Singapore raises ABSD rates and tightens home loan limits

The measures were imposed over rising prices and demand.

The Singapore government will raise Additional Buyer’s Stamp Duty (ABSD) rates and tighten Loan-to-Value (LTV) limits on home purchases as a way “to cool the property market and keep price increases in line with economic fundamentals.”

The Monetary Authority of Singapore (MAS) announced that the ABSD rates for Singapore Citizens (SC) and Singapore Permanent Residents (SPR) buying their first homes will be retained at 0% and 5% respectively. The rates for all other individuals will be raised by 5 ppt, whilst for entities, they will be up by 10 ppt.

An additional ABSD of 5% was also introduced. It is non-remittable under the remission rule (payable on the purchase price or market value, as applicable) for developers purchasing residential properties for housing development.

MAS noted that for purchases made jointly by two or more parties of different profiles, the highest applicable ABSD rate will apply.

Married couples with at least one SC spouse, who jointly purchase a second home, can continue to apply for a refund of ABSD, as long as they sell their first one within six months after the date of purchase of the second residential property or the issue date of the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) of the second home.

There will be a transitional provision for cases where an Option to Purchase (OTP) has been granted by sellers to potential buyers on or before 5 July 2018, and this OTP has not been varied on or after 6 July 2018. “For such cases, the current ABSD rates, instead of the revised ABSD rates, will apply if the OTP is exercised within 3 weeks of this announcement (i.e. exercised on or before 26 July 2018) or the OTP validity period, whichever is earlier,” MAS added.

Meanwhile, LTV limits will be tightened by 5 ppt for all housing loans granted by financial institutions (LTV). LTV limits for mortgage equity withdrawal loans (MWLs) will also be tightened.

Limits for a borrower with no outstanding home loan will be lowered to 75%, whilst it will be 45% for a borrower with an outstanding home loan.

MAS said it decided to implement measures due to the fact that private home prices are rising, whilst demand is growing. This echoed MAS managing director Ravi Menon’s statement on the state of the housing property market.

“The sharp increase in prices, if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply,” MAS said.