Summary of changes:
1. Additional Buyer’s Stamp Duties (ABSD) and Loan to Value (LTV) Limits
While many people hope for the ABSD and LTV limits to be relaxed, the government is not doing so yet. This ABSD and LTV limits has been a pain point for people who want to purchase a second residential property. Sometimes the additional stamp duties and cash down payment required just makes it senseless to purchase another property. Interest rates are still low now so they will certainly not relaxed these measures. I would think when interest rates goes up further, then these measures will be relaxed.
2. Seller’s Stamp Duties (SSD)
The SSD will be relaxed in this round of announcement. This SSD was introduced to prevent people from flipping properties (ie buying and selling within 4 years to make money). HDB has a minimum occupational period (MOP) of 5 years while private properties do not have thus the SSD was in place to prevent speculations.
For the changes, the SSD will only be imposed on properties which are sold less than 3 years, down from the current 4 years. The % will also be reduced by 4% for each tier. Do refer to the below image for the breakdown of the %.
Click to enlarge
3. Total Debt Servicing Ratio (TDSR)
The TDSR will be tweaked too. The current TDSR is 60% where all the monthly loan instalments we pay should not exceed 60% of our monthly gross income. This 60% will remain the same for most of the loans except for mortgage term/equity withdrawal loans for cashing out of private properties.
The TDSR will no longer apply for mortgage equity withdrawal loans with LTV ratios of 50% and below. This means if your net property value is 1 Million and you get a $500,000 or less cash out from your property, you'll not be subjected to the TDSR anymore. Simply said, it is easier to cash out of your private properties now.
If you're interested to cash out of your private property, you can contact me through this form and I'll assess your situation and advise you accordingly on the best way to do it.
4. New stamp duty on the purchase and sale of equity interest in property holding entities (PHE) with effect from March 11 2017
An Additional Conveyance Duty (ACD) will be introduced. This is aimed at significant owners of equities interest in PHEs that can include partnerships, trusts and companies. This means that those entities whose residential properties in Singapore form at least 50 per cent of its total tangible assets will be captured in this new requirement.
This ACD is quite confusing but doesn't affect most of us anyway unless we have equity interest in PHEs. You can read more about this here.
Many property developer stocks moved up last week in response to some of the measures being relaxed. In my opinion, I don't really see much impact unless the ABSD and LTV limits are relaxed as well. This is just a minor change to the residential property market. However, with the relaxation of the mortgage equity withdrawal loans, I think there will be more cash flooding our economy soon.
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