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

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

LYNETTE KHOO 
THU, JUL 05, 2018 - 7:49 PM

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. 

More details in https://www.businesstimes.com.sg/real-es...rty-market

Perfect storm for Oxley? The G imposing more curbs + CBs raising rates + Super leveraged balance sheets woefully undercapitalised.

can spiral down really fast if not careful. 

I wouldn't touch their bonds as well.

The beauty of many of our mid-small size developers (Oxley, KSH, Chip Eng Seng etc) is that there keep their land bank sizes fairly small and constantly sell their units to retail investors quickly, even before the projects are TOP'd. There is a high churn rate of units. As a result, most of the risk is passed to the retail investors. Due to the revenue recognition model and cash flow collection of projects, many of these results are not shown in the balance sheet until years later. this is also why for valuing ppty counters, the RNAV model is utilized.

One classic example is Alexandra Mall where retail investors were left to suffer financially with vacant shop units after buying from Chip Eng Seng; while CES recorded profits for the project. This are the kind of shrewd businesses who try to secure secured cashflow coupled with a leverage balance sheet we should look for.

<Previously vested in KSH, Chip Eng Seng, Oxley)

(06-07-2018, 10:17 AM)CY09 Wrote: The beauty of many of our mid-small size developers (Oxley, KSH, Chip Eng Seng etc) is that there keep their land bank sizes fairly small and constantly sell their units to retail investors quickly, even before the projects are TOP'd. There is a high churn rate of units. As a result, most of the risk is passed to the retail investors. Due to the revenue recognition model and cash flow collection of projects, many of these results are not shown in the balance sheet until years later.

That was true in the past. I don't think its land bank is even anywhere near fully sold. Authorities are alert this time round and acted ahead of the curve.

Oxley boasted it has the largest land bank in Sg now. Won't be surprised if on a land bank/market cap perspective, Oxley is way higher than others.

Sometimes it is better to do things quietly - beating drums and ringing bells when the G is determined to arrest home prices before hikes+next election is asking for trouble.  

Oxley had done well being nimble and jumping thru hoops in the past (e.g shoeboxes) but the hunter is getting sharper as well.

Depend on next 1 to 3 yrs sales volume. Unlike few years earlier. This round some Developers will be hit real hard if they can’t sell their developments. I am still surprise no developer is gone since 1st ABSD. This might change soon

the run up in private home prices , could it be due to the recent awareness that the old hdb flats prices (with many with lesser and lesser remaining leases) will become zero...triggering a surge to find new leasehold/resale leasehold private homes? for old resale leasehold private homes at least the mca can apply/appeal to top up of leases collectively on behalf of home owners?

It is a vicious cycle.

Government happy to sell land for top price at bidding
Property developer need to make a decent profit, mark up selling price
retail buyers no choice if needed a place then buy property at a higher price


Government see retail buyers stretched in their finances
then implement measures such as all the taxes for the retail buyers and property developers



the final equation, the government wins financially in any situation, the losers mostly the retail buyers
property developers with holding power can wait for the next cycle as the property cycles appear shorter recently


I am honestly worried about those who rush before midnight to sign on the dotted line, should the interest rate increases several time this and next year and should there be a major world event, I hope these people will have reserves to buffer the situation.

(07-07-2018, 11:13 PM)davidoh Wrote: It is a vicious cycle.

Government happy to sell land for top price at bidding
Property developer need to make a decent profit, mark up selling price
retail buyers no choice if needed a place then buy property at a higher price


Government see retail buyers stretched in their finances
then implement measures such as all the taxes for the retail buyers and property developers



the final equation, the government wins financially in any situation, the losers mostly the retail buyers
property developers with holding power can wait for the next cycle as the property cycles appear shorter recently


I am honestly worried about those who rush before midnight to sign on the dotted line, should the interest rate increases several time this and next year and should there be a major world event, I hope these people will have reserves to buffer the situation.

they will have some buffer as the TDSR will allow some spare income for servicing the debt. 

Interest rate rise might be the biggest problem. If the trade war causes global hyperinflation, we could see interest rates go up more then ever before.

(08-07-2018, 12:53 AM)BlueKelah Wrote: ..
Interest rate rise might be the biggest problem. If the trade war causes global hyperinflation, we could see interest rates go up more then ever before.

Forex is relative, what does "global" hyperinflation even look like 

It is quite obvious now all the policies are sharping up for 'one household to one property'.

Also, if you remember early last year, some developer escaped paying QC charges after an entity bought their unsold units at a bulk sale. I believe that move is still fresh in govt's memory.