Making sense of the property tweaks

View of luxury apartments in downtown Singapore.

In a surprising move, the government recently eased some of the property cooling measures. Will it draw home buyers back into the market and push property prices up? We ask the analysts for their views.

By Romesh Navaratnarajah

On 10 March 2017, the government shocked many Singaporeans by announcing adjustments to the Seller’s Stamp Duty (SSD) and Total Debt Servicing Ratio (TDSR) framework. The measures took effect the next day. However, there were no tweaks to the Additional Buyer’s Stamp Duty (ABSD) and loan-to-value (LTV) limits, which have proven to be effective in stabilising prices.

Hari V. Krishnan


“PropertyGuru sees the government’s move to tweak the property cooling measures as a sign that it is closely watching the sector, and seeking to ensure a healthy, thriving real estate market while addressing concerns from homeowners and investors.

“The downward revisions on SSD are likely to stimulate investment sales, especially in the short to medium term. This will most likely benefit real estate investors looking to exit their investments after three years, as they will be able to place their properties on the market earlier, without the burden of stamp duties.

“In 2016, private property subsales stood at 2.3 percent of caveats lodged with the Urban Redevelopment Authority. This was a decline from 2.8 percent in 2015. In the immediate term, sub-sales are unlikely to rise, but (the changes) will likely stimulate sub-sale volumes in 2018 and beyond.”

–Hari Krishnan, CEO of PropertyGuru Group

 

 

Eugene Lim ERA Realty Network


“(Tweaking the SSD) is a forward-looking measure that allows prospective buyers to recalibrate their calculations, expectations and holding period, going forward.

“While it may change slightly how investors and home buyers look at the timeline on holding the properties, we do not expect this tweak to have the effect of pushing up property prices in both the primary and secondary markets. This is because there is still abundant supply in the residential property market and the demandcooling ABSD rates and LTV limits remain unchanged.

“Developers and sellers are expected to remain realistic when pricing their units for sale. Transaction data is likely to show that reasonably priced properties will find buyers much quicker, while overpriced ones are likely to ‘remain on the shelf’.

“This (TDSR) relief is for a very small group of homeowners to meet their needs to borrow against the value of their properties to obtain additional cash. This is likely to have no impact on demand and prices in the primary and secondary markets.”

–Eugene Lim, Key Executive Officer, ERA Realty Network

Tricia Song


“We think this change (easing of SSD rates and reduction of holding period) gives property investors more flexibility in the options to sell, and developers are optimistic this will inject increased activity in the residential property market. However, we expect the impact to be muted on volumes and prices, as the demand-cooling ABSD and TDSR threshold of 60 percent remain unchanged.

“We foresee that this tweak in the (TDSR) framework will have a minimal impact on the residential market, as it is targeted at meeting the specific needs of retirees and semi-retirees.

“However, the change may increase home loan volumes which should be positive for banks.”

— Tricia Song, Head of Research, Colliers International Singapore

Ong Teck Hui


“The reduction of the holding period of the SSD to three years and lowering the rates to between four percent and 12 percent by itself may not have a significant impact on sales volume, as the change is an incremental one from the previous four-year holding period, with rates ranging from four percent to 16 percent.

“Over the last few years, buyers had already switched to a mindset of longer term property investment, and the reduction of the SSD holding period by one year is unlikely to encourage a speculative mindset. For those under financial hardship and need to dispose of their properties, the easing of this measure would reduce or remove the SSD penalty.

“The relaxation of the TDSR for mortgage equity withdrawal loans with LTV ratios of 50 percent or less is to assist those who need to monetise their assets. It is not expected to have a significant impact on demand.”

— Ong Teck Hui, National Director, Research & Consultancy, JLL

 

Mohamed Ismail


“It is a positive news, as most property buyers are taking a mid to long term view of their property investment. Reducing the SSD from four years to three years may not have any significant impact on transaction volume as there are minimal speculative activities.

“This 60 percent TDSR threshold will no longer apply to mortgage equity withdrawal loans with LTV ratios of 50 percent and below. These refer to loans where borrowers borrow against the value of their properties to obtain more cash. This move is expected to affect only a small group of owners though.

“We feel that changes to the TDSR framework will help homeowners to monetise their properties in their retirement years. However, it was felt that this announcement will not have a significant impact on the property market, as most speculative activities are eradicated by now.”

— Mohamed Ismail, CEO of PropNex Realty

 

 

 

Desmond Sim


“This (SSD revision) is not expected to have a major impact on transaction volumes in the near term, as it applies to residential property purchased on or after 11 March. However, this benefits buyers as it offers a respite as they would not have to wait up to four years to sell their property without incurring SSD. This allows buyers under this revision a little more flexibility in their investment / disposal strategies.

“This (TDSR tweak) gives people greater flexibility to borrow money against the value of their homes. However, the amount they wish to borrow must be 50 percent or less than the total value of their property / properties pledged as collateral. As such, in terms of whether this would translate into real estate demand, it would likely only promote property purchases by asset-rich individuals. CBRE Research feels that this will affect a small portion of property owners.”

— Desmond Sim, Head, CBRE Research, Singapore & South East Asia

The PropertyGuru News & Views This article was first published in the print version PropertyGuru News & Views. Download PDFs of full print issues or read more stories now!