Singapore News

Higher stamp duty rates for home purchases and tighter loan limits

SINGAPORE (Published 5 Jul, 2018) – The Additional Buyer’s Stamp Duty (ABSD) rates and Loan-to-Value (LTV) limits on home purchases will be increased to cool the property market and keep price increases in line with economic fundamentals, said the Government on Thursday evening (July 5).

There is no change for Singapore citizens and Singapore permanent residents buying their first residential property with rates remaining at 0 per cent and 5 per cent, respectively.

However, for all other individuals, ABSD will be raised by 5 percentage points. For entities, including companies, ABSD will be raised by 10 percentage points.

There will be an additional ABSD of 5 per cent for developers purchasing residential properties for housing development.

The changes take place on July 6.

The latest cooling measures come amid an increase in private residential prices of 9.1 per cent over the past year.

After declining for close to four years, private home prices started rising in the third quarter of last year. The sharp increase in prices, if left unchecked, could raise the risk of a destabilising correction in the future, especially with rising interest rates and the strong pipeline of housing supply, said the Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore in a joint press statement.

Minister for National Development Lawrence Wong said: “The government has been monitoring the property market closely. We are very concerned that prices are running ahead of economic fundamentals. There is a large supply of units coming on stream and interest rates are going up. We want to avoid a severe correction later, which can have more destabilising consequences. Hence we are acting now to maintain a stable and sustainable property market”.

On Wednesday, Monetary of Singapore managing director Ravi Menon had also noted that there was euphoria in the Singapore property market, and warned that developers, banks and home buyers should be cautious.

Mr Menon had warned that developers should be cautious when making their land bids, bearing in mind the supply that is coming on-stream, at the MAS annual report media briefing.

Loan-to-value limits will be tightened by 5 percentage points for all housing loans granted by financial institutions. For example, before the change, for the first housing loan, a borrower could borrow up to 80 per cent (or 60 per cent if the loan tenure is more than 30 years, or extends past age 65) . Now, the limits have been reduced to 75 per cent (or 55 per cent).

These revised LTV limits do not apply to loans granted by HDB.

Source: The Straits Times