Govt raises ABSD, tightens LTV limits to cool Singapore property market

IN a bid to cool the residential property market and prevent prices from running ahead of economic fundamentals, the Singapore government has decided to raise the additional buyer's stamp duty (ABSD) and tighten loan-to-value (LTV) limits on residential property purchases.

The current ABSD rates for Singapore citizens and Singapore permanent residents (SPR) purchasing their first residential property will remain at zero and 5 per cent respectively.

But the ABSD rates for all other individuals will be raised by five percentage points and 10 percentage points for entities.

An additional ABSD of 5 per cent that is non-remittable under the Remission Rules (payable on the purchase price or market value, whichever is applicable) will also be introduced for developers buying residential properties for housing development.

For LTV limits, they will be tightened by five percentage points for all housing loans granted by financial institutions. These revised LTV limits will apply to loans for residential property purchases where the option to purchase is granted on or after July 6. But they do not apply to loans granted by HDB.

In line with the tightening of LTV limits for housing loans, LTV limits for mortgage equity withdrawal loans (MWLs) will be tightened to 75 per cent for a borrower with no outstanding housing loan for the purchase of another residential property; for a borrower with an outstanding housing loan, it will be 45 per cent for another residential purchase.

The surprise move came hot on the heels of the release of second-quarter flash estimates on Monday, which saw private home prices rapidly regaining the ground they lost since values started slipping five years ago.

With the 3.4 per cent rise in private home prices in the second quarter, prices have risen by a total of 9.1 per cent over four quarters since mid-2017. They had earlier taken 15 straight quarters of decline to push private home prices down 11.6 per cent by the middle of last year.

This steep price recovery has led market watchers to predict a new peak in private home prices by the end of this year.

"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," said the Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore in a joint statement on Thursday.

"Demand for private residential property has also seen a strong recovery, as transaction volumes continue to rise," the government said on Thursday.

"The government will continue to monitor the property market and adjust our policies as necessary, to maintain a stable and sustainable property market."