Singapore property cooling measures will remain, says the Monetary Authority of Singapore (MAS).
Transactions in 2016 for residential properties have seen an increase thanks to aggressive sales, project launches and reasonable selling prices. This rising trend continued up to the 1st quarter of 2017 due to low interest rates and rising incomes. Dealings in the 1st quarter increased by almost 40% versus the average quarterly transactions since the TDSR or the Total Debt Servicing Ratio framework was implemented in 2013.
MAS managing director, Ravi Menon says that the demand for private residences continues in spite the low interest rates. This was his official statement in the central bank’s 2016/17 annual report. He adds that it is not the right time to ease the cooling measures.
Singapore’s residential property prices have fallen by almost 12%. This is after 14 successive quarters of decline.
The Singaporean government has implemented macro prudential measures since 2009. Macro prudential measures are commonly known as property cooling measures. The purpose of which is to promote sustainable financial prudence when it comes to the residential property market.
Calibrated adjustments to the SSD or Seller’s Stamp Duty and TDSR framework, were in made in March in response to market conditions and feedback.
Menon, however, stressed that the adjustments made do not indicate changes in the property cooling measures. The adjustment, he says, are made only for particular purposes.
SSD rates decreased by four percentage points. The residential property holding period had been decreased from four years to three years.
Owners who sell a residential property within three years of purchase will have to pay a tax of 4% to 13% of the property value. This is under the revised SSD framework.
Menon also mentions that the SSD rules have been adjusted because speculative flipping or overturning of properties have been significantly declining.
The government has removed the TDSR for mortgage equity withdrawal loans with LTV or loan-to-value ratios of 50% and below. The move was made in response to feedback from borrowers that the TDSR framework is constricting their ability to liquidate properties when they retire. This, however, affects a small group, says Menon. He approximates that mortgage equity loans that were not included in the TDSR framework, constitutes only 1% of private housing loans given in the last three months.
Changes made to the property cooling measures renewed interest in the real estate market. Investors are still interested for as long as yield and safety is evident in the property market.
Menon notes that property markets in China, South Korea, Hong Kong and New Zealand have been buoyant. Respective authorities have introduced property cooling measures for the last six months. He recommends vigilance so that preventive measures do not encourage investor demand into the Singaporean market. Loosening the measures might send a wrong signal.
If measures were eased, it would be sending the wrong signal, Menon adds. He emphasized that the MAS and the Ministry of Finance (MOF), together with
The MND (Ministry of National Development) shall continue to keep a hawk’s eye over the property market. Property prices should be aligned with income trends, over the medium-term.