Combination of articles on 7th Round of Property Cooling Measures

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#1
The Straits Times
www.straitstimes.com
Published on Jan 12, 2013
PROPERTY COOLING MEASURES
Tighter loan limits, more cash upfront

Curbs 'temporary, to protect home buyers from destabilising correction'

By Esther Teo Property Reporter

HOME buyers will now have to stump up even more cash upfront after the Government moved to cool the property market in an environment of "extraordinarily low" interest rates.

The additional buyer's stamp duty (ABSD) - first introduced in December 2011 - will be raised between 5 and 7 percentage points across the board.

And the proportion of a home's value that a buyer can borrow, known as the loan-to-value (LTV) limit, will be slashed to as low as 20 per cent for certain buyers.

The minimum down payment for some buyers will also be hiked to 25 per cent. These changes affect those with at least one outstanding housing loan.

They were part of the seventh round of measures unveiled by Finance Minister Tharman Shanmugaratnam and National Development Minister Khaw Boon Wan at a press conference yesterday.

The measures are intended to help Singaporean couples buy their first home, which is the Government's first objective, and to protect all property owners from a price correction down the road, Mr Tharman said.

But he emphasised that measures such as the revised ABSD and tighter loan limits were "exceptional" ones put in place as counter-cyclical measures and are not permanent. Once the market has cooled, these measures will be reviewed, he added.

"Interest rates are abnormally low, abroad and in Singapore. That's why we've had to take this additional set of measures that we would not normally take, because we're not in a normal situation.

"So it's better that we calm the market now and get some softening of prices now than wait for a more destabilising correction later," he added.

For individuals getting a second housing loan on top of an outstanding one, the LTV limit will be cut to 50 per cent from 60 per cent. It will fall to 30 per cent if the loan term is more than 30 years or extends past the age of 65 of the buyer.

Those taking a third or subsequent housing loan will see their LTV slashed to 40 per cent or to 20 per cent if the loan term is more than 30 years or extends past age 65 of the buyer.

The LTV limit will also be lowered to 20 per cent from 40 per cent before for non-individual borrowers such as companies.

In addition, the minimum cash down payment required for borrowers who have one or more outstanding housing loans will be raised to 25 per cent from 10 per cent previously.

The ABSD will also be raised further and imposed on two new groups of buyers. Permanent residents purchasing their first home will now be slapped with an ABSD of 5 per cent while Singaporeans buying their second property will be charged a 7 per cent ABSD.

Certain reliefs will be provided, for instance, to eligible couples who have bought a second home but will dispose of the first.

Mr Lee Sze Teck, senior manager of training, research and consultancy at Dennis Wee Group, said it is worth noting that the Government said the ABSD measures and LTV regulations are temporary and will be reviewed later depending on market conditions.

"The Government is probably trying to reassure the market that they are not against foreigners and PRs investing in Singapore's property market. They imposed these measures because of extenuating factors in the market."

esthert@sph.com.sg

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The Straits Times
www.straitstimes.com
Published on Jan 12, 2013
Permanent residents hit by changes


By Rachel Chang

PERMANENT residents (PRs) now face unprecedented limits on their ability to buy property in Singapore.

To buy a first property, whether a private unit or a Housing Board resale flat, PRs must pay an additional 5 per cent stamp duty.

If they buy a second or subsequent property, the stamp duty is an extra 10 per cent, up from the current 3 per cent more.

Also, PRs who own an HDB flat can no longer sub-let their entire flats, although they may still rent out individual rooms.

Those already sub-letting their flats can do so only until the end of the current approved period.

Finally, while Singaporean flat owners can buy a private property and keep their HDB flats too, PRs will no longer be allowed this dual ownership: On buying a private property, they must sell off their flats within six months.

The changes take effect today.

PRs were stunned by the severe measures, which the Government, said Deputy Prime Minister Tharman Shanmugaratnam yesterday, had "thought hard about".

Although PRs have never been given access to new, subsidised HDB flats, this is the first time they are being "taxed" for all property purchases, private or public.

Mr Tharman said the move was "necessary, particularly because of the HDB resale market, where PRs are taking up a larger share of new buying".

While PRs own only a small proportion of HDB flats, they formed "a rising component of demand in the last year" for all forms of housing, he said.

There are 49,190 PR households that own HDB flats. Latest data show 2,142 PR-owned flats are rented out - about 5 per cent of flats approved for sub-let.

PRs last night were dismayed.

"It's not fair," said Chinese national Thomas Feng, on the new sub-let ban.

"In this case, why let PRs buy flats at all?"

The accountant, a Henan native in his early 30s, has been a PR since 2007 and owns a four-room flat in Kallang.

Myanmar software developer Zarni Win said she could accept the policy last year that set the duration of the sub-let limit at five years.

"But this new change is too much. What if we have a job posting overseas, then we have to continue paying a mortgage without staying in the flat?" said the 34-year-old.

Briton Francis Chandler, 41, an IT professional, who has been a PR since 2010 said: "The PRs I know are all living in their property. Whereas I know a lot of Singaporeans who have multiple properties for investment."

Others were resigned.

"Of course it is unfair," said Filipino architect Ram Poyaoan, 48, who owns a five-room flat in Pasir Ris. "But what can we do? It's like living in your uncle's house. You don't get the same treatment."

rchang@sph.com.sg

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The Straits Times
www.straitstimes.com
Published on Jan 12, 2013
Curbs imposed on loans for HDB flats


By Daryl Chin

NEW rules governing loans for HDB flats have been rolled out to ensure buyers do not overstretch their finances.

Starting today, the Monetary Authority of Singapore has capped the mortgage servicing ratio for loans granted by banks at 30 per cent of a borrower's gross monthly income.

There were no caps on this previously and banks were known to grant loans even if the repayments took up as much as 60 per cent of the monthly income, as long as the borrower was credit-worthy.

The new rules also state that if a buyer takes up an HDB loan, his mortgage servicing ratio is now reduced to 35 per cent, down from 40 per cent previously.

Although this new rule applies to both new flats bought directly from the Housing Board and resale units, National Development Minister Khaw Boon Wan said yesterday that it was the latter he was intent on targeting.

"Resale buyers tend to get their loans from commercial banks. Greater restrictions on lending are welcome because excessive credit doesn't do anybody any good, and it's always good to let go of some air from the market," he added.

SLP International's head of research Nicholas Mak said the new rules will force buyers to go for cheaper flats which are smaller or not as centrally located, simply because their purchasing power has been curbed.

Dennis Wee Group spokesman Lee Sze Teck said those who use up to 60 per cent of their monthly income to service their home loans are typically earning decent wages and have a good credit rating.

"But this is not considered prudent, particularly if an emergency crops up or if someone loses his job," he said.

Mr Timothy Kua, director of SmartLoans.sg, cited an example of a buyer who takes up a 30-year loan for a $700,000 flat. The loan is assumed to be 80 per cent of the flat's value, and the interest rate pegged at 1.5 per cent.

Based on a 40 per cent mortgage servicing ratio in the past, he would need to have a gross monthly income of $4,830.

For the same property, now at a 30 per cent ratio, he would need to make $6,440 a month.

"In short, someone making $4,830 could buy a $700,000 property in the past but can technically afford only a $525,000 property now," he said.

House hunters yesterday were taken aback by the stringent rules imposed.

Engineer James Leow, 26, had plans to buy a five-room resale flat near his parents' place in Ang Mo Kio this year.

"It's back to the drawing board for me. I need to rework my finances and see if I can even afford the area in the first place," he lamented.

Another measure, to tighten terms for granting HDB loans, will take effect on July 1. Buyers who go for a flat with less than 60 years remaining in its lease could be disallowed from using their Central Provident Fund savings if the lease is too short, and be forced to take shorter-term loans.

darylc@sph.com.sg

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The Straits Times
www.straitstimes.com
Published on Jan 12, 2013
No more massive EC units with new cap on maximum size


By Magdalen Ng

ENORMOUS executive condominium (EC) units are now a thing of the past, after new measures to curb their sizes were unveiled yesterday.

The maximum size of EC units - a hybrid of public and private housing attracting government subsidies - will be capped at 160 sq m, or 1,722 sq ft.

The size and prices of some EC units have been hot topics of late, after the sale of vast, swanky ECs.

One 4,349 sq ft penthouse unit, including a 1,600 sq ft roof terrace, at CityLife@Tampines went for $2.05 million last month.

Previously, developers of nonlanded private projects and ECs did not have to pay development charges for sky terraces as they were not treated as gross floor area (GFA).

With the new measures, taking effect from today, private enclosed spaces and private roof terraces will be counted as "bonus" GFA of a project and subject to development charges.

Also, developers of future EC sites from the Government Land Sales programme will be allowed to launch units for sale only 15 months from the date of award of the sites, or after the physical completion of the foundation works, whichever is earlier.

Minister for National Development Khaw Boon Wan said this would help to moderate bids.

On larger EC units, he said: "This is a very recent trend. EC units' sizes and pricing have been quite moderate and very much in keeping with what the market thinks the target buyers can afford but when they start exceeding 200 sq m and start charging $2 million, one should ask how can a $12,000 income group family afford such a unit."

The sale of new dual-key EC units will also be restricted to multi-generational families only. The units have two separate entrances, allowing grandparents, for instance, to live separately.

However, some dual-key owners had been renting out space.

Developer Qingjian Realty, which recently won a bid for an EC site in Punggol Way/Punggol Walk, is dismayed at the rules.

Qingjian deputy general manager Li Jun told The Straits Times it had planned about 100 dual-key units in the upcoming project, but will now have to consider reducing the numbers.

"There will definitely be some impact on demand," he said.

R'ST director of research Ong Kah Seng said: "The most evident measures for ECs address the recent controversies surrounding supersized units."

Mr Don Poh, who missed out on a dual-key unit at CityLife and settled for a four-bedroom unit instead, does not expect much to change with the move.

The self-employed 25-year-old said: "Many people will still want to live with their families. The appeal that you can do so, and still retain your privacy, remains."

songyuan@sph.com.sg

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The Straits Times
www.straitstimes.com
Published on Jan 12, 2013
NEWS analYSIS
Chilling wind over property market

But there is the risk that market will over-react and cause a deep freeze

By Aaron Low Assistant Money Editor

THE cooling measures announced yesterday will surely send a chilling wind throughout the property market in the weeks and months ahead.

The seventh and most comprehensive set of measures so far are targeted at those looking to park their excess cash in the local property market.

Singaporeans looking to buy more than one property will have to pay additional buyer's stamp duty of between 7 per cent and 10 per cent.

Their loan amounts will also be drastically slashed, as the Government took aim at those who are looking to profit from extremely low interest rates today.

Analysts such as Mr Alan Cheong, Singapore research head at Savills, were shocked at the move.

"It is as if I have a rodent problem, but I'm going to drop a nuclear bomb on this," he said.

The measures are, without a doubt, harsh. But will they prove to be an overkill?

From the Government's point of view, the moves were clearly needed to cool a market where prices are "running ahead of fundamentals", as Deputy Prime Minister and Finance Minister Tharman Shanmugaratnam said yesterday.

He also revealed that the set of measures had been prepared weeks ago and that they were "just waiting for fourth quarter numbers" to release them.

"We were quite concerned about the re-acceleration in prices that we've seen in both the private market and the HDB resale market," he said.

In other words, the move was not a knee-jerk reaction but a calculated move aimed at sucking out speculative demand in a market that just cannot get enough of property investments.

Earlier this month, on the day fresh economic data was released to show that Singapore's economy had grown by just 1.1 per cent in the final three months of last year, property prices had risen by a larger than expected 1.8 per cent.

And for the whole of last year, while the economy grew by just 1.2 per cent, the property market rose by 2.8 per cent.

In fact, in the first three weeks of January, there were signs that the property market was picking up again.

Echelon, a 508-unit condo in Alexandra View tagged at a pricey $1,700 per sq ft (psf) on average, sold 200 units just last weekend.

It has been a similar story in public sector housing.

Prices of HDB resale flats rose at their fastest pace for the year in the fourth quarter, climbing 2.5 per cent. A big part of the still-buoyant demand is the stark fact that money is so cheap.

Interest rates remain extraordinarily low, close to zero. And to top it off, central banks in the US, Europe and Japan have been releasing liquidity to the market, some of which would have eventually flowed into property here, analysts said.

As such, the measures were targeted at staunching the flow of funds threatening to flood the market, said Mr Ong Kah Seng, director of R'ST research.

He believes that while sales volumes will tank in the months ahead, prices may just stabilise and "at most decline by single digits, maybe 7 per cent".

The measures are, however, not without risks.

For one, the economy is heading towards a slowdown.

Notwithstanding the fact that fourth quarter property index prices shot up unexpectedly, overall, demand has been slowing.

Take the private residential market. It rose 2.8 per cent last year, but this was half of the 5.9 per cent rise seen in 2011. The measures could cause the market to over-react in a panic.

As Mr Cheong noted: "When you implement such administrative measures, you run the risk that this will be the last measure that breaks the camel's back."

The Government recognises this risk and did provide a caveat.

In a departure from past announcements, it specifically said yesterday that the higher stamp duties and loan limits are temporary and will be reviewed in future.

But will it be able to react in time and differentiate an intended slowdown from a potential crash? Hopefully, the answer will be yes. If not, the measures could do more than cool the market; it could lead to a deep freeze that will hurt everyone.

aaronl@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/
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#2
"It's not fair," said Chinese national Thomas Feng, on the new sub-let ban.
"In this case, why let PRs buy flats at all?"

Solution is simple: be a citizen. You can't have your cake and eat it. Show us you are vested with our long term future before you talk

"It is as if I have a rodent problem, but I'm going to drop a nuclear bomb on this," he said.

Property issue is more than a rodent issue: it affects the people's cost of living, the competitive structure of the economy, wealth gap, social mores...

Took china more than 18 months to raise RRR and interest rates to engineer the decline in early 2011 while in the midst of it all most people claim government efforts are not effective. When the govt is persistent and serious, we should listen carefully. It's like people belittling and fighting the Fed, always sensational and romantic to fight institutions Smile

Curbing property prices augers well for long term development. Countries that don't pre-empt has a lot of lessons that they should be looking at, including Eurozone. We should be thankful we have a govt that at least try to use their brains.
Before you speak, listen. Before you write, think. Before you spend, earn. Before you invest, investigate. Before you criticize, wait. Before you pray, forgive. Before you quit, try. Before you retire, save. Before you die, give. –William A. Ward

Think Asset-Business-Structure (ABS)
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#3
> "It's not fair," said Chinese national Thomas Feng, on the new sub-let ban.

He want to be fair, sure can. Go back to his own country. Citizens must have privileges. PRs have been fighting everything from school places to resale HDB units to good jobs.

It should have been implemented in 2009...
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#4
(12-01-2013, 02:06 PM)Contrarian Wrote: > "It's not fair," said Chinese national Thomas Feng, on the new sub-let ban.

He want to be fair, sure can. Go back to his own country. Citizens must have privileges. PRs have been fighting everything from school places to resale HDB units to good jobs.

It should have been implemented in 2009...

well said bro...ask them I served 2.5 yrs full time NS and my son also wasted 2.5 yrs in NS total 5 yrs contributed to the country for nothing...if some1 attack SG, will this PR who 1 leg step on 2 boats will carry the M16 to defend S'pore...definitely 'no' as we have no choice our family and assets are here.

Actually, if I am KBW long ago should 'bang' PR from buying public housing...they are lucky becos of oldman stubborn mindset on FT's policies..
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#5
PRs will still sublet whole unit of their HDB but lock one room. No way to stop them.
“risk comes from not knowing what you’re doing.”
I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.
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#6
All could be wayang also this can also be a 'push' to get PR to take the plunge to become citizens, to get around these restrictions if the wife take the plunge and convert while husband remains then most of the restrictions will also just evaporate, they will still 1 leg 2 boat except no more problems and they will also enjoy benefits thru "proxy"

Then when they make enough they will follow like millionaire table tennis players.
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