What Happened In The World Of Finance Over The Past Week: Relaxation of Property Cooling Measures In Singapore

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Let’s take a look at interesting developments over the past week in the world of finance that investors should take note of. One major development is the Singapore government’s easing of its property cooling measures.

Calibrated adjustments

The government announced last Friday that it has relaxed certain property cooling measures. The changes, which came into effect on 11 March 2017, relate to the seller’s stamp duty (SSD) and the total debt servicing ratio (TSDR) framework.

The SSD is a stamp duty that owners of residential properties have to pay if they sell their properties within a certain timeframe. The rates vary depending on how long the property has been owned. Here’s a table showing the old and new SSD rates:

SSD table
Source: Government press release

As for changes to the TDSR, now, the 60% TDSR-threshold will not be applicable to mortgage equity withdrawal loans that have loan-to-value (LTV) ratios of 50% or below. Under the current TDSR framework, a person’s total loan obligations cannot exceed 60% of his/her monthly gross income.

The government explained the rationale for the change in the TDSR as follows:

“[S]ome borrowers have given feedback that the TDSR framework has limited their flexibility to monetise their properties in their retirement years, i.e. to borrow against the value of their properties to obtain additional cash. MAS [Monetary Authority of Singapore] will therefore relax the rules to meet such needs.”

Other property cooling measures – such as the  Additional Buyer’s Stamp Duties (ABSD) rates and LTV limits – were not changed. That’s because the government thinks that transaction volumes in  the private residential market “remain healthy.” The press release also mentioned:

“While the growth in outstanding housing loans has moderated, it is prudent for households to further build up their financial buffers to protect against future interest rate increases or any losses in income. The Government is therefore retaining the current ABSD rates and loan-to-value limits.”

The move by the government to ease its property cooling measures caught some by surprise as the Budget 2017 speech delivered in late February did not contain any indication that a relaxation of the measures would come.

Eugene Lim, the key executive officer of property agency ERA, spoke to the press regarding the easing of the property cooling measures and said that it is not likely to push up prices of properties in both the primary and secondary market.

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