[SINGAPORE] With the current property market taking a hit across the board for the past few months, the all consuming wish for property players and developers is for a cooling move to cool the property curbs.
The call from some quarters for the government to roll back or tweak the cooling measures had already begun and is now getting louder.
Hopes that the Budget may in part introduce easing of the total debt servicing ratio (TDSR) and additional buyers' stamp duty (ABSD) are subtly resounding across the airwaves.
According to a Business Times report:
"Our wish is for the government to consider scaling back or loosening up certain measures which have yielded the desired results," and reviewing these policies would send the "right signal" to foreign investors, said Donald Han, managing director at Chesterton Singapore.
Sub-sales and foreigners' participation rates are now at a new low compared to two years ago. This is largely attributed to the successful implementation of the sellers' stamp duty (SSD) and ABSD. In fact the TDSR framework has single-handedly put a check on escalating property prices and transaction volumes.
That brings me to the all telling Property Curb Golden Strategies:
Property Curb Golden Rule No. 1 - Limiting Leverage
Reduce a borrower's capacity for financing and you limit his investment opportunities, his purchasing ability and his purchasing choices.
There you have it in one swift curtailing stroke - the total debt servicing ratio.
Property Curb Golden Rule No. 2 - Price Levy
Impose a levy to the purchase, and you influence their decision to buy. The deterrence factor would depend on the amount of levy imposed.
Property Curb Rule Golden No. 3 - Time Constraint
Impose a time frame before the owner can resell a property, or buy for that matter and you have a huge leverage in controlling the timing factor in the property market. This rule is generally more applicable to public housing.
According to Urban Redevelopment Authority (URA) data, prices of private residential properties decreased 0.9 per cent in Q4 last year - the first overall price fall since Q1 2012, which indeed is a clear sign that the market is stabilising rather than going up and up and up.
The truth of the matter is these cooling measures are implemented so that the property market do not go off the roof with runaway prices and formed bubbles that would escalate into a crisis which will take a long time for the country to mend when the balloon bust.
And so began a series of property cooling measures starting in September of 2009.
The Property Cooling Measures Timeline:
Sept 2009 – Round 1
- Resinstatement of GLS confirmed list.
- Removal of Interest Absorption Scheme.
Feb 2010 – Round 2
- Seller’s stamp duty (SSD) introduced.
- LTV lowered to 80%.
Aug 2010 – Round 3
- Holding period for imposition of SSD increased to 3 years.
- Minimum cash down-payment raised to 10% for 2nd and more loan borrowers.
- LTV lowered to 70% for 2nd and more loan borrowers.
- For HDB, minimum occupation period (MOP) for non-subsidised flats increased to 5 years. Concurrent ownership of both HDB flats and private residential properties disallowed within the Minimum Occupation Period.
Jan 2011 – Round 4
- SSD rates increased.
- Holding period for imposition of SSD raised to 4 years.
- LTV lowered for non-individuals and 2nd and more loan borrowers.
Dec 2011 – Round 5
- Additional Buyer’s Stamp Duty (ABSD) for foreigners and non-individuals, PRs buying 2nd and subsequent property and Singaporeans buying their 3rd and subsequent property.
Oct 2012 – Round 6
- Cap of tenure of all residential loans at 35 years.
- LTV cap reduced for individual borrowers.
Jan 2013 – Round 7
- ABSD rates revised and increased.
- LTV lowered for housing loans granted by financial institutions.
- Increased cash down payment for individuals applying for 2nd or subsequent housing loan.
- LTV lowered for non-individuals and second and more loan borrowers.
Total Debt Servicing Ratio – June 2013
- Total Debt Servicing Ratio (TDSR) framework introduced for all property loans granted by financial institutions.
- TDSR framework takes into account the borrower’s outstanding loans.
Enhancement of the Special CPF Housing Grant.
Introduction of the Step-Up CPF Housing Grant.
Enhancement of the Multi-Generation Priority Scheme.
SPR household must wait 3 years before buying resale HDB flats.
Introduction of three-generation flats (3Gen flats).
Lowered Mortgage Servicing Ratio (MSR) and loan tenures for HDB housing loans.
In this respect and up until now, the Singapore government has been doing its job. It is very prudent about the direction the country should take and how we can continue to grow the economy in increasingly challenging times and stiffer competition from our neighbours.
It is unlikely the government will remove or reduce any of the cooling measures just as yet, as these have just started to take effect.
According to Business Times, Bank of America Merrill Lynch economist Chua Hak Bin said, the earliest relaxation of measures will probably be in late 2014 or early 2015, and "Any relaxation will likely come from changes in stamp duties rather than leverage ratios," referancing the loan-to-value ratio (LTV) and TDSR.
Meanwhile consultants generally agree that the combined onslaught of TDSR, ABSD and SSD have effectively slowed down the number of transaction volumes and the rate of price increases in the private property market.