Chronology Of Property Regulations And Where Is The Value

Property Cooling Measures and Regulations And
How It Affects Your Net Worth
Learning these regulations, you will then see what each
regulation aims to achieve and the outcomes from each of one
and it's cumulative effect.
From 2009 to August 2013, there has been 10 property cooling
measures and 1 car loan regulation.
Let’s list the 10 Recent Property Cooling Measures

1. 14 Sep 2009 - Measures to Ensure a Stable and Sustainable
Property Market - MAS Link
a. Removal of Interest absorbing scheme (IAS) and
Interest only Housing loan (IOL).
b.
b. Property-Related Budget 2009 Assistance
Measures to developers to expire when due.
No more low monthly repayment.Impact

2. 19 Feb 2010 - Measures to Ensure a stable and sustainable
property market - MAS Link.
They’ll take effect on 20 February 2010.
a. Introducing a SSD on all residential properties and
residential lands that are bought after today and sold
within 1 year from the date of purchase.

SSD will be applied at the standard ad valorem stamp duty
rates for the conveyance, assignment or transfer of property:
 1% for the first $180,000 of the consideration.
 2% for the next $180,000.
 And 3% for the balance.

b. Lowering the LTV limit from 90% to 80% for all housing
loans provided by financial institutions regulated by the
MAS
• Reduced people that corner up properties, book
them up, mark up and flip them.
• Increase in the down payment required, means that
you need to put up more equity for a purchase.
Impact

3. 30 Aug 2010 - Joint Press Release on Measures to Maintain a
Stable and Sustainable Property Market - MAS Link
They`ll take immediate effect on 30 August 2010
a. Increase the holding period for imposition of SSD
from the current one year to three years.

b. For property buyers who already have one or more
outstanding housing loans at the time of the new housing
purchase:
 Increase the minimum cash payment from 5% to 10% of the
valuation limit2; and
 Decrease the LTV limit for housing loans granted by financial
institutions regulated by MAS to these buyers from the
current 80% to 70%.(for second or more properties)

c. Decrease the LTV limit for housing loans granted by financial
institutions regulated by MAS from the current 80% to 70% for
Property Purchasers with one or more outstanding Housing
Loans
d. The LTV limit is lowered from 80% to 70% with effect from 30
Aug 2010.

e. Loans granted by HDB for HDB flats (including DBSS flats) will
still have an LTV cap of 90%.
HDB loans are offered to eligible first-time flat buyers and
second-timers who are right-sizing their flats to meet their
housing needs.
They are required to utilize all of their CPF Ordinary Account
balance before HDB loans will be granted.
Furthermore, those taking a second concessionary HDB loan
must use the CPF refund and 50% of the cash proceeds from
the sale of their previous flat before they are granted an HDB
loan.

This is in line with HDB's home ownership policy of helping
eligible buyers, especially first-time buyers, purchase public
housing in a financially prudent manner.
Further increase holding period to 3 years to deter flipping.
Deter people who has 1 residential property with outstanding
loan from buying a second property.
Impact

4. 31 Jan 2011 - Measures to Maintain a Stable and Sustainable
Property Market - MAS Link.
a) Increase the holding period for imposition of SSD
from the current three years to four years
b) Raise the SSD rates to 16%, 12%, 8% and 4% of
consideration for residential properties which are bought
on or after 14 January 2011, and are sold in the first,
second, third and fourth year of purchase respectively.

c)Lower the LTV limit to 50% on housing loans granted by
financial institutions regulated by MAS for property purchasers
who are not individuals ; and
d) Lower the LTV limit on housing loans granted by financial
institutions regulated by MAS from 70% to 60% for property
purchasers who are individuals with one or more outstanding
housing loans2 at the time of the new housing purchase.

Further reduce flipping by increasing Seller stamp duties and
increasing the limit of this tax to 4 years. Maximum loan
granted for non-individual (i.e. Companies) is 50%. This means
that they have to come up with 50% cash for down payment,
this effectively killed off collective purchase of Private
residential properties for investments by individuals.
Impact

5. 07 Dec 2011 - Additional Buyer's Stamp Duty for a Stable and
Sustainable Property Market - MAS Link
The ABSD will take effect on 8 Dec 2011. Government imposes
additional buyer stamp duty to curb demand in several sectors.
a. The Government announced today an ABSD to be imposed on
certain categories of residential property purchases.
The ABSD will be imposed over and above the current BSD, and
will apply to the purchase price or market value of the property
(whichever is higher) for the following purchases:

b. Foreigners and non-individuals (corporate entities) buying any
residential property will pay an ABSD of 10%;
c. Permanent Residents (PRs) owning one and buying the
second and subsequent residential property will pay an
ABSD of 3%; and
d. Singaporeans owning two and buying the third and
subsequent residential property will pay an ABSD of 3%.

Remission of ABSD will be given for options granted on or before 7
Dec 2011 and exercised within 3 weeks (i.e. on or before 28 Dec
2011) or the option validity period, whichever is the earlier.
Note, the 5 nations which Free Trade Agreement with Singapore
are treated in the same way as Singaporeans.

After deterring speculators, it was not enough.
Now regulators need to impose duties on buyers, effectively
crimping demand.
Imposing duties to crimp demand does not make demand go
away. It is a brute force measure to momentarily reduce
demand.
Impact

6. 05 Oct 2012 - MAS Restricts Loan Tenure for Residential
Properties - MAS Link
The new rules will take effect from 6 October 2012.
a. The maximum tenure of all new residential property loans will
be capped at 35 years.
In addition, loans exceeding 30 years tenure will face significantly
tighter LTV limits.
This will apply to both private properties and HDB flats.

b. In addition, MAS will lower the LTV ratio for new residential
property loans to borrowers who are individuals, if:
i. the tenure exceeds 30 years; or the loan period extends
beyond the retirement age of 65 years. For these loans, the
LTV limit will be:
 40% for a borrower with one or more outstanding residential
property loans; and
 60% for a borrower with no outstanding residential property
loan.

c. MAS will also lower the LTV ratio for residential property loans
to non-individual borrowers (i.e. property holding companies or
any company purchase) from 50% to 40%.
Further reduce financing ability of borrowers to curtail demand.
Again, this is brute force, as real demand is still there, just that
part of these demand now cannot afford the price of these
property supply.
Impact

7. 11 Jan 2013 - Additional Measures To Ensure A Stable And
Sustainable Property Market - MAS Link
Effective 12 Jan 2013.
This round of regulation is aimed as further increasing the price of
levies through increasing additional buyer stamp duties.
a. Raising of Additional Buyer Stamp Duty (ABSD)
b. Impose Additional ABSD on Permanent residents buying their
1st residential property and Singaporeans buying their 2nd
residential property.

c. Loan-to-value limits on housing loans granted by Financial
institutions to be tightened for individuals who have already 1
outstanding residential loan.
d. Loan-to-value limits on non-individuals (such as companies) to
be tightened.
e. Increase of minimum cash down payment for individuals
applying for a second or subsequent housing loan to be raised
from 10% to 25%. (The rest can be via CPF ordinary account if it is
sufficient and complies with CPF limits)

f. Concessions will be given to married couples with at least 1
Singaporean spouse who are purchasing their 2nd property and
will sell their first residential property.
g. FOR HDB, MAS will cap the Mortgage Servicing Ratio (MSR) for
housing loans granted by Financial institutions at 30% of a
borrower's gross monthly income.
h. For loans granted by HDB, the cap on the MSR will be lowered
from 40% to 35%.
i. PRs who own a HDB flat will be disallowed from subletting their
whole flat.

j. PRs who own a HDB flat must sell their flat within six months of
purchasing a private residential property in Singapore.
Measures for Executive Condominium Developments
k. The Government will introduce measures specific to new EC
developments to ensure that ECs continue to serve as an
affordable housing option for middle-income Singaporean
families.

i) The maximum strata floor area of new EC units will be capped
at 160 square meters.
ii) Sales of new dual-key EC units will be restricted to multi-
generational families only.
iii) Developers of future EC sale sites from the Government Land
Sales program will only be allowed to launch units for sale 15
months from the date of award of the sites or after the
physical completion of foundation works, whichever is earlier.

l. Private enclosed spaces and private roof terraces will be treated
as GFA.
The GFA of such spaces in non-landed residential developments,
including ECs, will be counted as part of the ‘bonus’ GFA of a
residential development and subject to payment of charges.
This is in line with the treatment of balconies under URA’s current
guidelines.
Cooling measures for Industrial Property Market: Seller’s Stamp
Duty

Prices of industrial properties have doubled over the last three
years.
In addition, there has been increasing speculation in industrial
properties: in 2011 and the first eleven months of 2012, about
15% and 18% respectively of all transactions of multiple-user
factory space were resale transactions carried out within three
years of purchase.
This is significantly higher than the average of about 10% from
2006 to 2010.

The Government is introducing Seller’s Stamp Duty (SSD) on
industrial property to discourage short-term speculative activity
which could distort the underlying prices of industrial properties
and raise costs for businesses.
i. The following SSD rates will be imposed on industrial
properties and land bought and sold within three years of the date
of purchase (These SSDs will apply for industrial properties and
land bought on or after 12 January 2013.)

More brute force measure to cure the symptoms, not the
source of the problems.
Latent demand still not sated, real demand reduced as a result
of brute force measures.
Impact

8. 28 Jun 2013 - MAS Introduces Debt Servicing Framework for
Property Loans - MAS Link
a. MAS introduces Total Debt Servicing ratio (TDSR) for credit
approval so as to align all the bank's lending criteria.

b. Total Debt servicing ratio is capped at 60% of the borrower's
income.
While total debt refers to all the borrower's debt.
Incomes refer to fixed income which is treated as 100% and
variable income to be treated as 70%.
And collaterals/assets can be pledged are amortized over 48
months as "income".

c. Loan tenure is also based on income weighted average age to
determine loan tenure.
d. Where there are previous and existing property loans with joint
borrowers, incomes of joint borrowers are required and the debt
servicing is assessed accordingly.
e. For residential home loans, an interest rate of 3.5% is used, for
Commercial and industrial properties, a 4.5% rate is used for TDSR
computation.

f. (Not in MAS notice), but all credit cards, outstanding balances
will be taken into account in the computation of TDSR.
g. HDB buyers need to clear the 30% Mortgage Servicing Ratio
(MSR) which includes all incomes but also subjected to TDSR of
60%.

Good intentioned policy, ill conceived execution. Huge policy gaps
exposed.
After I pointed out that an average couple may not be able get a
loan for a HDB but can qualify for a higher quantum for EC and
Condominiums, a new regulation is imposed.
Impact

9. 09 Dec 2013 – MND - Refining the Executive Condo housing
scheme (link) – MSR cap of 30% to apply to EC. (Effective with OTP
on 10th Dec 2013)
We welcome MND's refining of the regulations. However what
has happened is, MND slapped the Monthly servicing ratio (or
Mortgage servicing ratio) of 30% on the Executive Condominium
as well.
Total Debt Servicing ratio (TDSR) for credit approval so as to align
all the bank's lending criteria.

Buying HDB and EC are harder now as borrowing is crimped. This
artificial measure crimps demand in this sector.
Ironically, this is the sector (especially HDB) is the sector where 80-
90% of Singapore population stays in. We will explain the
problems in the following paragraphs.
Impact

Illustration - A couple buying the EC will have to meet both the
criteria of: -
• MSR less than or equal to 30% and;
• Total Debt Servicing Ratio (TDSR) less than or equal to
60%.
On top of that, new Executive condominiums have an upper
income cap of $12,000 a month.
Impact

Meaning, in order to meet the MSR <= 30%, the selling price has
to be about or less than $880,000.
Else a couple's salary will not be sufficient. This effectively killed
off the developer's chances of marketing the property above
$880,000.
Developers bid high to acquire land due to pent up demand
created whilst salaries are not growing much.
Impact

Hence Singapore citizens and Permanent residents will end up
staying in ever smaller housing units as developers will build
smaller to maintain higher per square feet unit prices.
Government land sales are still in spurts (accumulated demand
causing spurts of demand chasing limited supply), developers will
bid high and build every smaller units.
Impact

10. 10 Feb 2014 – MAS broadens exemptions from TDSR
thresholds
This shows that MAS really value feedback. However, the policy is
again fraught with ambiguity as many banks we spoke to are not
sure how much "exemptions" they are allowed to do.
For investment properties, they can waive TDSR to be coupled
with a debt reduction plan.
Impact

However there was no mention of what kind of debt reduction.
This goes to show that MAS still has some room for improvement
where it involves industry consultation, such as involving the
stakeholders such as banks for implementation feedback.
Impact

So how does it affect you, the
property buyer or investor?
For refinancing
For existing home owners who bought their houses before 29
June 2013 (before the imposition of TDSR and who are a bit
stretched, income-wise, now is probably a last chance to
refinance.
Else you may not get another waiver anytime soon. Check out
the home loan refinancing experts.

Pockets of Extra HDB supply due to Permanent Residents letting
go HDB flats.
By Jan 2013, when Permanent Residents are not allowed to rent
out their units anymore after expiry of current lease, this means
that by Jan 2014 or Jan 2015 many of these Permanent
residents will be looking to sell their HDBs if they continue to be
away from Singapore.
This presents a small pocket of extra supply of HDB.

However Permanent residents who are away from Singapore
and cannot secure permission to rent out their HDB flats have
no economic benefit from keeping these units and will be keen
to let go, you can probably get yourself a deal here.

Financing Anomaly - Extremely difficult with HDB and EC, but
not so with Condominiums
With the imposition of MSR of 30% or less for Executive
Condominium, coupled with the income ceiling of $12,000, this
means that the maximum price of an Executive condominium is
about $880,000 (in order for a 80% loan of $880,000), buying an
EC or HDB will be tough as many will fail the MSR criteria.

A couple would still have an easier time to borrow a larger
quantum for Condominiums than for HDB or an executive
condominium.

Artificially depressed HDB demand and prices may bounce back
in 2016 onwards
HDB prices will be artificially depressed due to the MSR of 30%
or less, at least for the short term.
And all at the same time, the government has deliberately
stopped or slowed down HDB supplies through slow release of
land supplies for building HDB, citing already ample supplies.

There may be built-up pressures for HDB in a few years time
when the moratorium of 3 years on new permanent residents
comes due and in 2016, these PR would be 3 years in Singapore
and eligible to buy HDB, causing more demand – supply
imbalance.
As HDB is the base benchmark, if HDB rises, every property class
takes it's reference from there.
HDB prices may bounce back in 2016 onwards, just after
election.

Demand artificially channeled to Private (non-landed) housing
Many buyers, may select private residential dwellings instead
due to EC and HDB financing difficulties.
However, if you look at the Private property vacant units, there
is some 18,003 units representing 6.2%.
Traditionally this is considered low, as the vacancy rate at which
property price is more or less in equilibrium is about 7.5

Hence the prices for private properties though softening, is still
holding up fairly well for completed properties.
But the supply in the pipeline is a healthy 83,702 units, annual
consumption is about 11 to 15 thousand, representing roughly 5
to 7 years of supply, coming on-stream in the next 1 to 5 years.
The supply in the Private residential sector is much more ample
than the HDB sector.

While these 83,702 units seemed like a huge supply pipeline,
these supply are phase in over several years (supply numbers
changes every quarter as developers alter plans to build or
launch).

Larger share of salary going into property purchase and
loan repayment servicing
The artificial channeling of buyers into private residential
dwelling may increase the long term sales trend line
(consumption) of private residential dwelling.
Even though the average household income of a family
buying a private residential dwelling has been falling)

Are prices really crashing for properties?
There is however competition from developers to launch
uncompleted units for sale to ease their financing cost.
Highly leveraged or weaker developers may be more hard
pressed to launch and garner sales faster.
As many developers rush to launch, these uncompleted
units comes into the market (as uncompleted “supply”)

Hence giving rise to the impression that the market is
softening dramatically or even “crashing” with so many
units for sale.
The stronger developers will have holding power and not
act rashly unless triggered by unbalanced release of land
supplies or deliberately not releasing land for sale citing
“land reserve value not met”.
Once the weaker developer's stock are absorbed, we can
see that prices will firm up again.

Figure 1: URA Q4, 2013 Stock And Vacancy Supply In Pipeline

Other things to note are, the CCR has become very
attractively priced relative to OCR.
This is an anomaly which is not justified given that there
may have been no change so material that has made
Punggol more attractive than say Orchard road.

Historically prime regions in core central regions always
command a premium relative to the other 2 location
classes.
OCR overshooting CCR may indicate that many people
may be buying into hype of Outside of central region
(OCR) and are paying too much for these properties.

If property buyers start to look at the prime areas, they
may yet realize that these areas are not too expensive
after-all.
ALL THAT GLITTERS IN OCR AREAS MAY NOT BE
GOLD

Figure 2: Property Price Index – Q3 2013 – Non-landed Private
residential Property

About Property Buyer Mortgage Consultants
Property Buyer Mortgage Consultants is a research focused independent mortgage broker. We
emphasize a consultative approach where we match our client’s financial situation with the best
fit mortgage loan, not simply a cheap loan.
We also help property buyers in their buying process helping them avoid pitfalls from
unscrupulous property agents. (We are not property agents, therefore there is no conflict of
interests.)
We also developed our proprietary home loan reporting tool which provides amongst other
things, 23 years Sibor history as well as 6 years worth of SOR.
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save on staffing cost as we are not on their payroll.
www.PropertyBuyer.com.sg/mortgage
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Chronology Of Property Regulations And Where Is The Value

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Chronology Of Property Regulations And Where Is The Value