MAS Property Cooling Measures – Jan 2013

property cooling measuresMAS announced new cooling measure measures effective from 12 January 2013. This include higher buyer’s stamp duty, lower loan to value financing quantum, increased cash down payment for second mortgages onwards and a NEW introduction of seller’s stamp duty for industrial properties.

The measure are viewed to be targeted at property buyers buying a second property and taking up a second mortgage and is till date the most comprehensive and significant set of cooling measures introduced. Previous measures have helped reined in property prices but recent property indexes continue to show strong demand and upward rise in prices for the Singapore property market.

 

Details of the cooling measures:

Annex 1 - Raising Additional Buyer’s Stamp Duty (ABSD) Rates & Imposing ABSD on New Groups of Buyers

1          Currently, ABSD is imposed on certain groups of buyers:

(i)         Foreigners and non-individuals purchasing any residential property, at a rate of 10%,

(ii)        Permanent Residents (PRs) purchasing their second and subsequent properties, at a rate of 3%; and

(iii)        Singaporeans purchasing their third and subsequent properties, at a rate of 3%.

 

2          ABSD rates will be raised on the above groups of buyers.  In addition, ABSD will be imposed on two new groups of buyers:

(i)         PRs purchasing their first residential property at a rate of 5%; and

(ii)        Singaporeans purchasing their second residential property at a rate of 7%.

 

3          The new ABSD structure is as follows:

 

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%

 

4          Singaporean first-time buyers and Singaporean buyers of HDB flats will not be affected by the new measure.

 

5          For purchases made jointly by two or more parties, the higher applicable ABSD rate will be imposed.  For  example,  if  a  Singaporean  purchases  a property with a foreigner, the ABSD rate of 15% will apply irrespective of the number  of  properties  each  owns.  If two Singaporeans jointly purchase a property with one of them already owning a residential property at the time of purchase, the ABSD rate of 7% will apply.

 

6          However, ABSD relief will be provided for joint purchases by married couples with at   least one Singaporean spouse (i.e.  A married couple with a Singaporean spouse and PR / foreigner spouse). Such purchases will not be subject to ABSD, as long as both spouses do not own any other property at the time of purchase. This relief facilitates their purchase of a matrimonial home, and puts them in the same position as a married couple with both Singaporean spouses who are purchasing their first residential property.

 

7           ABSD relief will also be provided to eligible married couples with at least one Singaporean spouse, who have purchased a second private residential property and will dispose their existing residential property.

(i)         The ABSD paid will be refunded if these Singaporean married couples dispose their first property within six months of the purchase of the second property, if the latter property is a completed unit.

(ii)        If the second property is an uncompleted unit, the refund will be given if the  first  property  is  disposed  within  six  months  of  the  Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) date of the second property, whichever is earlier.

(iii)        These Singaporean couples must also not acquire any other residential property before the disposal of the first residential property, if they wish to  avail  themselves  of  the  refund  on  ABSD  paid  on  the  second property.

 

8          The revised ABSD structure will take effect on residential property purchased on or after 12 January 2013. If a buyer of a residential property has been granted Option to Purchase on and before 11 January 2013 and exercises it thereafter on or before 1 February 2013 (without any extension of the option validity  period),  the  buyer  can  apply  to  the  Inland  Revenue  Authority  of Singapore (IRAS) for remission so that the old ABSD rate will apply.
 

Annex 2 – Lowering the Loan-to-Value (LTV) Limit and Raising the Minimum Cash Down Payment on Housing Loans Granted by MAS-Regulated Financial Institutions for the Purchase of Residential Property

 

LTV Limit

1           The  current  LTV  limits  for  individuals  who  currently  have  one  or  more outstanding housing loans and are obtaining second or subsequent housing loans are 60%, or 40% if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65.

 

2          The following measures will take effect on 12 January 20132:

(i)         For individuals obtaining a second housing loan, the LTV limits will be lowered to 50%, or 30% if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65;

(ii)        For individuals obtaining third or subsequent housing loans, the LTV limits  will  be lowered to 40% or 20% if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65; and

(iii)        For  non-individual  borrowers,  the  current  LTV  limit  of  40%  will  be lowered to 20%.

There is no change to the existing LTV limit for individual borrowers who have no outstanding housing loans3.

 

Minimum Cash Down Payment

 

3           The current minimum cash down payment required of individual borrowers who have one or more outstanding housing loans and are obtaining second or subsequent housing loans is 10% of the valuation limit.

 

4           With effect from 12 January 2013, the minimum cash down payment required for such individuals will be raised to 25%5. There is no change to the existing minimum cash down payment requirement for individual borrowers who have no outstanding housing loans and are applying for a housing loan.

 

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%

 

Reliefs

5           A borrower will not be subject to the lower LTV limit and higher minimum cash down  payment requirement when he obtains another housing loan for the purchase of a  property which is an Executive Condominium (EC) purchased directly from a property developer or a HDB flat.

 

6          The borrower must provide the financial institution granting the loan a copy of the signed undertaking to HDB committing to complete the sale of his sole existing   property within the period stipulated in the individuals with no outstanding housing loans.
 

Annex 3 – Measures Specific to Public Housing

New Mortgage Servicing Ratios (MSRs) for Loans for the Purchase of New or Resale HDB Flats

 

1          Currently, HDB offers housing loans with MSR of up to 40% of a borrower’s gross monthly income. From 12 January 2013, HDB will offer housing loans with MSR of up to 35% of the gross monthly income instead. The cut-off dates for HDB loans are shown in Table A.

 

Table  A:  Cut-off  dates  for  implementation  of  revised  MSR  limit  at  35%  of borrower’s gross monthly income for HDB loans

Transaction Type

Cut-off dates

Purchase of flat from HDB

Application for HDB Loan Eligibility (HLE) letter and sale exercise launch date both from 12 January 2013.

Purchase of resale flat

Application for HLE letter received on or after 12 January 2013.

Taking over ownership of existing flat

Application for HLE letter received on or after 12 January 2013.

Purchase of new DBSS flat

Loan application received by HDB on or after 12 January 2013.

 

2          MAS  will  set  an  MSR  limit  of  30%  for  loans  granted  by  MAS-regulated financial  institutions for the purchase of HDB flats.8   This rule shall apply to loans which are for the purchase of HDB flats, if the date which the Option to Purchase was granted is 12  January  2013 or after. In the case of a re-financing facility in

relation to a HDB Flat, the rule shall apply if the application date for the re-financing facility is 12 January 2013 or after.

 

PRs owning HDB Flats Disallowed from Subletting their Whole Flat

 

3          Currently, a PR flat owner can sublet his whole flat after meeting the minimum occupation period (MOP). From 12 January 2013, PR households will be disallowed from subletting their whole flat. This will apply to existing PR households owning an HDB flat and PR households who intend to buy resale flat. PR households will continue to be able to sublet rooms.

 

4          PR households who have been approved by the HDB to sublet their whole flats  prior  to  12  January  2013  will  be  allowed  to  continue  with  the  subletting arrangement for the remainder of the approved duration.

  

PRs  owning  HDB  Flats  Must  Sell  their  Flat  after  Purchase  of  Private Residential Property in Singapore

 

5          Currently, PR households can retain their flats and invest in private residential property after meeting the MOP for their flats.

 

6          From 12 January 2013, PR households must dispose of their HDB flats within six months of purchasing a private residential property in Singapore. PR households who  had  earlier  been  allowed  by  HDB  to  own  a  private  residential  property  in Singapore prior to  12  January 2013  will not be  required to sell  their HDB flats. However, if they buy another private property in Singapore on or after 12 January 2013, they must sell their HDB flats. Please see Table B.

 

Table B: Disposal of existing HDB flat upon purchase of private property in Singapore by PR households

Type of Private Residential  Property in Singapore

Treatment

Completed

PR flat owners must dispose their HDB flat within six months of completion of purchase of the private property.

Uncompleted

PR flat owners must dispose their HDB flat within six months of granting of Temporary Occupation Permit or Certificate of Statutory Completion, whichever is earlier.


 

Annex 4 – Use of CPF Funds and Provision of HDB Loans for Purchase of Public Housing

 

1          Currently, there are limits on the use of CPF funds for the purchase of private residential properties with less than 60 years of lease remaining. MAS-regulated financial institutions (FIs) also consider the lease period of properties in granting home loans.

 

2          The rules on the use of CPF funds for private residential property purchases with less than 60  years of  remaining lease will apply to the purchase of  public housing with similar lease duration from 1 July 2013.  In tandem, HDB will revise its rules in granting HDB housing loans from 1 July 2013. The details are as follows:

Remaining Lease of HDB Flat

Use of CPF funds

HDB Housing Loan

> 60 years

Allowed based on current policy, i.e. status quo.

Allowed based on current policy^, i.e. status quo.

30 to 59 years

Allowed, except for buyers for whom the remaining lease cannot cover them to the age of at least 80.

The total CPF usage by the household will be the pro- rated Valuation Limit (VL)# based on the ratio of the remaining lease when the youngest buyer who can use CPF turns 55 years old, to the lease at point of purchase.

Allowed, if remaining lease can cover the buyer* to the age of at least 80.

Loan tenure will be the shortest of: 30 years; 65 years minus average age of buyers; and balance lease at the point of purchase minus 20 years.

20- 29 years

Not allowed.

Allowed, if remaining lease can cover the buyer* up to the age of at least 80.

Loan tenure will be the shortest of: 30 years; 65 minus average age of buyers; and balance lease at the point of purchase minus 20 years.

< 20 years

Not allowed.

No HDB housing loan.

#  The VL of the flat is the lower of its valuation or its purchase price.
* Based on the average age if there is more than one buyer to a flat.
^ Mortgage Servicing Ratio limit at 35% (see Annex III).
  

1   The material date of acquisition is the date on which the contract is made. For instance, where there is an Option to Purchase, the material date shall be the date when the  Option  is exercised. In the case of  a  direct  sale of  an  uncompleted  property  by the  developer  where  the  Sale  &  Purchase Agreement constitutes the first contract between the developer and the Original Purchaser, the date of acquisition shall be the date of the Sale  & Purchase Agreement between the developer and the Original Purchaser.

2   The measures will apply to loans granted by financial institutions regulated by MAS for the purchase of residential property if the date when the option to purchase was granted or the date of the Sale & Purchase agreement (where there is no option to purchase) is on or after 12 January 2013.

3   For such borrowers, the LTV limit remains 80%, or 60% if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65.

4 Valuation limit is defined as the lower of current property value or purchase price.

5    The remaining balance between the housing loan amount granted and the minimum  cash down payment requirement may be paid using CPF monies and/or cash.

6   For such borrowers, the cash down payment required is 5%, or 10% if the loan tenure exceeds 30 years or the loan period extends beyond the borrower’s retirement age of 65.

7   HDB’s rules require a buyer of (i) an EC unit purchased directly from a property developer, or (ii) a completed/resale or uncompleted HDB/DBSS flat, to sell his existing property  within  six months of TOP/CSC of the EC unit or taking possession of the HDB/DBSS flat.

8  The monthly repayment instalment used in the computation of the MSR shall be  determined by using, at minimum, a medium-term interest rate.  Introductory rates applied at the initial years of the loan should not be used.

9   This applies even if the PR flat owner had disposed of the uncompleted private residential property before the granting of Temporary Occupation Permit or Certificate of Statutory Completion.