SSD and LTV Measures Explained

In an effort to maintain a stable and sustainable property market the PAP government has introduced a new raft of measures. Singapore identifies the two that will affect you the most.

Seller’s Stamp Duty (SSD)
[The amount you must pay if you sell your property within a certain time period.]
The SSD has been raised from current three years to four years. You will now pay an SSD of 16%, 12%, 8% and 4% for residential properties which are bought on or after 14 January 2011, and are sold in the first, second, third and fourth year of purchase respectively.

Loan to Value (LTV)
[The amount a bank is able to loan you based on the value of a property you already own]
The LTV limit has been lowered from 70% to 60% for property purchasers who are individuals with one or more outstanding housing loans. If a corporation is purchasing a property, the LTV limit has been lowered to 50%.

Anti-Speculative, but Aspirational Home Owners Hit Too
Burgeoning house prices generally reflect a growing economy and GDP, something the Singapore government obviously wants to encourage. They do also though remain acutely aware that – even with previous property market moderation measures – the combination of low interest rates and a lot of money washing around in the marketplace, property prices could rise beyond sustainable levels for the average Singaporean.

The measures introduced are – especially when interest rates do eventually rise – designed to help prevent purchasers from overextending themselves financially. The raising of the SSD, for example, is aimed at putting off investors looking to make short-term gains – as SSD is payable regardless whether the property is eventually sold at a gain or loss. Notably, the SSD hike is squarely aimed at the private property market, as the required Minimum Occupation Period for HDB flats is five years.

Likewise, the reduction in LTV is aimed at property speculators – although this does raise questions about the PAP’s previously expressed sentiments about property ownership being a key component in Singaporean’s creating wealth for themselves – as it reduces the amount of money one can leverage on an existing property to purchase a new one. While borrowers who can show evidence that they have sold their existing properties will not be subject to the lower LTV limit when they buy a new property, it could be argued this would only benefit the super-rich, as most home owners would expect to take a loan on their current home before purchasing the next.

First-time homebuyers are, obviously, not affected by the new measure. However, those taking a second concessionary HDB loan must use the CPF refund and 50% of the cash proceeds from the sale of their previous flat before they are granted an HDB loan. This measure is a continuance of the PAP’s policy to try and ensure that eligible buyers, especially first-time buyers, purchase public housing in a financially prudent manner.