017 if the Singapore Interbank Offered Rate rises to 7 per cent in that time.

It said rates have not reached that level since the 1998 Asian financial crisis, and there has to be a very strong growth or a sharp pick-up in inflation in the US economy to see such a high rate returning, due to the close links between the US and Singapore economies.

Update on MAS Restriction on Loan Tenure

New MAS Property Market Cooling Measures: What Effects?

Singapore, 5 October 2012…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.

Singapore BanksThe 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 aim to curb continued upward pressure on residential property prices, driven by low interest rates and rapid credit growth.

As a result, I’ve been picking up calls from many of my clients and especially, addressing the concerns of my recent Kovan Regency‘s buyers who had successfully secured their choice unit at the recent, 29 Sept 2012’s Preview, “so what does it mean for me? Am I affected and will I be able to get the loan for my property purchase?”

MAS Restriction on Loan Tenure Effective Date

First thing first. The new rules will take effect from 6 October 2012, i.e. it is the date of the signing of the loan agreement with the bank. The date of signing the Option-to-Purchase (OTP) / Sale & Purchase (S&P) agreement does not matter as much (as there are too many various scenarios, e.g. having an in-principle approval before 6-Oct but signing the OTP on the 8-Oct, etc).

Summary of New Restrictions on Loan Tenure & Loan Limits

MAS Loan Tenure Restriction Summary |

Home Loans Within Age / Tenure Limits

For example, if you’re a buyer that is 35 years old, and you take a home loan with a tenure of 30 years. This is your first house.

You will be (35 + 30) = 65 years old when the loan ends. Your loan tenure does not exceed 30 years and does not cross your retirement age of 65. Everything is within acceptable limits.

Total amount you can borrow = 80% LTV (highlighted by red box in the Summary Chart above). So if the price of the house is $1 million, the bank can loan me $800,000.

*Note: If this is my second housing loan, I can only borrow 60% ($600,000).

Home Loans Outside the Maximum Age Limits

Another example, Buyer B is 45 years old, and he takes a home loan with a tenure of 30 years. This is his first house.

He will be (45+30) = 75 years old when the loan ends. His loan tenure does not exceed 30 years, but that’s irrelevant as he had crossed the acceptable age boundary (65 years of age).

Total amount he can borrow = 60% LTV. So if the price of the house is $1 million, the bank can loan him $600,000.

*Note: If this is my second housing loan, I can only borrow 40% ($400,000).

Home Loans Outside the Loan Tenure Limits

Final example to illustrate the category of buyer that you’ll fall into. Buyer C is an ambitious 25 years old, and she took a home loan with a tenure of 35 years. This is her first house.

She will be (25 + 35) = 60 years old when the loan ends. Okay, no problems there. But the loan tenure exceeds 30 years.

Total amount Buyer C can borrow = 60% LTV. So if the price of the house is $1 million, the bank can loan her is $600,000.

Referring to the Summary Chart above, yes, breaking either the age limit OR loan tenure will reduce the maximum LTV to 60%.

Effects of these Restrictions on the Property Market

Skies Miltonia Launch

1) Long term stability in Singapore Property Market

MAS’ main focus is on the property market as a whole. Since 2009, average loan tenures have risen from 25 to 29 years. Now, MAS is worried about a local version of the American sub-prime mortgage crisis.

As loan tenures increase, default rates go up. And if banks make it a habit of offering long loan tenures, we’ll probably see a surge in bankruptcy cases.

This is bad for the banks: If everyone defaults on their loans, the banks can’t pay the interest on their existing deposits. There’s also a spillover threat, to guarantors and mortgage insurers. Have too many defaulters, and the finance industry might come apart at the seams.

“QE3 and low interest rates have made credit easy but this will eventually change. We will do what it takes to cool the market and avoid a bubble that will eventually hurt borrowers and destabilise our financial system,”

said MAS chairman and deputy prime minister and finance minister Tharman Shanmugaratnam.

Currently, financial institutions have been lengthening the tenures of residential property loans. Over the last three years, the average tenure for new residential property loans has increased from 25 to 29 years. More than 45% of new residential property loans granted by financial institutions have tenures exceeding 30 years.

Previously before this round of property cooling measures, UOB was the local bank that was giving out up to 50 years loan tenure. In an environment of low interest rates and continued property price increases, buyers are attracted by the low monthly repayment amounts. But herein lies the risk of being over-leveraged when interest rates starts to climb, foreigners starts to leave Singapore due to poor economic outlook and property prices fall as the market is going through the down cycle. This group of buyers are the target group that will think twice before buying their next property now.

2) Futher Moderation of Property Prices

The new MAS restrictions will dissuade some speculators and investors. With LTV ratios as low as 40%, many will lack the capital to buy new properties.

Sellers who are desperate for buyers will need to compensate; this could translate to lower median COV (cash over valuation), or bigger discounts amongst property developers.

HDB BTO crowd

These lowered prices will not happen overnight. Some property investors have the capital to buy even with small loan quantums. And many sellers will resist lowering their prices: Due to the currently low interest rates, property owners have got substantial holding power.

But if you’re intending to buy your first home, all of this is great news nontheless. Keep your eyes focused on existing prices, and follow us on Facebook or continue to check back our SGRealist web portal: We’ll update you when we see the market dip.

If you’re planning to buy in a few months (a respectable decision, given these new measures), you might want to visit home loan comparison sites like early. Crunch some numbers; see if you’ll be ready to buy when prices drop.