Just days after Singapore’s monetary authority fired a warning shot across the bow of the country’s overheating market, the government announced that it would raise the additional buyer’s stamp duty (ABSD) and tighten loan-to-value (LTV) limits on residential property purchases.
While the move comes as a surprise to many, market watchers say the recent cautionary language from the government has been an indicator that this was on the cards. The government has also expressed concerns about property market prices running ahead of economic fundamentals.
However, the government said current ABSD rates for Singapore citizens and permanent residents (SPR) purchasing their first residential property will remain at zero and 5% respectively. ABSD rates for all other individuals will be raised by five percentage points and 10 percentage points for entities.
LTV limits will be tightened by five percentage points for all housing loans. The revised LTV limits are applicable to loans for residential property purchases, where the option to purchase is granted on or after July 6. This ruling will not apply to loans granted by HDB.
Also, in line with the tightening of housing loans LTV limits, the LTV limits for mortgage equity withdrawal loans (MWLs) will be tightened to 75% for a borrower with no outstanding housing loan for the purchase of another residential property. Purchasers with an outstanding housing loan will be limited to 45% for another residential purchase.
In recent months, private home prices rapidly have been regaining ground they lost since values started slipping five years ago. There was a 3.4% rise in private home prices in the second quarter, while prices have risen by a total of 9.1% over four quarters since mid-2017.
Prior to this, the Singapore market saw 15 straight quarters of decline, due largely to cooling measures introduced at that point of time.
However, the steep price recovery has led market watchers to predict a new peak in private home prices by the end of the year, and the government has been adamant about preventing a bubble.
In a joint statement, Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore said: “The sharp increase in prices, if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply.”
Read our earlier story on MAS here.