The full article can be found in The Straits Times, Opinion Section, Page A24, 12 July 2018.
The latest adjustments to property curbs shocked both buyers and developers, inducing a wave of unhappiness and disappointment.
Developers have to now adhere to a higher Additional Buyer’s Stamp Duty (ABSD) of 25 per cent instead of the previous 15 per cent, and an extra 5 per cent that cannot be waived even if they sell all of their units in time.
What are the effects of the new measures on the general public or a family seeking an upgrade?
Tightening loan limits means that even first-time buyers have to now pay 24 per cent of their home prices in cash, an increase of 5 percentage points.
This is the first time the loan-to-value (LTV) ratio on loans for first properties has been increased since its implementation in 1996, and observers state that the reason behind this change is to encourage financial prudence.
At 75 per cent LTV, Singapore enters the ranks of countries like Hong Kong with thriving property markets, where regulations restrict traditional bank mortgages on properties costing less than HK$10 million (S$1.74 million) to 60 per cent of their value.
The recent change affects even those purchasing Housing & Development Board (HDB) flats and who wish to take advantage of the lower interest rates currently offered by banks – as low as 1.6 per cent – as compared to the 2.6 per cent currently offered by HDB.
This implies that a young couple purchasing a four-room resale flat in Ang Mo Kio at the median price of S$452,000 will have to cough up S$113,000 in cash and Central Provident Fund savings – S$22,600 more than prior to the announcement, which is by no means a small sum, especially for couples short of money who want to get married soon but are new to the workforce.
HDB flat buyers can choose to take up HDB loan, which allows them to borrow up to 90 per cent of a home’s value or price, but it comes with higher interest rates, and other buyers will have to redo their sums.
Some hope the higher cash bar will bring the prices down, but analysts say that sellers will not be quick to do this or reduce it by much, and this will lead to a stalemate for several months.
History shows that new private property prices fell only slightly in the immediate aftermath of ABSD measures implemented in December 2011 and January 2013, only recovering to their original levels five months later.
Those seeking an upgrade have also been affected by the chance. Purchasing a condo has always been a constant Singaporean aspiration, and today’s slate of one million HDB flats forms about 73 per cent of total housing stock, a decrease from 78 per cent in 2006 and 85 per cent in 1996.
However, those who live in HDBs or even mass-market condo residents who hope to move to a more upscale one will have to pay the new ABSD of 23 per cent upfront.
They are then entitled to six months of a timeline to sell their existing unit before they can apply for a refund and get this ABSD amount back.
It is a large sum; for a three-bedroom condo unit in the suburbs that costs S$1.3 million, that works to an extra S$65,000 upgraders would have to pay upfront.
“That’s about the price of a resale Japanese car upfront,” said ZACD Executive Director and Chief Investment Officer, Nicholas Mak.
He added, “Not many people have this kind of cash lying under their mattresses.”
This does not take into account the buyer’s stamp duty, which was raised in February from 3 to 4 per cent on the value of a home exceeding S$1 million.
According to flash estimates from last week, HDB resale prices went sideways with a 0.1 per cent rise – a considerably small increase, but the first after six straight quarters of decline. This contrasts private residential prices, which have increased by 9.1 per cent since last June, after 15 consecutive quarters of decline.
Even as developers’ stocks took a hit over the week, analysts prefer a wait-and-see approach on the full impact of the measures.
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