Property Cooling Measures Likely to Reduce the Risk of Self-Reinforcing Price Cycle

Although the Covid-19 pandemic has kept us in a state of uncertainty for the past several months, the Government has finally decided to implement modified cooling measures in the Singapore real estate market. The main goal of the agencies is to reduce the rising threat of the self-reinforcing price cycle that increases more often for housing board and private resale markets. As this price cycle leaves a considerable impact on the affordability of houses, Desmond Lee, Minister for National Development, has finally taken this decision.

If we look at the recent reports, the market shows clear upward momentum in the transaction volumes and prices, irrespective of the rising cases of the new Omnicron variant. Prices are running high, even beyond the economic fundamentals. This situation is likely to increase the chances of destabilizing correction and it may hurt several households.

The borrowers in the industry may also experience a huge rise in mortgage interest rates in the coming year. The major central banks are also planning to tighten the monetary policy in response to the recovery and inflammation in the economy. This ongoing combination of higher interest rates and rising prices may cause a considerable rise in debt servicing costs for all the upcoming buyers.

Mr. Lee recently reported a huge rise in the house price to income ratio for both HDB resale markets and private properties as well. But these costs are observed to be at historical averages at present. HPI for the HDB resale flats has increased almost 4.4 times during the first three quarters of the year.

The transaction volumes for both these markets are observed to be high. Even the Build to Order demand for the HDB flats has become quite high and the buyers are now feeling more worried about the drastic change in the prices.

With the announcement about new property cooling measures, Mr. Lee also stated that the additional buyer’s stamp duty (ABSD) for the purchase of these residential properties will be also increased in near future. The respective stamp duty is expected to rise from 12% to 17% for the citizens that are interested to invest in second residential property. However, it will be 15 to 25% high for those who are going to buy a third property.

Permanent residents that are planning to buy second residential property may need to pay higher stamp duty with a rise from 15 to 25%. However, for the third and subsequent residential properties, they can expect a hike from 15 to 30%. Foreigners that are buying residential property may need to pay stamp duty of almost 30%, which is currently 20% only.

The rate of additional buyer’s stamp duty for entities as well as housing developers is expected to rise from 25% to 35%. However, in a few cases, the housing developers may have this amount refunded if they meet a specific set of conditions. Other than this, the total debt servicing ratio for borrowers may be tightened from 60 to 55%. The HDB loans may be also lowered to 85% from the current 90% of the total purchase price of the property.

Additional Buyer's Stamp Duty (ABSD)

Profile Of BuyerABSD rates:
6th July 2018 - 15th Dec 2021
ABSD rates:
16th Dec 2021 - 26th Apr 2023
ABSD rates:
On or After 27th Apr 2023
Singapore Citizen Buying First Residential PropertyNilNil Nil (No Change)
Singapore Citizen Buying Second Residential Property12%17% 20% (Revised)
Singapore Citizen Buying Third and subsequent Residential Property15%25% 30% (Revised)
Singapore PR buying First Residential Property5%5% 5% (No Change)
Singapore PR buying Second Residential Property15% 25% 30% (Revised)
Singapore PR buying Third and subsequent Residential Property15%30%35% (Revised)
Foreigners buying residential property20%30% 60% (Revised)
Entities buying residential property25%
Plus Additional 5% for Developers (Non-Remittable)
Plus Additional 5% for Developers (Non-Remittable)
Plus Additional 5% for Developers (Non-Remittable)

Changes of the Additional Buyer’s Stamp Duty


Learn more from the webpage below