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How to Thrive in Singapore’s 2023 Property Market: Unveiling Cooling Measures

Singaporean property enthusiasts eagerly opened their calendars and marked a significant date. The buzz in the air was almost palpable as they anticipated the new round of cooling measures scheduled to cool the seemingly fiery Singapore real estate market. 

After a scorching period of skyrocketing property values, the government stepped in to cast a calming shadow over the market frenzy. But what could this mean for current and potential homeowners, real estate investors, and the overall economy? 

If you find yourself intrigued and wondering how these new rules may impact you and the property landscape in Singapore, you’ve come to the right place. Let’s dive deep into the complexities and implications of the Singapore Property Market Cooling Measures of 2023.

ABSD rates increased for Singaporeans and foreigners

The Singapore government has recently introduced new property cooling measures in 2023 to maintain a sustainable property market. One significant change is the increase in Additional Buyer’s Stamp Duty (ABSD) rates, particularly targeting foreign buyers. The revised rates took effect from April 27, 2023, and are expected to impact about 10% of residential property transactions, based on 2022 data. The aim is to prioritize housing for owner-occupation and manage the investment demand in the residential property market.

For Singapore Citizens (SCs) purchasing their second residential property, the ABSD rate has been raised from 17% to 20%. Meanwhile, SCs purchasing their third and subsequent residential properties and Singapore Permanent Residents (SPRs) buying their second residential property will now face an ABSD rate increase from 25% to 30%. SPRs purchasing their third and subsequent residential properties will face a higher ABSD rate of 35%, up from 30%.

Foreign buyers have been specifically targeted with a significant increase in ABSD rates, doubling from 30% to a whopping 60%. Likewise, entities or trusts purchasing residential properties, except for housing developers, will face a staggering 65% ABSD rate increase, up from the previous 35%. These measures are seen as a deterrent for rich foreigners investing heavily in Singapore’s residential property market.

Despite these new cooling measures, the ABSD rates for SCs and SPRs buying their first residential property remain unchanged at 0% and 5%, respectively. These buyers make up approximately 90% of residential property transactions based on 2022 data. Married couples with at least one SC spouse can still apply for a refund of ABSD subject to conditions when jointly purchasing a second residential property.

Overall, these new cooling measures by the Singapore government are designed to maintain a balanced, sustainable property market that caters primarily to the needs of locals and permanent residents. While the impact of the increased ABSD rates on foreign investors remains to be seen, these measures indicate a clear commitment to prioritizing homeownership for Singaporeans. 

Higher BSD rates for higher-value properties

In Singapore’s Budget 2023, the government introduced higher buyer’s stamp duty (BSD) rates for higher-value properties in both residential and non-residential sectors. For residential properties, the portion of the property value above $1.5 million and up to $3 million will be taxed at 5%, while the portion in excess of $3 million will be taxed at 6%, up from 4%. This increase in BSD rates is expected to impact 15% of all residential properties.

On the other hand, non-residential properties will also experience higher BSD rates. The portion of the property value exceeding $1 million up to $1.5 million will be taxed at 4%, while the portion above $1.5 million will be taxed at 5%, up from the current rate of 3%. This measure is expected to have a more significant effect, impacting 60% of non-residential properties.

The adjustments in BSD rates came into effect on February 15 and are expected to result in a 2% increase in total costs for buyers, according to Tricia Song, CBRE Head of Research for Southeast Asia. On its own, this increase may not cause a significant impact on the market. However, when combined with earlier wealth taxes, cooling measures for residential properties, and higher financing costs for both residential and commercial properties, the transaction volumes in both sectors could slow down in the near term.

Nevertheless, experts believe that property prices could still remain resilient due to the strong fundamentals of the underlying sectors. The increased BSD rates could primarily affect higher-end homes with property values above $10 million. For homes priced at $2 million, the incremental BSD is only 0.25% of the property purchase price, which is considered minimal.

However, analysts caution that the combination of higher BSD rates, additional buyer’s stamp duty (ABSD) from December 2021’s cooling measures, property tax increases announced in Singapore’s 2022 Budget, and higher mortgage rates could further deter the overall buying sentiment, particularly in the mid-to-high-end market. As a result, CBRE Research maintains its forecast of average private home price growth of 3%–5% in 2023 and new home sales volume at 7,500–8,500 units. 

Medium-term interest rate floor for bank and HDB housing loan eligibility

The Singapore government has introduced new property market cooling measures in 2023 to ensure prudent borrowing and sustainable market conditions. One of the key measures focuses on the medium-term interest rate floor for bank and HDB housing loan eligibility. Aimed at promoting responsible borrowing amid rising interest rates, this measure is critical in helping individuals avoid future difficulties in servicing their home loans.

Effective from 30th September 2022, the medium-term interest rate floor has been revised for both financial institutions and HDB housing loans. For property loans granted by private financial institutions, the Monetary Authority of Singapore (MAS) has raised the medium-term interest rate floor by 0.5% to compute the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR). 

This measure is applicable to loans for the purchase of properties where the Option to Purchase (OTP) is granted on or after 30th September 2022. The actual interest rates charged for mortgages, however, continue to be determined by private financial institutions.

In addition, the Housing & Development Board (HDB), Singapore’s public housing authority, introduced a 3% interest-rate floor for computing eligible loan amounts for housing loans granted by HDB. This will apply to fresh applications for an HDB Loan Eligibility (HLE) letter received on or after 30th September 2022, without affecting the actual HDB concessionary interest rate, which continues to remain unchanged at 2.6% p.a.

These measures underscore the government’s commitment to promoting prudent borrowing practices and ensuring long-term stability in the property market. By implementing higher medium-term interest rate floors, borrowers will gain a better understanding of their repayment capacity in the context of rising interest rates, helping them make informed decisions when taking a housing loan. 

Lowered LTV limit for HDB-granted loans

A significant change announced in the latest round of property cooling measures in Singapore is the lowering of loan-to-value (LTV) limits for HDB-granted loans. This move aims to curb demand for public housing and ensure long-term sustainability in the property market while promoting prudent investment decisions among homebuyers.

The LTV limit for HDB home loans has been lowered from 85% to 80%, which applies to both new and resale HDB flats. This change affects buyers who opt for HDB loans for financial assistance in acquiring their homes. With the reduced LTV limit, purchasers can now only borrow a maximum of 80% of the property’s purchase price or value from HDB, compared to the previous 85%.

Consequently, this reduction in LTV limits translates to higher downpayments required for homebuyers. For example, buying a resale flat at SGD 500,000 would have allowed a maximum loan of SGD 425,000 with the previous LTV of 85%. With the lowered LTV of 80%, however, the maximum loan amount is now reduced to SGD 400,000. Homebuyers in this scenario would need to find an additional SGD 25,000 (5% of the purchase price) to meet the downpayment requirements.

It is essential to note that the LTV limit for private financial institutions, such as banks, remains unchanged at 75%. Thus, potential homebuyers would need to carefully consider their options when choosing between an HDB loan and a bank loan for financing their property.

In conclusion, the lowered LTV limit for HDB home loans is a noteworthy aspect of the property market cooling measures implemented in Singapore. This move is set to impact the property-buying landscape by encouraging potential homeowners to be more financially prudent, fostering sustainability and stability in the market.

While these changes might pose challenges for some buyers, they are expected to contribute positively to the long-term health of Singapore’s housing market. 

15-month wait for private property owners buying non-subsidised HDB resale flat

In a recent bid to cool the Singapore property market, authorities have introduced a 15-month wait-out period for private property owners who wish to purchase a non-subsidized Housing Development Board (HDB) resale flat. This new rule, effective from September 30, signifies a surprising turn of events and aims to deter buyers with deeper pockets who might be eyeing larger spaces in the HDB resale market.

Previously, private property owners were allowed to buy HDB resale flats on the open market as long as they sold their private properties within six months of the purchase. However, this wait-out period will now apply to those who have already sold their private property, as well as those who intend to sell their private properties before submitting an application to buy a resale flat. Senior citizens aged 55 and above, looking to move from their private property to a four-room or smaller resale flat, are exempted from this rule.

Property analysts believe this latest cooling measure could have a more significant impact on the HDB resale market, specifically, the larger five-room and executive HDB flats. These flats could experience lower demand from private home downgraders or en bloc sellers, leading to moderated prices.

The 15-month wait-out period might also affect the condominium resale market, potentially resulting in a drop in volume. Some private property owners may decide to hold back from putting up their units for sale now that they have to face a lengthy waiting time before purchasing an HDB resale unit.

In conclusion, the introduction of a 15-month wait for private property owners looking to buy non-subsidised HDB resale flats serves as a form of deterrence against buyers with the financial means to purchase larger HDB flats, thus moderating demand and ensuring that resale flats remain affordable for the majority of Singaporeans. Only time will tell if this measure proves successful in achieving its goals and whether it will remain in place for the long term. 

Tightened Total Debt Servicing Ratio threshold

In response to the growing concerns over Singapore’s property market, the government has implemented several cooling measures to ensure continued housing affordability. One such measure is the tightening of the Total Debt Servicing Ratio (TDSR) threshold.

The TDSR is a crucial factor that banks and other financial institutions use to determine the eligibility of borrowers in securing a loan, ensuring that loan repayments do not cause undue financial strain on the borrower.

Previously, the TDSR threshold was set at 60%, which meant that no more than 60% of a borrower’s gross monthly income could be used to service their total debt obligations, including housing, car loans, and other personal loans.

However, with the new cooling measures introduced in 2023, the TDSR threshold has been further tightened to 55%. This measure aims to promote greater financial prudence among borrowers and reduce the risk of loan defaults.

The tighter TDSR threshold will primarily impact borrowers who already have significant existing debt obligations or low monthly incomes. As a result, these borrowers will likely face more stringent financing conditions when attempting to secure loans for property purchases.

Additionally, this measure is expected to encourage potential homebuyers to reassess their financial situation and borrow within their means, ensuring they can comfortably meet their monthly loan repayments.

Ultimately, the tighter TDSR threshold is a reflection of the government’s commitment to promoting financial stability and maintaining control over the property market. By implementing this measure, the authorities aim to keep property prices in line with economic fundamentals and curtail speculative purchases.

It is essential for Singaporeans to be well-informed about these cooling measures and how they may affect their property investment plans. Taking note of the tightened TDSR threshold and adjusting their borrowing plans accordingly will ensure that they stay on track to realizing their dream of owning a home, while also safeguarding their financial future. 

Non-remittable 5% ABSD for developers

In response to the escalating property prices in Singapore, the government has introduced various cooling measures to curb excessive property speculation and maintain a stable and sustainable property sector. One such measure that targets property developers is the imposition of Non-Remittable Additional Buyer’s Stamp Duty (ABSD).

Effective since 27th April 2023, developers in Singapore are required to pay a non-remittable 5% ABSD on top of the remittable ABSD rates, which were also revised upward. This new measure aims to curb speculative activities by developers and promote responsible property development.

This measure affects property developers who purchase residential properties and lands for development purposes. The non-remittable 5% ABSD is charged on the purchase price or market value of the property, whichever is higher. It is termed as ‘non-remittable’ because it cannot be waived or refunded, unlike the remittable portion of the ABSD.

The rationale behind implementing this additional cost to developers is to ensure that they are more cautious in their investment decisions in the property sector, thus preventing overdevelopment and oversupply of residential units. This, in turn, helps to maintain a sustainable and stable property market.

As a result of this cooling measure, developers are expected to be more prudent in their land acquisition strategies and make well-informed investment decisions. This may lead to a more controlled pace of residential property development, avoiding situations where excessive land banking could contribute to speculation and inflation in property prices.

In conclusion, the Non-Remittable 5% ABSD for developers is a significant cooling measure introduced by the Singapore government to stabilize the residential property market, maintain economic fundamentals, and promote sustainable property development. 

This, along with other cooling measures enforced, is expected to contribute to a more balanced and stable property sector in Singapore, ensuring long-term growth and overall socio-economic benefits for its residents. 

Foreigners pay 60% ABSD for any property purchase

In a bid to cool the growing property market, Singapore has recently introduced new cooling measures in 2023. One of the most noticeable changes is the increase in Additional Buyer’s Stamp Duty (ABSD) for foreign buyers, which now stands at a staggering 60%. 

This massive increase is aimed at curbing the demand from wealthy foreign investors, who have been driving up property prices in prime areas. However, it remains to be seen how effective this measure will be in slowing down the property market as a whole.

The new ABSD rate for foreign buyers has doubled from its previous level of 30%. This sudden hike has caught many in the industry off-guard, especially considering that foreign buyers only accounted for 3.3% of Singapore’s property transactions last year. While the impact on the overall market may be minimal, it is expected to have a significant effect on prime residential areas, where wealthy foreigners tend to invest.

Foreign buyers typically look for high-end properties in prestigious locations like Districts 9 and 10 or luxury homes on Sentosa Cove. These properties are generally priced way above the budget of an average Singaporean, so the higher ABSD rate is expected to dampen their demand, in turn reducing the pressure on prices in these areas. However, some market experts argue that ultra-wealthy foreigners may not be deterred by the increased tax, as the price tags for prime properties in Singapore still fall short of those in international cities like London and New York.

Given the low percentage of foreign buyers in the market, it is unlikely that the 60% ABSD will dramatically alter Singapore’s property landscape. However, it could help curb the demand for high-end properties, which may, in turn, stabilize prices in prime residential areas. It remains to be seen whether this measure will have the desired cooling effect on the property market or if further changes will be needed to ensure a more balanced market that caters to the needs of all buyers, local and foreign alike. 

LTV limits tightened across all housing loans

In 2023, the Singapore government introduced new property market cooling measures aimed at ensuring a sustainable and stable market. One significant component of these measures was the tightening of Loan-to-Value (LTV) limits across all housing loans. The LTV limit is the maximum percentage of a property’s valuation that a bank or financial institution is willing to lend to potential buyers.

The most notable change in LTV limits was for HDB housing loans, which were reduced by 5% – from 85% to 80%. This means that buyers opting for HDB loans can now borrow a maximum of 80% of the property’s valuation instead of the previous 85%. This reduction applies to new flat applications and complete resale applications received by HDB on or after September 30, 2022.

However, this revised LTV limit does not apply to loans granted by financial institutions. The LTV limit for these loans remains at 75%. This distinction is crucial as it affects the amount that home buyers can borrow from HDB versus financial institutions.

Another critical aspect of the property market cooling measures is the 15-month waiting period for private property owners below 55 years of age who wish to purchase non-subsidised HDB resale flats. This temporary measure aims to moderate demand in the HDB resale market and may be reviewed in the future based on overall market conditions and housing demand.

By tightening LTV limits, the Singapore government aims to promote prudent borrowing and avoid potential difficulties for homebuyers in servicing their loans. This move, along with other property cooling measures, reflects the government’s commitment to maintaining a stable and sustainable property market in Singapore.

Overall, these new property market cooling measures are expected to have a significant impact on the Singapore property market, encouraging responsible borrowing and protecting homebuyers from potential financial difficulties. As the property market evolves and adapts to these changes, buyers should consider these new LTV limits and other property cooling measures in their decision-making process while venturing into the housing market. 

ABSD rates increased for SPRs and corporate entities.

The Singapore government has been proactive in implementing measures to cool the property market, ensuring long-term stability and affordability. In line with these objectives, the government announced a series of adjustments to the Additional Buyer’s Stamp Duty (ABSD) rates in April 2023.

Singapore Permanent Residents (SPRs) have seen an increase in the ABSD rates for purchasing their second, third, and subsequent residential properties. Specifically, the ABSD rate was raised from 25% to 30% for SPRs purchasing their second residential property. 

For those interested in acquiring their third and subsequent properties, the ABSD rate now stands at a hefty 35%, up from the previous 30%. This move aims to promote a sustainable property market and prioritize housing for owner-occupation, effectively managing investment demand in Singapore’s residential property market.

Additionally, there was a significant increase in ABSD rates for corporate entities and trusts. The rate was raised from 35% to 65% for entities or trusts purchasing any residential property, excluding housing developers. This measure is expected to discourage speculative activities and prevent short-term profiteering in the property market. However, housing developers may apply for remission of the ABSD subject to certain conditions.

In conclusion, these adjustments in ABSD rates for SPRs and corporate entities showcase the Singapore government’s commitment to fostering a stable and sustainable property market. By increasing the costs associated with property investment, the government aims to deter excessive speculation and maintain long-term affordability for Singapore’s residents.

Property buyers, especially those intending to purchase multiple properties or make corporate investments, should take note of these new ABSD rates and factor them into their property acquisition plans.

Written by Andrew Lim

As editor at CityNewsR.com, Andrew is passionate about journalism and dedicated to accuracy and fairness. He works closely with his team to create high-quality content on a range of topics including politics, business, and technology. Andrew has a bachelor's degree in journalism from UCD and extensive experience as a journalist covering a variety of topics.

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