Desmond Lee: Govt to Impose Cooling Measures on Soaring Home Prices.

Minister for National Development (MND) Desmond Lee said that despite the ongoing uncertainty caused by the COVID-19 pandemic, the government has decided to implement new property cooling measures to reduce the risk of a self-reinforcing cycle of price increases in the private housing and HDB resale markets, which will also affect housing affordability.

He noted at a briefing on December 16 that despite the instability of the COVID-19 pandemic, such as the spread of the Omicron variant in Singapore, there has been a clear upward momentum in housing prices and transaction volumes.

“If property prices are not controlled in a timely manner, they could outpace economic fundamentals. This would increase the risk of a destabilizing correction later on, which could harm many households,” he added.

“As central banks look to tighten monetary policy to counter inflation amid economic recovery, borrowers will also be vulnerable to potential interest rate hikes next year and beyond. A concurrent rise in property prices and interest rates will expose future buyers to the risk of a significant increase in debt servicing costs.”

Desmond Lee also pointed out that the house price-to-income ratio (HPI) in the private residential and HDB resale markets has been rising, but it currently remains below its historical average.

“In the first three quarters of 2021, although the house price-to-income ratio for HDB resale flats reached 4.4 times, this is still far below the levels of a decade ago. Notably, it is now on a clear upward trend,” he said.

Transaction volumes in the private residential and HDB resale markets have been high. Desmond Lee added that the demand for Build-To-Order (BTO) flats is also very high, so it is understandable that buyers turning to the HDB resale market are concerned about rising prices.

Starting from December 16, the Additional Buyer’s Stamp Duty (ABSD) that must be paid for purchasing residential properties will be increased.

For citizens buying their second residential property, the stamp duty will be raised from 12% to 17%. If they purchase a third and subsequent residential property, the stamp duty will be increased from 15% to 25%.

For permanent residents (PRs) buying their second residential property, the stamp duty will rise from 15% to 25%. If they purchase a third and subsequent residential property, the stamp duty will be increased from 15% to 30%.

The stamp duty payable by foreigners purchasing any residential property will also be increased from the current 20% to 30%.

The stamp duty payable by entities, including housing developers, will be raised from 25% to 35%. While housing developers can have this remitted if they meet certain conditions, they will still be subject to a 5% non-remittable stamp duty.

The Total Debt Servicing Ratio (TDSR) for borrowers will also be tightened from 60% to 55%, which limits the amount of a person’s monthly income that can be used to service debts.

The HDB loan limit will also be reduced from 90% to 85% of the property purchase price.

In addition, the loan-to-value ratio limit will apply to new flat applications for sale exercises launched after December 16, 2021, and complete resale applications received by HDB from December 16. The revised limit does not apply to loans granted by financial institutions, for which the ratio remains at 75%.

Desmond Lee said, “This measure will also encourage homebuyers in the public housing market to be more prudent in their financial investments. At the same time, this change is not expected to have a significant impact on first-time homebuyers, especially those from low- to middle-income families.”

He further explained, “This is because first-timer families buying a resale flat can benefit from grants of up to S$160,000 and can use their Central Provident Fund (CPF) to pay for the purchase. This reduces the overall loan amount needed by first-time buyers to complete their purchase.”

He also noted that these new measures are intended to address both housing demand and supply issues and will help support a stable and sustainable property market in the medium term, while also ensuring that housing remains affordable for the majority of Singaporeans living in HDB flats.

“Our measures are first and foremost to prioritise homebuyers who need a home for owner-occupation, especially first-timers,” he added. “These measures are also to ensure the affordability of the HDB resale market (as measured by the house price-to-income ratio), which currently remains well below its historical levels.”

Since the first quarter of last year, private residential prices have risen by about 9%, while HDB resale prices have recovered significantly after six years of decline, rising by about 15% over the same period.

To meet the genuine needs of homebuyers and address their anxieties, the supply in both the private and public housing markets will be increased.

New Property Cooling Measures: Higher Additional Buyer’s Stamp Duty

*Source: Ministry of Finance (MOF), Ministry of National Development (MND), Monetary Authority of Singapore (MAS)

In 2022 and 2023, the supply of Build-To-Order (BTO) flats will be expanded to 23,000 units per year. At the same time, the supply of private housing will also be increased through the Government Land Sales (GLS) programme. In the first half of 2022, there will be about 2,800 units on the Confirmed List, with another 3,700 units on the Reserve List.

Desmond Lee added, “We will continue to monitor the Singapore property market and remain vigilant to the risk of a sustained increase in prices relative to income trends.”

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