Last updated on 30 Sep 2022
Singapore government issues cooling measures from time to time according to market situation. Here we summarize past cooling measures. You can also use our guide or calculator for your planning purpose - The Complete Guide on Financing an EC or Condo.
Cooling Measures effective from 30 Sep 2022
- TDSR and MSR for residential property increases from 3.5% to 4%.
- Wait-out period of 15 months for current and former owners of private residential property to buy a non-subsidised HDB resale flat.
*Not apply to seniors aged 55 and above (and their spouses) who are moving from their private property to a 4-room or smaller resale flat. - LTV for HDB reduced from 85% to 80%
- LTV for private property remains at 75%
Joint MAS-MND-HDB Press release: Measures to promote sustainable conditions in the property market by ensuring prudent borrowing and moderating demand
Cooling Measures effective from 16th Dec 2021
Published on 17th Dec 2021
On the evening of 15 Dec 2021, around 11:45pm, the Government introduced a fresh round of cooling measures effective immediately from 16th Dec 2021.
The measures announced on 15 December primarily take aim at curbing investment and speculative demand for property which has been fueled by:
1. a low interest rate environment worldwide since the onset of the global pandemic in early 2020,
2. a quick recovery from the pandemic supported by fiscal and central bank measures
3. a resilient property market throughout the pandemic, unlike in previous recessions
We will summarize the key changes and impact:
Infographic on Cooling Measures effective from 16th Dec 2021
Key Changes
- Revised ABSD Rates for foreigners, 2nd/3rd property owners (5%-15% up)
- Tightened TDSR from 60% to 55%
- Reduced LTV Ratio for HDB loans from 90% to 85%
You don't have to memorize all these rates and start to calculate numbers yourself. Our calculators are here to assist you - The Complete Guide on Financing an EC or Condo.
Potential Impacts of the Cooling Measures
WINNERS
Singaporeans buying their first home
Measures will ensure that home prices do not rise rapidly and become more stable.
Singaporeans looking to buy a property in the CCR
They may face less competition from foreigners for units (1) attractive prices for new launches, (2) could be in a better position to negotiate on prices for resale transactions.
Upgraders entering the resale market
Sellers may be less aggressive with asking prices due to reduced TDSR from 60% to 55%.
LOSERS
Buying a second and subsequent residential property
The hike in ABSD rates will soften investment demand.
Foreigners
30% ABSD could prove to be concern for many foreign buyers, especially for big ticket purchase in CCR. Foreigners may stay away from buying for a while.
Developers with CCR projects
High-end home demand will likely slow down as investment demand moderates and lack of foreigners entering the market.
En bloc hopefuls
- Impact on the collective sale market may be uneven, with mega sites and
CCR sites facing more challenges - Collective sale sites in the OCR could still find buyers provided the owners
are realistic on pricing
1) New Home Sales Volume
New launch sales volume may cool down for 3-6 months with lowered demand from buyers due to the ABSD revisions and TDSR.
2) New Home Prices
Overall prices in 2022 will moderate to 3-5% growth. The price may continue to grow as the supply gap will be broadened next year. The market performance would also depend on how well the economy recovers with the variation of Covid 19 and how frequent US fed rate hikes next year.
3) Future Launches
Developers will likely push back future launches planned for the first two months of the year to wait for market to settle down.
Developers with CCR projects may calibrate their pricing to take into account lower demand from investors and foreigners.
New launch prices in the CCR will likely cool down (down by 5-8%) to take into account the higher ABSD rates and the tighter TDSR.
4) Private Resale Market
Private resale volume especially for homes in the CCR will be impacted with moderated demand from investors, foreigners. OCR and RCR market should be resilient, as more than 90% of the buyers are from local or PRs. New measures are not affecting them if they are buying their 1st properties. Freehold/big size resale units will continue to do well, as they are severely under supply right now.
5) HDB resale market
Not so significant impact. As primary reason causing HDB to appreciate did not change, i.e. delay of BTO construction and Enhanced Housing Grant. However Buyers, particularly new married couples, might be more prudent in buying a HDB due to the lower HDB LTV ratio.
6) EC market
The only market that's not affected by the measures. It may benefit as a result.
7) ENBLOC Market
Impact on the collective sale market may be uneven. Mega sites (billion dollar sites) and enbloc projects in the CCR may face some challenge.
Collective sale sites in the OCR could still find buyers, provided the owners are realistic on pricing.
8) Commercial Shophouse
Commercial shophouse transaction almost doubled in 2021. It will continue to do well as more High-net-worth foreigners will turn to this segment due to higher ABSD rate.
Cooling Measures on 5th July 2018
Published on 18th July 2018
On the evening of 5 July 2018, Singapore’s property market got a shock when the Government introduced a fresh (and unexpected) round of cooling measures.
This comes off the back of multiple rounds of cooling measure over the past nine years, the last of which was introduced in June 2013, when the Total Debt Servicing Ratio (TDSR) was introduced.
Today, we look at how would the latest measures impact on Singapore property market.
1) Future price growth may not grow as much as analyst predicted in the early of this year.
Whether the price will continue to head north or go side-lines, only time will tell. However, it’s un-likely to have major price correction purely because of the newly implemented cooling measures. Singapore government has repeatedly stressed that it has no intention to crash the property market, but needs to ensure price increment in line with economic fundamentals and not resulting of any speculative bubble. Developer may become price sensitive in their new launches, however the price may still hold quite tight due to fast accelerated land cost in the past one year. (refer to above chart).
Demand for the next 2 years might be well supported by the hot money released from the enbloc deals to the market, $19 billion liquid equity need to find place to park. (refer to below chart) Domestically, Singaporeans tend to have greater faith putting their money in real estate than in other asset classes like equities or bonds. Imagine if half of the money were to flow back into the property market with average 50% loan-to-value ratio, which is $19 billion worth of property value. This amount can easily consume 19,000 units of condos with average value of $1,000,000. e agent.
2) En-bloc fever will cool down. The hardest hit group with the latest ABSD are the developers.
The rate was increased from 15% prior to 5th July to now 30%. Developers will be more cautious in bidding for en-bloc site as the cost of acquiring land (especially the mega site) has effectively increased and furthermore, developers now face higher risks if they are unable to sell out all the units with five years of acquiring the land.
3) Cooling measures are here to stay.
Investors who have been waiting patiently on the sidelines since year 2013 hoping for relax of cooling measures would finally wake up and realize that could be just their wishful thinking. Cooling measures might be here to stay as a permanent tax feature and it could even get more drastic.
4) 1st Time home buyers are the lucky group.
The only group generally not affected by the latest round of cooling measure are the Singaporean and PR 1st time buyers. This is a good time for them to come out and hunt for some good deals. As developers and resale owners will become more realistic in pricing their units. (refer to below comparison) The only effect is that they need prepare 5% more upfront capital as loan-to-value now dropped from 80% to 75%. People with not enough capital may turn to new launches, as the payment goes with construction stage and they have more time (9-12 month) to save up the extra amount.
Homebuyers will have a wide list of options to choose from with a robust pipeline including Treasure at Tampines, Riverfront Residences, Parc Esta, Stirling Residences, The Tapestry, Jadescape, Parc Colonial and Whistler Grand.
5) De-coupling of property ownership or re-structuring of property (sell one buy two under individual names) will become norm.
Since 2013 when TDSR and ABSD came into effect, we have seen a fair number of clients doing de-couple of property ownership by removing one party from the existing property and free up the other party to buy another property as 1st time owner. Typically, such de-coupling or part-purchase could cost you below $30,000 (if current property value below 1.5M) including the legal fees and stamp duties you need to pay for transferring the half share. Another more straight forward way is to cash out from existing property and re-invest into 2 properties under individual names.
6) There could be mixed effect for HDB resale market.
People who has not enough cash (due to lower loan-to-value) to buy a condo may turn to HDB resale market, which increases the demand. While, at the same time, more HDB owners who have intention to keep their HDB and invest another condo initially, may now have to consider sell away their HDB to save on ABSD, which increase the HDB supply in the market.
7) Rental market may improve.
As some buyers may hold horses to watch market while in the meantime renting first. And there might be more foreigners willing to rent than before considering the extra 5% ABSD to buy a home now.
8) The Commercial or Industrial market could see renewed interest as there’s no ABSD for this segment yet.
9) More people may turn to overseas market
Especially for those market yet to impose ABSD, like Vietnam, Cambodia, Malaysia, Thailand and Japan, etc.. And because of the low entry price for these countries, the ABSD amount for Singapore Condo ($150-$200k) alone might be able to fully paid the properties for most of these countries. However, buyers considering to invest into overseas market should exercise due diligence before investing, as it involves whole lots of risks that you may not be aware in a country that you are not familiar with.
Above are just my personal views, investors should have your own judgement based on facts and figures you can obtain from the research.
