MND : MEASURES TO MAINTAIN A STABLE AND SUSTAINABLE PROPERTY MARKET

13 JAN 2011,

Press Releases

MEASURES TO MAINTAIN A STABLE AND SUSTAINABLE PROPERTY MARKET

1 The Government announced today the following measures to maintain a stable and sustainable property market:

Increase the holding period for imposition of Seller’s Stamp Duty (SSD) from the current three years to four years;


Raise the SSD rates to 16%, 12%, 8% and 4% of consideration for residential properties which are bought on or after 14 January 2011, and are sold in the first, second, third and fourth year of purchase respectively;


Lower the Loan-To-Value (LTV) limit to 50% on housing loans granted by financial institutions regulated by MAS for property purchasers who are not individuals1; and


Lower the LTV limit on housing loans granted by financial institutions regulated by MAS from 70% to 60% for property purchasers who are individuals with one or more outstanding housing loans2 at the time of the new housing purchase;

The measures will take effect on 14 January 2011.

2 The Government's objective is to ensure a stable and sustainable property market where prices move in line with economic fundamentals. Previous Government measures have to some extent moderated the market, but sentiments remain buoyant. Low interest rates plus excessive liquidity in the financial system, both in Singapore and globally, could cause prices to rise beyond sustainable levels based on economic fundamentals. Moreover, when interest rates eventually rise, it could strain purchasers who have overextended themselves financially. Therefore, the Government has decided to introduce additional targeted measures to cool the property market and encourage greater financial prudence among property purchasers.

Extending the Holding Period for Imposition of Seller’s Stamp Duty (SSD) on Residential Properties from 3 Years to 4 Years & Raising the SSD Rates

3 Currently, for residential properties bought on or after 30 August 2010, SSD3 is imposed on the sale of such properties within three years of purchase. This followed the introduction of SSD for residential properties bought on or after 20 February 2010.

4 The SSD rates will be increased sharply from 14 January 2011, so as to provide a strong disincentive for investors looking to make short term gains. The holding period for imposition of SSD will also be extended from the current three years to four years. The impact of the SSD is especially significant as it is payable regardless whether the property is eventually sold at a gain or loss.

5 Specifically, for residential properties bought4 on or after 14 January 2011, the SSD rates to be levied on the full consideration will be increased5 to as follows:

SSD at 16% (higher than up to 3% currently), if the property is sold in the first year of purchase, i.e. the property is held for 1 year or less from its purchase date.


SSD at 12% (higher than up to 2% currently), if the property is sold in the second year of purchase, i.e. the property is held for more than 1 year and up to 2 years.


SSD at 8% (higher than up to 1% currently), if the property is sold in the third year of purchase, i.e. the property is held for more than 2 years and up to 3 years.


SSD at 4% (no SSD currently), if the property is sold in the fourth year of purchase, i.e. the property is held for more than 3 years and up to 4 years.

Please see Annex for examples of how the SSD will be computed.

6 The extended SSD will not affect HDB lessees as the required Minimum Occupation Period for HDB flats is 5 years.

7 IRAS will be releasing an updated e-tax guide on the circumstances under which SSD will apply and the procedures for paying SSD6. The e-tax guide will be available at www.iras.gov.sg. Taxpayers with enquiries may call IRAS at 6351 3697 or 6351 3698.

Lower the Loan-To-Value (LTV) Limit to 50% on housing loans granted by financial institutions regulated by MAS for residential property purchasers who are not individuals

8 With effect from 14 January 20117, an LTV limit of 50% will apply to all residential property purchasers who are not individuals. This includes corporations, trusts and collective investment schemes, among others. The 50% LTV limit for housing loans will also apply to joint property purchases by an individual and a purchaser who is not an individual.

Lower the LTV limit on housing loans granted by financial institutions regulated by MAS from the current 70% to 60% for residential property purchasers who are individuals with one or more outstanding housing loans at the time of the new housing purchase

9 The LTV limit is lowered from 70% to 60% with effect from 14 January 20118 for borrowers who are individuals and have one or more outstanding housing loans (whether from HDB or a financial institution regulated by MAS) at the time of applying for a housing loan for the new property purchase.

10 However, borrowers who can show evidence that they have sold their existing properties will not be subject to the lower LTV limit when they buy a new property. Where the existing property is a private property, he can show a signed Sale & Purchase (S&P) agreement with the IRAS certificate showing that stamp duty has been paid on it. Where the existing property is a HDB flat, he can show HDB’s approval letter to sell the flat, that HDB will issue within 2 weeks of the First Appointment. These borrowers will still be able to borrow at an 80% LTV from financial institutions.

11 Borrowers without any outstanding housing loans continue to have a LTV cap of 80%.

12 These rules apply to housing loans granted by financial institutions for private residential properties, Executive Condominiums, HUDC flats and HDB flats (including DBSS flats).

13 Loans granted by HDB for HDB flats (including DBSS flats) will still have a LTV cap of 90%. HDB loans are offered to eligible Singapore citizens buying their first homes or right-sizing their flats to meet their housing needs. HDB loan applicants are required to utilise all the balance in their CPF Ordinary Account before HDB loans will be granted. Furthermore, those taking a second concessionary HDB loan must use the CPF refund and 50% of the cash proceeds from the sale of their previous flat before they are granted an HDB loan. This is to ensure that eligible buyers, especially first-time buyers, purchase public housing in a financially prudent manner.

Adequate Supply in the Pipeline

14 There is an ample supply of private residential units and buyers need not rush to buy now. The Government will continue to ensure an adequate supply of housing to meet demand.

15 The annual average take-up9 of private residential units between 2007 and 2010 is about 12,700 units. Thus far, the sites awarded under the Government Land Sales (GLS) Programme in 2010 will already yield about 13,300 units. In the GLS Programme for the first half of 2011, we will make available sites that can yield about 14,300 private housing units, of which about 8,100 units will be from sites on the Confirmed List.

16 As at 3Q2010, there were about 64,400 uncompleted units of private housing from projects in the pipeline10. Of these, about 33,800 units were still unsold. This is equivalent to about 3 years of supply based on the average annual take-up over the last 4 years. The 33,800 unsold units in the pipeline comprised 3,300 units that had been launched for sale by developers and 11,400 units which had the pre-requisite conditions for sale11 and could be launched for sale immediately. The remaining 19,100 units with planning approvals did not have the pre-requisite conditions for sale but these could be obtained quickly from the Government12. The Government will also make available more supply in future GLS programmes. Buyers should bear in mind this supply in the pipeline when deciding whether to buy now.

17 The Government will continue to monitor the property market closely and take further steps to promote a stable and sustainable property market if necessary.

*****

1 “Purchasers who are not individuals” refer to purchasers who are not natural persons. These include but are not limited to corporations, trusts and collective investment schemes.

2 Financial institutions are required to conduct checks with HDB and with one or more credit bureaus on whether the purchaser has an outstanding housing loan at the time of applying for a housing loan for the property purchase. For joint purchasers, if either purchaser has an outstanding housing loan, the joint purchasers will be considered as having an outstanding housing loan.

3 The SSD will apply to the transfer or disposal of interest (including sale and gifts) of residential lands and residential units (whether completed or uncompleted).

4 The date of purchase for computation of the holding period for SSD shall be the date when a buyer (i.e. Buyer A) exercises the option to purchase the property, or signs the sale and purchase agreement, whichever is earlier. The date of sale of the property shall be the date when the subsequent buyer (i.e. Buyer B) exercises the option to purchase the property from Buyer A, or signs the sale and purchase agreement, whichever is earlier.

5 Currently, the SSD rates are levied at the same rate as buyer's stamp duty, i.e. 1% for the first $180,000, 2% for the next $180,000 and 3% on the balance. The SSD rates are tiered according to the duration of the holding period, i.e. the seller pays the full SSD rate if the residential property is sold in the first year of purchase; 2/3 the full SSD rate if the sale is in the second year; 1/3 the full SSD rate if in the third year.

6 SSD is to be paid within 14 days of the execution of the Agreement (i.e. exercise of Option or signing of Agreement). If the Agreement is executed overseas, upon receipt of the Agreement in Singapore, the SSD must be paid within 30 days.

7 The 50% LTV limit will apply to transactions where the date on which the option to purchase (OTP) was granted falls on or after 14 January 2011; or if there is no OTP, where the date of the Sale & Purchase agreement falls on or after 14 January 2011.

8 The 60% LTV limit will apply to transactions where the date on which the option to purchase (OTP) was granted falls on or after 14 January 2011; or if there is no OTP, where the date of the Sale & Purchase agreement falls on or after 14 January 2011.

9 Take-up refers to the number of private residential units, including Executive Condominium (EC) units, sold by developers.

10 These refer to new development and redevelopment projects with planning approvals, i.e. either a Provisional Permission (PP) or Written Permission (WP).

11 These refer to private residential developments with Housing Developer Licence and Building Plan Approval. Under the Housing Developer (Control and Licensing) Act, a sale licence must be obtained for a project with more than 4 units, if the developer intends to sell uncompleted residential units in the development. However, the sale of the residential units can only commence with the approval of the building plans of the development.

12 These refer to uncompleted private residential developments without pre-requisites for sale but with WP or PP granted. The sale licences could be obtained within 5 working days and building plan approvals could be obtained within 7 working days from the date of application for cases where clearances from various technical agencies are obtained and relevant documents are in order during formal submissions.

Issued by: Ministry of National Development, Ministry of Finance and Monetary Authority of Singapore
Date: 13 January 2011

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Annex

Computation of the Seller’s Stamp Duty (SSD) for properties bought on or after 14 January 2011 and sold within 4 years of purchase

Example 1:

Mr Lee purchased his residential property on 14 January 2011 and sold it on 13 January 2012 for $1,000,000.

Holding period: 1 year (i.e. SSD rate of 16% is chargeable)
SSD payable :

16% of $1,000,000 = $160,000
Example 2:

Mr Tan purchased his residential property on 14 January 2011 and sold it on 13 January 2013 for $1,000,000.

Holding period: 2 years (i.e. SSD rate of 12% is chargeable)
SSD payable :


12% of $1,000,000 = $120,000

Example 3:

Mr Tan purchased his residential property on 14 January 2011 and sold it on 13 January 2014 for $1,000,000.

Holding period: 3 years (i.e. SSD rate of 8% is chargeable)
SSD payable :

8% of $1,000,000 = $80,000
Example 4:

Mr Tan purchased his residential property on 14 January 2011 and sold it on 13 January 2015 for $1,000,000.

Holding period: 4 years (i.e. SSD rate of 4% is chargeable)
SSD payable :

4% of $1,000,000 = $40,000
Example 5:

Mr Tan purchased his residential property on 14 January 2011 and sold it on 14 January 2015 for $1,000,000.

Holding period: More than 4 years. No SSD is payable.
SSD payable: $0

MND : MEASURES TO MAINTAIN A STABLE AND SUSTAINABLE PROPERTY MARKET

Press Releases

MEASURES TO MAINTAIN A STABLE AND SUSTAINABLE PROPERTY MARKET

1 The Government announced today the following measures to maintain a stable and sustainable property market:

Increase the holding period for imposition of Seller’s Stamp Duty (SSD) from the current one year to three years.


For property buyers who already have one or more outstanding housing loans1 at the time of the new housing purchase:


Increase the minimum cash payment from 5% to 10% of the valuation limit2; and


Decrease the Loan-to-Value (LTV) limit for housing loans granted by financial institutions regulated by MAS to these buyers from the current 80% to 70%.


The measures will take immediate effect on 30 August 2010.

2 The Government's objective is to ensure a stable and sustainable property market where prices move in line with economic fundamentals. The property market is currently very buoyant. While the rate of price increase of private residential properties has moderated in the last 3 quarters, prices have still increased significantly by 11% in the first half of 2010, and price levels have now exceeded the historical peak in the second quarter of 1996.

3 While Singapore has enjoyed strong economic growth in the first half of 2010, our economic growth is expected to moderate in the second half of the year. There are also still uncertainties in the global economy. Should economic growth falter and the market corrects, property buyers could face capital losses, with implications on their own finances and the economy as a whole. Moreover, the current low global interest rate environment will not continue indefinitely, and higher interest rates could have severe implications for buyers who have overextended themselves. Therefore, the Government has decided to introduce additional measures now to temper sentiments and encourage greater financial prudence among property purchasers.

Extending the Holding Period for Imposition of Seller’s Stamp Duty (SSD) on Residential Properties Sold from 1 Year to 3 Years

4 The Government imposed in February 2010 a seller’s stamp duty (SSD) for sellers who buy residential properties3 on or after 20 February 2010 and sell them within a year of purchase.

5 For residential properties bought4 on or after 30 August 2010, SSD will be imposed if these properties are sold within three years of purchase. Specifically, the SSD levied on residential properties will be revised to as follows:

Sold within the first year of purchase, i.e. the property is held for 1 year or less from its purchase date – The full SSD rate (1% for the first $180,000 of the consideration, 2% for the next $180,000, and 3% for the balance) will be imposed.


Sold within the second year of purchase, i.e. the property is held for more than 1 year and up to 2 years – 2/3 of the full SSD rate.


Sold within the third year of purchase, i.e. the property is held for more than 2 years and up to 3 years – 1/3 of the full SSD rate.


No SSD will be payable by the vendor if the property is sold more than 3 years after it was bought. Please see Annex for examples of how the SSD will be computed.

6 The extended SSD will not affect HDB lessees as the required Minimum Occupation Period for HDB flats is at least 3 years.

7 IRAS will be releasing an updated e-tax guide on the circumstances under which SSD will apply and the procedures for paying SSD. The e-tax guide will be available at www.iras.gov.sg. Taxpayers with enquiries may call IRAS at 6351 3697 or 6351 3698.

Increase the Minimum Cash Payment from 5% to 10% of the Valuation Limit for Property Purchasers with one or more outstanding Housing Loans

8 Previously, property buyers have to make cash payment of at least 5% of the valuation limit5. With effect from 30 Aug 20106, the cash payment is increased from 5% to 10% of the valuation limit7. This measure is applied only to buyers of private residential properties, Executive Condominiums, HUDC flats and HDB flats (including those under the Design, Build and Sell Scheme, or DBSS flats) who are taking housing loans from financial institutions regulated by MAS and who already have one or more outstanding housing loans at the time of applying for a housing loan for the new property purchase.

Decrease the LTV limit for housing loans granted by financial institutions regulated by MAS from the current 80% to 70% for Property Purchasers with one or more outstanding Housing Loans

9 The LTV limit is lowered from 80% to 70% with effect from 30 Aug 20108 for borrowers who have one or more outstanding housing loans (whether from HDB or a financial institution regulated by MAS) at the time of applying for a housing loan for the new property purchase. Borrowers who do not have any outstanding housing loans continue to have an LTV cap of 80%. These rules apply to housing loans granted by financial institutions for private residential properties, Executive Condominiums, HUDC flats and HDB flats (including DBSS flats).

10 Loans granted by HDB for HDB flats (including DBSS flats) will still have an LTV cap of 90%. HDB loans are offered to eligible first-time flat buyers and second-timers who are right-sizing their flats to meet their housing needs. They are required to utilise all of their CPF Ordinary Account balance before HDB loans will be granted. Furthermore, those taking a second concessionary HDB loan must use the CPF refund and 50% of the cash proceeds from the sale of their previous flat before they are granted an HDB loan. This is in line with HDB's home ownership policy of helping eligible buyers, especially first-time buyers, purchase public housing in a financially prudent manner.

11 Financial institutions' lending standards have remained prudent and the asset quality of housing loans has stayed robust, with the non-performing loans ratio at less than 1% as at Q2 2010. Nonetheless, there are signs that more housing loans are originating at higher LTV bands of above 70%. In line with the objective of ensuring a stable and sustainable property market, lowering the LTV limit sends a clear signal to financial institutions to maintain credit standards, and encourages greater financial prudence among property purchasers already servicing one or more outstanding housing loans.

Adequate Supply in the Pipeline

12 The Government will also continue to ensure that there is adequate supply of housing to meet demand. In the second half 2010 GLS Programme, we have made available sites that can yield about 13,900 private housing units, of which about 8,100 units will be from sites on the Confirmed List. This is the highest potential supply quantum in the history of the GLS Programme. We will inject an even larger supply of private housing in the first half 2011 GLS Programme, if demand continues to be strong.

13 Apart from the supply from the GLS Programme, there are also 61,800 uncompleted units of private housing from projects in the pipeline as at 2Q20109. Of these, 32,600 units were available or could be made available for sale. These comprised units that had been launched for sale by developers, units that had pre-requisite conditions for sale10 and which could be launched for sale immediately, as well as units with planning approvals for which pre-requisite conditions for sale could be obtained quickly from the Government and made available for sale11.

14 The Government will continue to monitor the property market closely and will introduce additional measures if required later, to promote a stable and sustainable property market.

*****

1 Financial institutions are required to conduct checks with HDB and with one or more credit bureaus on whether the buyer has an outstanding housing loan at the time of applying for a housing loan for the new property purchase. For joint buyers, if either buyer has an outstanding housing loan, the joint buyers will be considered as having an outstanding housing loan.

2 This is in addition to the cash over valuation amount that has to be paid in cash.

3 The SSD will apply to the transfer or disposal of interest (including sale and gifts) of residential lands and residential units (whether completed or uncompleted).

4 The date of purchase for computation of the holding period for SSD shall be the date when a buyer (i.e. Buyer A) exercises the option to purchase the property, or signs the sale and purchase agreement, whichever is earlier. The date of resale of the property shall be the date when the subsequent buyer (i.e. Buyer B) exercises the option to purchase the property from Buyer A, or signs the sale and purchase agreement, whichever is earlier.

5 The amount of CPF monies plus housing loan taken for the purchase of the property cannot exceed 95% of the valuation limit (defined as the lower of property value or property price).

6 The 10% minimum cash payment will apply to transactions where the date on which the option to purchase (OTP) was granted falls on or after 30 August 2010; or if there is no OTP, where the date of the sale and purchase agreement falls on or after 30 August 2010.

7 Therefore, the amount of CPF monies plus housing loan that can be used for the purchase of the property will be reduced from 95% to 90%.

8 The 70% LTV limit will apply to transactions where the date on which the option to purchase (OTP) was granted falls on or after 30 August 2010; or if there is no OTP, where the date of the sale and purchase agreement falls on or after 30 August 2010.

9 These refer to new development and redevelopment projects with planning approvals, i.e. either a Provisional Permission (PP) or Written Permission (WP).

10 These refer to private residential developments with Housing Developer Licence and Building Plan Approval. Under the Housing Developer (Control and Licensing) Act, a sale licence must be obtained for a project with more than 4 units, if the developer intends to sell uncompleted residential units in the development. However, the sale of the residential units can only commence with the approval of the building plans of the development.

11 These refer to uncompleted private residential developments without pre-requisites for sale but with WP or PP granted. The sale licences could be obtained within 5 working days and building plan approvals could be obtained within 7 working days from the date of application for cases where clearances from various technical agencies are obtained and relevant documents are in order during formal submissions.

Issued by: Ministry of National Development, Ministry of Finance and Monetary Authority of Singapore
Date: 30 August 2010