Singapore Announces New Property Cooling Measures
On 15 December 2021, Singapore government announced a new round of measures to cool the property markets. The new measures, effective from 16 December 2021, will only affect the private residential market and HDB resale market. Those who purchase HDB flats and Executive Condominiums (EC) directly from the Housing Development Board (HDB) will not be affected. With guidance from your economics tutor Singapore in your economics tuition Singapore class, identify similarities and differences between private condominiums and executive condominiums built by HDB.
Higher ABSD And Lower TDSR
The new measures include higher Additional Buyer’s Stamp Duty (ABSD) rates for additional properties after the first one, and lower Total Debt Servicing Ratio (TDSR) threshold and Loan to Value (LTV) limit for loans. In consultation with your economics tutor Singapore in economics tuition Singapore, explain the implications of higher ABSD and lower TDSR and LTV. To find out more about ABSD, TDSR and LTV, you may sign up for economics tuition Singapore with a reputable economics tutor Singapore.
For Singapore citizens, ABSDs increased five per cent to 17 per cent for the second residential property and 10 per cent to 25 per cent for the third and subsequent residential properties. For permanent residents, ABSDs increased 10 per cent to 25 per cent for the second residential property and 15 per cent to 30 per cent for the third and subsequent residential properties. Foreigners and entities saw ABSDs increase 10 per cent to 30 per cent and 35 per cent respectively for purchase of any residential property in Singapore, in addition to another five per cent for housing developers. You may discuss with your economics tutor Singapore in economics tuition Singapore the rationale behind differentiated ABSDs for citizens, permanent residents, foreigners and entities. The revised ABSDs will not apply to Option to Purchase (OTP) exercised on or before 5 January 2022.
TDSR was lowered to 55 per cent from 60 per cent, limiting borrowers’ total monthly loan repayments to 55 per cent of their monthly income. In addition, LTV was cut to 85 per cent from 90 per cent for HDB loans. LTV limit for loans granted by financial institutions remains at 75 per cent. With help from your economics tutor Singapore in your economics tuition Singapore class, calculate your maximum loan and monthly repayment based on the revised TDSR and LTV.
The Reasons Behind
The reasons for the new round of property cooling measures, as stated in the government’s press release were the sharp rises in property prices since 2020. Despite the negative economic impact of Covid-19 pandemic, HDB resale flat prices have risen by 15 per cent while private housing prices have risen by nine per cent since the first quarter of 2020. In discussion with your economics tutor Singapore in your economics tuition Singapore class, explain the possible risks of rising property prices. If left unchecked, property market may become overheated, raising the risk of speculative activities and a sudden price correction later. Volatile property price movements will lead to both economic and social issues. You may consult your economics tutor Singapore in economics tuition Singapore about these economic and social issues. A good economics tutor Singapore may be able to share with you a few real-life examples of how volatile property price movements have led to economic and social destablisation.
Analysts believe that the new property cooling measures will only slow down the upward movement of property prices in Singapore. Private property prices are expected to continue its upward momentum with an annualised increase of between zero and five per cent next year.
Linda Geng
Economics Tuition Singapore @ Economics Cafe
Principal Economics Tutor: Mr. Edmund Quek