January Property Cooling Measures Pack a Punch!

“TGIF”, I was thinking while gazing at my lovely chicken dinner when my handphone sang a little tune. I took a look at the SMS and learnt my lesson to not ever bring the phone to the dining table. Friday's slew of property cooling measures, unlike the previous few, strongly indicated that the Government is not happy with the pace that property prices are moving up. In fact, my gut is telling me the Government will not be happy until property prices undergo a correction.

The following is a summary of the key residential property measures and my two cents in italics.

• Reduction in the Debt Servicing Ratio to 30% if borrowing from financial institutions — a whooping 20% reduction. For loans granted by HDB, the Mortgage Servicing Ratio will also be reduced from 40% to 35%.
  
• Permanent Residents (PRs) who own a HDB flat will be disallowed from subletting their whole flat.
  
• PRs who own a HDB flat must sell their flat within six months of purchasing a private residential property in Singapore.

• HDB flats are for own-stay and certainly not for PRs to invest in. For Singaporeans, you can still keep one HDB flat for invesment but make sure your cashflow is good.

• Additional Buyer’s Stamp Duty (ABSD) rates will be raised between five and seven percentage points across the board.
  
• The ABSD will be imposed on PRs purchasing their first residential property and on Singaporeans purchasing their second residential property.

Citizenship	ABSD Rate on 1st Purchase	ABSD Rate on 2nd Purchase	ABSD Rate on 3rd & Subsequent Purchase
Singapore Citizens	Existing: NA Revised: NA	Existing: NA Revised: 7%	Existing: 3% Revised: 10%
Permanent Residents	Existing: NA Revised: 5%	Existing: 3% Revised: 10%	Existing: 3% Revised: 10%
Foreigners and non-individuals (corporate entities)	Existing: 10% Revised: 15%	Existing: 10% Revised: 15%	Existing: 10% Revised: 15%

• Loan-to-Value limits on housing loans granted by financial institutions will be tightened for individuals who already have at least one outstanding loan, as well as to non-individuals such as companies.
  
• Besides tighter Loan-to-Value limits, the minimum cash down payment for individuals applying for a second or subsequent housing loan will also be raised from 10% to 25%.

1st    Housing Loan

2nd Housing Loan

From 3rd Housing Loan

LTV Limit	Existing Rules 80%; or 60% if the loan tenure is more than 30 years or extends past age 65 Revised Rules No change	Existing Rules 60%; or 40% if the loan tenure is more than 30 years or extends past age 65 Revised Rules 50%; or 30% if the loan tenure is more than 30 years or extends past age 65	Existing Rules 60%; or 40% if the loan tenure is more than 30 years or extends past age 65 Revised Rules 40%; or 20% if the loan tenure is more than 30 years or extends past age 65
Minimum Cash Down Payment	Existing Rules 5% (for LTV of 80%) 10% (for LTV of 60%) Revised Rules No change	Existing Rules 10% Revised Rules 25%	Existing Rules 10% Revised Rules 25%
Non-Individual Borrowers	Existing LTV Limit 40% Revised LTV Limit 20%

• Residential property investing is only for the very rich – millionaries can own 2 properties but for 3 or more, millionaires do not make the cut. That is only for the multi-millionaires.
• For those who still harbour the thought of making a quick buck (e.g. speculators, specu-vestors and the like) off property, the death knell has struck. Adieu speculators.