1 The Government announced today the following measures to maintain a stable and sustainable property market:
a) Increase the holding period for imposition of Seller’s Stamp Duty (SSD) from the current one year to three years.

b) For property buyers who already have one or more outstanding housing loans(1) at the time of the new housing purchase:
i. Increase the minimum cash payment from 5% to 10% of the valuation limit(2) ; and

ii. Decrease the Loan-to-Value (LTV) limit for housing loans granted by financial institutions regulated by MAS to these buyers from the current 80% to 70%.

The measures will take immediate effect on 30 August 2010.

2 The Government’s objective is to ensure a stable and sustainable property market where prices move in line with economic fundamentals. The property market is currently very buoyant. While the rate of price increase of private residential properties has moderated in the last 3 quarters, prices have still increased significantly by 11% in the first half of 2010, and price levels have now exceeded the historical peak in the second quarter of 1996.

3 While Singapore has enjoyed strong economic growth in the first half of 2010, our economic growth is expected to moderate in the second half of the year. There are also still uncertainties in the global economy. Should economic growth falter and the market corrects, property buyers could face capital losses, with implications on their own finances and the economy as a whole. Moreover, the current low global interest rate environment will not continue indefinitely, and higher interest rates could have severe implications for buyers who have overextended themselves. Therefore, the Government has decided to introduce additional measures now to temper sentiments and encourage greater financial prudence among property purchasers.

Extending the Holding Period for Imposition of Seller’s Stamp Duty (SSD) on Residential Properties Sold from 1 Year to 3 Years

4 The Government imposed in February 2010 a seller’s stamp duty (SSD) for sellers who buy residential properties(3) on or after 20 February 2010 and sell them within a year of purchase.

5 For residential properties bought(4) on or after 30 August 2010, SSD will be imposed if these properties are sold within three years of purchase. Specifically, the SSD levied on residential properties will be revised to as follows:

a) Sold within the first year of purchase, i.e. the property is held for 1 year or less from its purchase date – The full SSD rate (1% for the first $180,000 of the consideration, 2% for the next $180,000, and 3% for the balance) will be imposed.

b) Sold within the second year of purchase, i.e. the property is held for more than 1 year and up to 2 years – 2/3 of the full SSD rate.

c) Sold within the third year of purchase, i.e. the property is held for more than 2 years and up to 3 years – 1/3 of the full SSD rate.

No SSD will be payable by the vendor if the property is sold more than 3 years after it was bought.

6 The extended SSD will not affect HDB lessees as the required Minimum Occupation Period for HDB flats is at least 3 years.

7 IRAS will be releasing an updated e-tax guide on the circumstances under which SSD will apply and the procedures for paying SSD. The e-tax guide will be available at www.iras.gov.sg. Taxpayers with enquiries may call IRAS at 6351 3697 or 6351 3698.

Increase the Minimum Cash Payment from 5% to 10% of the Valuation Limit for Property Purchasers with one or more outstanding Housing Loans

8 Previously, property buyers have to make cash payment of at least 5% of the valuation limit(5) . With effect from 30 Aug 2010(6) , the cash payment is increased from 5% to 10% of the valuation limit(7) . This measure is applied only to buyers of private residential properties, Executive Condominiums, HUDC flats and HDB flats (including those under the Design, Build and Sell Scheme, or DBSS flats) who are taking housing loans from financial institutions regulated by MAS and who already have one or more outstanding housing loans at the time of applying for a housing loan for the new property purchase.

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

9 The LTV limit is lowered from 80% to 70% with effect from 30 Aug 2010(8) for borrowers who have one or more outstanding housing loans (whether from HDB or a financial institution regulated by MAS) at the time of applying for a housing loan for the new property purchase. Borrowers who do not have any outstanding housing loans continue to have an LTV cap of 80%. These rules apply to housing loans granted by financial institutions for private residential properties, Executive Condominiums, HUDC flats and HDB flats (including DBSS flats).

10 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 utilise 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.

11 Financial institutions’ lending standards have remained prudent and the asset quality of housing loans has stayed robust, with the non-performing loans ratio at less than 1% as at Q2 2010. Nonetheless, there are signs that more housing loans are originating at higher LTV bands of above 70%. In line with the objective of ensuring a stable and sustainable property market, lowering the LTV limit sends a clear signal to financial institutions to maintain credit standards, and encourages greater financial prudence among property purchasers already servicing one or more outstanding housing loans.

Adequate Supply in the Pipeline

12 The Government will also continue to ensure that there is adequate supply of housing to meet demand. In the second half 2010 GLS Programme, we have made available sites that can yield about 13,900 private housing units, of which about 8,100 units will be from sites on the Confirmed List. This is the highest potential supply quantum in the history of the GLS Programme. We will inject an even larger supply of private housing in the first half 2011 GLS Programme, if demand continues to be strong.

13 Apart from the supply from the GLS Programme, there are also 61,800 uncompleted units of private housing from projects in the pipeline as at 2Q2010(9) . Of these, 32,600 units were available or could be made available for sale. These comprised units that had been launched for sale by developers, units that had pre-requisite conditions for sale(10) and which could be launched for sale immediately, as well as units with planning approvals for which pre-requisite conditions for sale could be obtained quickly from the Government and made available for sale(11) .

14 The Government will continue to monitor the property market closely and will introduce additional measures if required later, to promote a stable and sustainable property market.

Issued by the Ministry of National Development, Ministry of Finance and Monetary Authority of Singapore

(1) Financial institutions are required to conduct checks with HDB and with one or more credit bureaus on whether the buyer has an outstanding housing loan at the time of applying for a housing loan for the new property purchase. For joint buyers, if either buyer has an outstanding housing loan, the joint buyers will be considered as having an outstanding housing loan.

(2) This is in addition to the cash over valuation amount that has to be paid in cash.

(3) The SSD will apply to the transfer or disposal of interest (including sale and gifts) of residential lands and residential units (whether completed or uncompleted).

(4) The date of purchase for computation of the holding period for SSD shall be the date when a buyer (i.e. Buyer A) exercises the option to purchase the property, or signs the sale and purchase agreement, whichever is earlier. The date of resale of the property shall be the date when the subsequent buyer (i.e. Buyer B) exercises the option to purchase the property from Buyer A, or signs the sale and purchase agreement, whichever is earlier.

(5) The amount of CPF monies plus housing loan taken for the purchase of the property cannot exceed 95% of the valuation limit (defined as the lower of property value or property price).

(6) The 10% minimum cash payment will apply to transactions where the date on which the option to purchase (OTP) was granted falls on or after 30 August 2010; or if there is no OTP, where the date of the sale and purchase agreement falls on or after 30 August 2010.

(7) Therefore, the amount of CPF monies plus housing loan that can be used for the purchase of the property will be reduced from 95% to 90%.

(8) The 70% LTV limit will apply to transactions where the date on which the option to purchase (OTP) was granted falls on or after 30 August 2010; or if there is no OTP, where the date of the sale and purchase agreement falls on or after 30 August 2010.

(9) These refer to new development and redevelopment projects with planning approvals, i.e. either a Provisional Permission (PP) or Written Permission (WP).

(10) These refer to private residential developments with Housing Developer Licence and Building Plan Approval. Under the Housing Developer (Control and Licensing) Act, a sale licence must be obtained for a project with more than 4 units, if the developer intends to sell uncompleted residential units in the development. However, the sale of the residential units can only commence with the approval of the building plans of the development.

(11) These refer to uncompleted private residential developments without pre-requisites for sale but with WP or PP granted. The sale licences could be obtained within 5 working days and building plan approvals could be obtained within 7 working days from the date of application for cases where clearances from various technical agencies are obtained and relevant documents are in order during formal submissions.

HOME owners wanting to move and hoping for an 80 per cent loan on a new property will now have to produce evidence that they have sold their existing home.

The proof must come in the form of a signed sale and purchase agreement and a certificate showing that the buyer of their current property has already paid the stamp duty for the deal, said the Monetary Authority of Singapore (MAS) yesterday.

The Government unveiled on Monday a range of measures designed to dampen property speculation, including tighter lending rules for home owners with existing mortgages looking to buy another property.

They will now have to fund a 30 per cent downpayment for the new property, up from 20 per cent previously, and can borrow up to only 70 per cent of the value, down from 80 per cent.

The moves prompted questions from many home owners unsure whether they would qualify for 80 per cent financing if they intended to sell their existing property – or were in the process of doing so – and move into a new one.

The MAS clarified yesterday that borrowers who have sold their existing homes, but are still in the process of completing the sale, will still qualify for an 80 per cent loan provided they have supporting evidence of the sale.

For private property, this includes a signed sale and purchase agreement and a certificate from the Inland Revenue Authority of Singapore (Iras) showing that stamp duty has been paid by the buyer of the existing home.

For HDB flats, the MAS requires an approval letter from the Housing Board to the seller within two weeks from the date of the first sales appointment.

The home owner should also provide additional information, such as a letter from the bank providing the current housing loan, stating that the borrower will discharge his outstanding loan by the time the property sale is completed.

Industry analysts predicted yesterday that the stricter lending rules will mean lengthier negotiations between buyers and sellers.

PropNex chief executive Mohamed Ismail said that while it usually takes about 12 weeks for a sale to be completed, sellers may now negotiate for 14 to 16 weeks.

‘This gives them time to look for a new home, get a loan and move out of their property,’ he said.

HDB home owners are required to move out of their existing home upon completion of its sale, usually eight weeks after the first sales appointment.

But sellers may negotiate mutual agreements with buyers that allow them to stay beyond the sale completion date as a condition for selling the flat, said a 40-year-old property agent who declined to be named.

Banks that The Straits Times spoke to yesterday said they had been sent a new set of home loan rules by the MAS.

A circular issued on Tuesday by the MAS stipulated that banks had to ‘conduct comprehensive checks’ on borrowers with credit bureaus and the HDB.

OCBC Bank head of consumer secured lending Phang Lah Hwa confirmed that the bank could offer 80 per cent financing ‘to genuine home buyers who have sold their existing homes… provided these customers can show evidence of the sale of the existing property at the point of loan application’.

Home owner Ming Fang Goh, 30, who is looking for an investment property, has mixed feelings about the new rules, but thinks they could be a ‘blessing in disguise’.

‘If the cooling measures help to bring prices down by 10 per cent, then even with a 30 per cent downpayment, some investment homes could become more affordable.’

Supporting documents

WHAT home owners need to have to qualify for an 80per cent loan if they already have an outstanding loan:

· For private property, the supporting documents must include the signed sale and purchase agreement indicating the borrower has sold his existing property, and a certificate from the Inland Revenue Authority of Singapore showing stamp duty has been paid by the person who bought the existing property from the borrower.

· For HDB flats, the supporting documents must include the approval letter from the HDB to the seller within two weeks from the date of the First Appointment.

The borrower should also provide supplementary information, such as a document from the financial institution that provided the outstanding housing loan, stating the outstanding loan will be discharged on that existing property by the completion of the property sale.

They must sell overseas home within six months of buying HDB flat

PEOPLE who own a home overseas will still have to comply with the tough new rules on property ownership if they want to buy an HDB resale flat.

The clarification yesterday came amid uncertainty over who might or might not be exempt from the rules announced on Monday.

The new regulations state that if you buy an HDB resale flat you must dispose of any additional private property within six months of the HDB purchase.

That rule also applies to people who own homes offshore, according to the HDB yesterday. This means an overseas property must be sold within six months of buying an HDB resale flat.

And an owner of a non-subsidised HDB flat who has yet to meet his minimum occupation period (MOP) of five years will also not be allowed to buy a private property locally or abroad.

How new financing rules affect owners of homes offshore was also made clearer yesterday.

Under the revised regulations, a buyer with a mortgage on a local property must stump up a downpayment of 30 per cent when buying an additional property. This is up from 20 per cent previously.

And at least 10 per cent of this deposit must be in cash – up from 5 per cent before – with the rest coming from his Central Provident Fund (CPF) accounts.

But the Monetary Authority of Singapore (MAS) said that a buyer with a home loan for an overseas property will not be subject to these financing rules if buying an additional property here.

However, the MAS said it ‘expect(s) financial institutions to take into account the borrower’s outstanding loans when making their credit assessment’.

Industry players say that the new rules effectively delineate the HDB resale market as ‘public housing’, reserved for those whose HDB flat will be their only property, whether here or abroad.

They will also put pressure on permanent residents (PRs) who might own a home in their native country to choose where they want to be based permanently.

PRs make up about one in five resale flat buyers, and some Singaporeans have blamed the influx of PRs in recent years for the soaring prices of these homes.

Mr Colin Tan, research and consultancy director of Chesterton Suntec International, said the new rules were similar to an income ceiling. ‘Basically, it seems to be saying: If you can afford to own a private property then you don’t deserve to own an HDB flat,’ he said.

While the new rules are aimed at keeping HDB flats for owner occupiers and not for investment purposes, Mr Tan felt that exceptions should be made for genuine cases such as retirees looking to monetise their overseas assets through renting out an offshore property.

But enforcement and implementing penalties for those who flout the rules would be a challenge, say experts.

Mr Steven Tan, executive director of residential at OrangeTee agency, said enforcement would be difficult when buyers pay for overseas property all in cash.

He added that the new rules could be an extension of an existing one that prevents owners of build-to-order flats and executive condominiums from buying private property during the five-year MOP.

Ms Flora Lam, 32, a PR from Malaysia, said the rules had placed her in a tough spot as she would now have to sell her Malaysian home if she wanted to buy a resale flat. ‘I feel like I have to decide now where I want to be based and it’s a tough call to make. Maybe I’ll continue renting before I make up my mind,’ she said.

The Housing and Development Board (HDB) will increase the Minimum Occupation Period (MOP) of non-subsidised flats from three to five years.

It said this will reinforce the message that flats are meant for long-term occupation and dampen demand from those who are not in urgent need of housing.

Buyers of these flats will also be banned from concurrently owning both an HDB flat and a private residential property within the MOP.

Private property owners who buy a resale HDB flat must now dispose of their private residential property within six months from the date of flat purchase.

HDB said this will help ensure buyers purchase flats only when they have the intent of staying in it for long term and ensure equitable treatment for all flat lessees during their MOP.

Ownership of private properties by HDB lessees will be allowed after the MOP.

The changes will apply to resale applications received by HDB from Monday.

The Prime Minister in his National Day Rally speech on Sunday said more will be done to ensure that HDB flats will remain within reach of first-time buyers.

HDB will ramp up the supply of new flats, Design, Build and Sell Scheme (DBSS) flats and Executive Condominiums (ECs) substantially to meet the housing needs of first-time property buyers.

It will be offering more than 16,000 new flats this year.

If demand remains strong, HDB said it’s prepared to launch up to 22,000 new flats next year.

Over two years, it will offer more new flats than the total flats of 35,400 in Toa Payoh town today.

In addition, it will release more land for tender in 2010 to yield an estimated supply of 3,000 DBSS flats and 4,000 ECs.

In 2011, HDB will release land sites for another 4,000 DBSS flats and 4,000 ECs, if demand is sustained.

To widen their housing options, HDB will allow first-timer households with monthly income of between S$8,000 and S$10,000 to buy new DBSS flats with a CPF Housing Grant of S$30,000.

Similar to the purchase of ECs, the HDB concessionary loan will not be available for these buyers.

This revision will be applicable to DBSS projects launched for public sale after Monday.

To help households get their new flats faster, HDB has also streamlined the Build-to-Order (BTO) processes to allow flat buyers collect keys to their new homes six months earlier.

Buyers of projects launched in mid-2011 onwards will generally need to wait for two and a half years to collect the keys instead of the current three years.

The red-hot public housing market is set to cool significantly now that private home-owners including speculators have been effectively shut out of the market. Market watchers say recent rapid growth in HDB resale prices will moderate as the pool of potential buyers grows smaller, and more flats are put on sale. The new rules, unveiled yesterday, ‘will have great ramifications’ on the market, said property agency PropNex’s chief executive Mohamed Ismail, as they will ‘reduce speculation and short-term investment’. He predicts that HDB resale transactions will fall in the second half of the year by 10 per cent from the same period last year. Median values of cash upfront paid by buyers – known as cash-over-valuation – which hit a record $30,000 in the second quarter, may dip 10 per cent by year’s end and by 20 per cent next year, he said. HDB resale flat prices shot up 4.1 per cent in the second quarter, smashing records for the eighth straight quarter, prompting concerns that prices were beyond the reach of Singaporeans. Jones Lang LaSalle’s head of research for Singapore and South-east Asia, Dr Chua Yang Liang, said the new policy was well directed as it is ‘more targeted at reducing speculative buying and not affecting (genuine) occupier demand’. ‘This would promote a healthier investment climate for the Singapore residential market in the longer term. HDB resale flat prices could moderate to 1 to 2 per cent per quarter,’ said Dr Chua. He also observed that while the Government has maintained its stand about not interfering with the pricing of HDB resale flats, the stricter rules on ownership have now placed these properties firmly in the ‘public housing’ category.

Some home-seekers had lobbied the Government to cap or remove the cash-over-valuation payments for resale flats, but this aspect ‘is more about market transactions, so they’ve left that to the market’, Dr Chua said. ‘But when it comes to ownership, I think it’s more of a larger policy issue. The Government does not want people to hoard public housing and cause prices to go up.’ National Development Minister Mah Bow Tan said at a briefing yesterday that the new rules were meant to ‘ensure equitable treatment’ of all flat-owners during the minimum occupation period, which is now five years, up from three years.