Some may consider it pre-mature and some, timely, but the Singapore government has announced a 5% increase on property stamp duties last Friday.
5% increase in stamp duties for developers, local and foreign buyers
The authorities’ latest move could be a reaction to the market exuberance that seems to forebode bubbling over. For many industry players who have hoped that the government’s rein on the series of property cooling measures increasingly met out since 2011 would be loosened, the tables seemed to have been turned.
From 7 pm last Friday, there will be a 5% increase in property stamp duties. This change applies to:
- Singapore citizens and Permanent Residents purchasing their second and subsequent properties
- Foreigners purchasing any property in Singapore, even their first.
The recent rise in private home prices has brought the consistent increase over 4 quarters to 9.1%. This hurried recovery may have prompted authorities to tighten property cooling measures ahead of time. Private home prices have however fallen 11.6% over 15 consecutive quarters or over the past 5 years.
The hardest-hit could be developers, especially those who have not yet replenished their land banks. There will now be an increase of the additional buyer’s stamp duty (ABSD) from 15% to 25% for entities purchasing residential properties for housing development. They have to now pay an upfront additional 5% of the property price. This may affect the collective sale market in the months ahead.
Shrinking loan-to-value (LTV) limits for property buyers
For the consumer, getting a loan will now also be more difficult. The loan-to-value (LTV) limit is now 5% lower.
For a local buyer looking to purchase a second or successive property costing $1 million, it means:
- Paying 5% more on stamp duties (paying $50,000 more than before)
- Only being able to loan $750,000 ($50,000 less than before)
There would essentially be a $100,000 shortfall, should the financial calculations be done before last Friday.
This move has prompted some industry analysts to estimate a new private property peak by the year-end. Some are concerned that this premature move may increase the number of vacant units in the market which may bring on an oversupply.