Singapore property market has been witnessing a massive spike in private housing prices as well as resale flat prices over the last few years. This has put a large cap over the buying capacity of genuine home buyers. Therefore, Singapore government took immediate action and introduced new property cooling measures to bring things to normal with time. Let’s get a sneak peek into these property cooling measures and how they are affecting the buying powers of various sectors of population residing in Singapore.
Property Cooling Measures — An Overview
These property cooling measures were brought into effect from Dec 16, 2021, with the sole purpose of cooling down the spiking prices of properties in Singapore. Before imposing these property cooling measures, only a specific sector was acquiring the buying power in most of the property transactions. Government then decided to impose these enlisted measures to bring some stability in the property market:
- Increase in Additional Buyer’s Stamp Duty (ABSD) for foreigners to 30%.
- Total Debt Servicing Ratio (TDSR) threshold reduced from 60% to 55%.
- Additional Buyer’s Stamp Duty (ABSD) for second home buyers increased from 12% to 17%.
- Additional Buyer’s Stamp Duty (ABSD) for third or subsequent home buyers increased from 15% to 25%.
- HDB loan minimum down payment increased from 10% to 15%.
Effect of Higher Additional Buyer’s Stamp Duty (ABSD)
The purpose of introducing ABSD in the first place was to minimize the saturation of buyers with multiple properties in Singapore. But the spiking property prices urged the need to increase these ABSD rates.
The increase in these rates puts multiple property buyers on hold. Now they have to pay more tax upfront in order to purchase two or more than two residential properties in Singapore. This rise in taxes will surely prevent people from making hasty buying decision right away; thus ending up in reducing the pace at which people were buying multiple properties.
Effect of Reduced Total Debt Servicing Ratio (TDSR) Limit
Total Debt Servicing Ratio (TDSR) is a limitation brought into effect to put a cap on loan and debt servicing. If you are a Singaporean resident with a salary of $5,000 per month; then $3,000 can be spent on paying off your home loans and other debts. But now the limit has been reduced under the new property cooling measures.
People who were spending almost 60% of their monthly income to service home loans and debts are now brought to the limit of spending 55% only. This might seem a slight decrease in limitation; but it brings a massive change in the borrowing capacity of borrowers.
Effect of Increase In HDB Loan Minimum Down Payment
The increase in HDB loan minimum down payment from 10% to 15% will require you to pay an increased upfront down payment than before. HDB loans are common in Singapore with a higher but fixed interest rate. People usually prefer to opt for HDB loans compared to bank loans.
Overall Impact on Property Market
This is the first time since 2018 that Singapore has brought forward these property cooling measures to stabilize the rising prices of properties. Moreover, government has increased the supply of private and public housing as well.
2018 property cooling measures did not stop Singaporeans from buying properties. Most of the property buyers in Singapore are first-time buyers. So, putting a cap on buying power by increasing stamp duties does not seem to cause any significant change in the buying trend of people. The overall impact of these cooling measures on property market is yet to be seen before coming to a final conclusion.