Singapore Government has introduced new cooling measures that will affect home buyers of HDB resale flats and private residential properties with effective from 16 December 2021. 

The Ministry of Finance (MOF), the Ministry of National Development (MND) and the Monetary Authority of Singapore (MAS) took the unusual step to release the press statement just before the midnight and it took everyone by surprise. There was little or no time for investors and property agents to react to the news as the Government seek to avoid a buying frenzy amid the COVID-19 pandemic.

Increase in Additional Buyer Stamp Duty (ABSD)

The Additional Buyer's Stamp Duty (ABSD) for the purchase of second and subsequent residential properties will be increased. 

The existing ABSD rates for Singaporeans and permanent residents (PR) buying their first residential property will be unchanged at 0 per cent and 5 per cent respectively.

Singapore citizens will now pay an ABSD rate of 17 per cent for their second residential property, and 25 per cent for their third and subsequent house. 

Permanent residents (PR) will now pay an ABSD rate of 25 per cent for their second property and 30 per cent for a third and subsequent residential property,

Foreigners must pay ABSD of 30% when purchasing any residential property in Singapore.

The new ABSD rates will apply to cases where the Option to Purchase (OTP) is granted on or after 16 December 2021

Total Debt Servicing Ratio (TDSR)

The TDSR threshold will be tightened to 55 per cent from 60 per cent. It will apply to mortgage loans for the purchase of properties where the Option to Purchase (OTP) is granted on or after 16 December 2021.

The same applies to mortgage equity withdrawal loan applications made on or after 16 December 2021.

If you are planning to take up a home loan, your total monthly loan repayments cannot exceed 55 per cent of your monthly income.

Your car loan and personal unsecured credit card loans will be taken into consideration for Total Debt Servicing Ratio (TDSR) threshold.

You will not be affected by the revised TDSR if you are refinancing your existing property loans.

Reduction in Loan to Value (LTV) for HDB Flats

Affordability is a major concern among Singaporeans for HDB flats also known as the public housing.

The LTV limit for HDB loan will now be reduced from 90 per cent to 85 per cent. This is the maximum amount potential homeowners can borrow from HDB.

The HDB Loan has a concessionary interest rate of 2.6% per annum and it is pegged at 0.10% above the prevailing CPF Ordinary Account (OA) interest rate.

If you wish to take a housing loan from the banks, the LTV remains at 75 per cent for your first property.

Rationale for Cooling Measures

The Government was very concerned that the HDB resale flat prices have increased by 15 per cent whereas the prices of private residential properties have rallied by 9 per cent since the first quarter of 2020.

The low interest rate environment is unsustainable if the Federal Reserve decides to taper and raise interest rates next year. 

Based on the latest FOMC meeting, Federal Reserve is projected to raise the interest rate by 3 times in Year 2022.

The objective of cooling measures is to encourage greater financial prudence in order to promote a stable and sustainable property market.