Weed out speculators
The government aims to eliminate property speculators from the market, rather than put off first-time buyers and genuine home occupiers, is the verdict of Dr Chua Yang Liang, head of research in South East Asia for real estate services firm Jones Lang LaSalle. Although, the measures were introduced later than expected, Dr Chua welcomes them ‘as the impact is more targeted at reducing speculative buying and not affecting occupier demand.’ He argues that this strategy promotes a healthier investment climate for the Singapore residential market in the longer term.
Li Hiaw Ho, executive director at multinational real estate corporation CBRE Research concurs. His reading of the legislature is that the new measures will mean ‘only those who have a strong cash position will be able to enter the residential market for investment purposes.’
Second-home Owners Beware
The increase in cash down payment – buyers of second homes must pay 10 per cent of the new home’s value in cash, up from 5 per cent – and the decrease in loan-to-value ratio – if you have an existing mortgage you can now only borrow up to 70 per cent of the property’s value, down from 80 per cent – are, in Mr Li’s opinion, aimed at discouraging property speculators from over-extending and finding themselves in financial difficulties.
First-time Buyer Bonus
One of the main beneficiaries, says Mr Li, are Singaporean first-time buyers with monthly household income of $8,000 - $10,000, as they can now buy DBSS flats – (public housing properties, which are designed, built and sold by private developers), as well as HDB’s Executive Condominium apartments – with a CPF housing grant of $30,000. However, Mr Li estimates that HDB ‘upgraders’ (public housing owners looking to upgrade to private properties) will shrink, as this group would now have to wait five years, instead of the previous three, before they can sell without now paying a punitive seller’s stamp duty.
HDB vs Private Home
The other major development is that an owner of private property, who buys a HDB flat, must then dispose of the private property within six months. Mr Mohamed Ismail, CEO of Singapore real estate agency, PropNex, believes that this ruling will have massive ramifications on the property market. ‘About 10% of all HDB resale purchases are by private property dwellers’ he says, and believes that this 10 per cent may be investors ‘who will now not be able to purchase HDB flats and keep their private property for investment purposes.’ Despite this, Dr Chua believes that private property prices are ‘unlikely to be adversely impacted, but could moderate to a more sustainable level of 2-3% per quarter going forward.’
The consensus appears to be that prices across private and public housing will moderate in the future, with developer’s sale volume now expected to come down and HDB expected to build 22,000 new flats in 2011. Upgraders and purchasers of second homes are likely to be hardest hit, along with more vulnerable property developers, while those with the means to purchase their first home, whether private or HDB, should not be adversely affected.
How will the new measures on buying, selling and owning private and public property affect you? Break it down in an easy to read table.
Introducing each new measure, the body that is managing it, and the probable impact on you.
August 2010 measures:
Statutory Board | Measures | Impact |
Housing Development Board (HDB) | Allow households with income of between $8,000 to $10,000 to buy new DBSS flats with a $30,000 CPF Housing Grant | Improves affordability for sandwiched class, should fuel short to medium term demand for DBSS flats |
HDB | Increase supply of new flats, DBSS and ECs | Ensure land price stability in the mid to long term but no immediate effect on prices |
HDB | Shorten completion of BTO flats | No likely impact on prices nor reduce flat applications until shorter delivery timeline is physically felt |
HDB | Increase Minimum Occupation Period (MOP) for non-subsidised flats to 5 years | Immediate to short term reduction of demand for public and private housing market particularly those multiple ownership i.e. owns a non-subsidised HDB flat and a private property. Limited information on this market size. |
HDB | Disallow concurrent ownership of both HDB flats and private residential properties within the MOP | |
Urban Redevelopment Authority (URA) | Increase holding period for imposition of Seller’s Stamp Duty (SSD) from 1 to 3 years | Increase costs for short term speculators but limited impact on genuine long term investors |
URA | For buyers with 1 or more outstanding housing loans
| Effectively reduces the affordability for buyers with outstanding home loans No impact on first time home buyers and buyers with high liquidity |
