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Property Cooling Measures Jan 2013

01.18.2013 · Posted in Dividend Stocks, Real Estate, Singapore

Just a few days ago, the government issued the most drastic cooling measures as compared to the previous measures. In the new measures, not only did they clamp down on residential properties, they introduced seller stamp duty for industrial properties as well.

Additional buyer stamp duties are raised across the board as compared to the previous round of additional buyer stamp duties. In my opinion though, PRs may be hit hard in this case as they will have to pay extra stamp duty despite it being their 1st house.

a) Citizens – 7% for 2nd purchase, 10% for 3rd and subsequent purchase

b) PRs – 5% for 1st purchase, 10% for 2nd and subsequent purchase

c) Foreigners and non individuals – 15% for any purchase

LTVs are also reduced drastically to 50% for 2nd housing loan or 40% for 3rd housing loan or more. If the loan tenure is above 30 years or beyond borrower’s age of 65, it gets further reduced to 30% and 20%. For non individuals, LTV will only be 20%. So funds will no longer get much leverage with residential property investments.

Other measures include HDB measures and EC measures, but I won’t list them out as they are quite long. All in all, if HDB prices can come down, then it may also affect private residential property prices.

 

Will Residential Property Prices Fall?

With the extra stamp duties and lower LTVs, demand for private residential properties will definitely be much weaker. However, analysts are mixed on whether the property prices will fall. Following the measures, showrooms have been much quieter. Some analysts have predicted a drop of 5-10% this year in mass market pricing.

However, there are a couple of factors which may keep the private residential property prices up.

1. Developers have acquired landbanks at much higher prices recently and will not be able to sell cheap

2. Developers generally have strong balance sheets and can afford to hold on launches as opposed to selling them at drastically reduced prices

3. Sub sale activity may be subdued as the houses which were bought after the seller stamp duties were introduced in 2011 (16%, 12%, 8%, 4%) will be unlikely to be put in market, hence reducing the supply.

4. Interest rates remain low and properties are still seen as a good investment vehicle

5. There is still a lot of liquidity in the market and the Singapore dollar remain an attractive currency to park money in

 

In the next post, I will write about some investment ideas post this round of cooling measures.

 

For further reading, you may be interested in:

Additional Stamp Duty For Singapore Properties

60 Year Lease Residential Site Awarded for $73.8 million

Comments on the UOB 50 Year Housing Loan

Further Comments on the 50 Year Loan

Investing in Real Estate for your Retirement: Pros and Cons

My Interview on Next Insight – The Rewards of Investing In Property

Should I Invest The Money Intended to Purchase My Home In Stocks While Waiting For a Market Correction?

 

6 Responses to “Property Cooling Measures Jan 2013”

  1. looking fwd to your evaluation & insights :) Tks.

  2. I read somewhere that over at Johor side, the government may also impose buying limits on foreigners.

    Imagine buying a property at RM1,000,000 instead of the current RM 500-800,000 ?
    What are your views especially the election is approaching near.

    Thanks

    • Hi mr chua, yes Johor is contemplating raising the minimum to RM 1,000,000. There are 2 possible consequences to this.

      1. Mid-High end buyers below a RM 1 mil may drop in value due to the lack of foreign buyers. This is especially so for houses below RM 700k, like smaller condos, terrace, semi-ds etc.

      2. Developers and sellers may adjust selling prices upwards or simply put in a higher price for SPA to clear the hurdle if the quantum is not too far from RM 1 mil, for e.g. RM 800k-RM-900k+

  3. The second scenaro is more likely…

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