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Singapore property market finally sees slight easing - and a new stamp duty
SINGAPORE announced on Friday targeted tweaks to property market measures and a new stamp duty - moves that observers said are in response to recent developments in the property market and the wider economy.
The release by government agencies said that Singapore will lower the seller's stamp duty (SSD) by four percentage points for each tier and shorten its holding period.
The Total Debt Servicing Ratio (TDSR) will also no longer apply to mortgage equity withdrawal loans with loan-to-value ratios of 50 per cent and below.
But even as the government eased these measures, a new stamp duty called the Additional Conveyance Duties (ACD) was introduced to plug a loophole in residential property transactions undertaken via transfer of shares in property-holding entities.
These changes take effect on March 11.
They are the Singapore government's first major response in four years to recent developments in the property market. But unlike Friday's measures, those unveiled in early 2013, including the TDSR, were aimed at cooling a red-hot market.
Market response to Friday's measures, announced just before noon, was swift. The FTSE ST Real Estate Holding and Development Index was up 3.8 per cent at the day's high of 838.24 at 12.39 pm.
Stressing that developers have gone through an "arduous" time since 2013, R'ST Research director Ong Kah Seng said: "These slight relaxations were indeed very hard-earned."
However, industry players say that the impact on the property market will be limited, as the Additional Buyers' Stamp Duties (ABSD), loan-to-value (LTV) and TDSR will still curb demand. They also say that Friday's measures are aimed at ensuring that the property market's development is in line with wider economic trends. Interest rates will be rising amid Singapore's slower growth; the construction sector has also been performing badly.
Christine Li, director of research at Cushman & Wakefield, said: "Once certain segments in the property market fall out of line with the wider developments, the government will try to release the pressure, tweak it to make it more equitable."
The joint statement, issued by the Finance Ministry, the National Development Ministry and the Monetary Authority of Singapore (MAS), said the current set of property market measures are still needed to promote a sustainable residential property market and financial prudence.
Thus, there will be no changes to the ABSD rates and LTV limits.
The release noted that transaction volumes in the private residential property market remain healthy, as interest rates are low and income grows. But analysts expect interest rates to rise at a faster pace this year. Last week, US Federal Reserve chairman Janet Yellen said that a hike this month would be "appropriate".
So while growth in Singapore's outstanding housing loans has slowed, households should still be "prudent" in shoring up financial buffers, said the release.
Even so, the government noted that property sales within a four-year window timeframe has fallen significantly over the years since the SSD was introduced. The SSD, a transaction cost, must be paid by those who sell a residential property within a holding period. This was extended in 2011 to a four-year window.
Now, the holding period is shorter at three years. Rates are also lowered by four percentage points for each tier. They now range from 4 per cent to 12 per cent. These rates will apply to all residential property purchased on and after March 11.
Industry watchers point out that the impact from these changes will be minimal - as buyers are used to a mindset of longer-term investment, shortening of the holding period is unlikely to encourage a speculative mindset. But for those under financial stress, "easing of this measure would reduce or remove the SSD penalty", said JLL director of research Ong Teck Hui.
Also coming into effect on March 11 is a slight easing of the TDSR framework. Mortgage equity withdrawal loans with LTV ratios of 50 per cent and below are not subjected to the TDSR. These are loans that allow borrowers to use residential properties as collateral to get cash.
This comes after MAS received feedback from borrowers that current rules restrict their flexibility to monetise their properties in their retirement years.
But observers say this move is unlikely to stoke demand. "It would likely only promote property purchases by asset-rich individuals," said Desmond Sim, head of CBRE Research for Singapore and South-east Asia.
Even as the market reacted positively to the new easing measures, the government moved swiftly to ringfence a loophole seen in transactions of residential property.
CapitaLand had in January sold its 100 per cent stake in Nassim Hill Realty, which owned the remaining 45 units at The Nassim, to Wee Cho Yaw's family firm Kheng Leong for S$411.6 million.
Only a tax of 0.2 per cent of the net asset value was levied for this transfer. If it was a direct purchase of a residential property, it would have incurred a buyer's stamp duty and also the ABSD.
In an extremely rare move on Friday, an amendment to the Stamp Duties Bill was introduced - and passed - within the same sitting in Parliament. This will close up the stamp duty rate differential, said Lawrence Wong, Second Minister for Finance, who introduced the amendment.
The last time a Finance Ministry measure saw such a rushed treatment is understood to be for the introduction of the SSD in 2010. "We adopt this approach because the measure involved is market sensitive and needs to be effected shortly after the bill has been announced," said Mr Wong.
Starting March 11, the ACD will be levied on the transfer of shares by significant owners of certain property holding entities (PHE). Significant owners are those who presently hold at least a 50 per cent equity interest in the PHE, or else hold at least 50 per cent interest after the transfer.
Such PHEs are defined as those with residential properties here that form at least 50 per cent of its total tangible assets, and will be captured under this new requirement. This can include partnerships, trusts, or companies.