Relaxed curbs an encouraging sign

Relaxed curbs an encouraging sign
Stabilising prices and increased CPF Housing Grants for first-time buyers make it a good time to enter the market.
PHOTO: The Straits Times

It always feels great to be heard and looked after.

The Government's decision to tweak property cooling measures is encouraging, as it is a sign that it is watching closely to ensure a robust property ecosystem, where stable prices and healthy investment activities coexist.

However, the measures will not affect most consumers, as key measures that curtail affordability, namely the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR), remain intact.

Read also: Surprise tweaks in property cooling measures seen signalling further unwinding

Foreign buyers and real estate investors with more properties to their names will also continue to pay the same amount of Additional Buyer's Stamp Duty.

The revised cooling measures will benefit specific groups of buyers. Short-term investors and retirees will find themselves in a more favourable position when it comes to property investments.

The revision of the Seller's Stamp Duty (SSD) - that saw a reduction in the holding period from four years to three, and a reduction in rates from 16 per cent to 12 per cent - is made less punitive for short-term investors.

Property investors can look forward to a shorter holding period before they can sell their asset to reap capital gains.

Read also: Hot and bothered over condo's cooling towers

The SSD was effective in minimising the number of property sales within the four-year window, with sub-sales (homeowner sales before the condominium unit completes) around 3 per cent of all private property transactions.

Lifting the burden of stamp duties will likely stimulate investment sales, especially in the short-to-medium term, but any recovery in sub-sale activity will likely be seen only after next year.

Ensuring that buyers are able to monetise their properties in their retirement years, the TDSR framework has been relaxed to include exceptions.

PRUDENCE

It is also worth noting that the intent to foster financial prudence is still in effect, as the exceptions of the mortgage equity withdrawal loans must meet the requirement of loan-to-value ratios of 50 per cent and below.

The last change levels the playing field between retail real estate investors and larger funds and high net worth individuals.

The Additional Conveyance Duty on the transfer of equity interest in entities whose primary tangible assets are residential properties in Singapore ensures that, regardless of price point or whether the buyer is purchasing shares or the asset outright, a similar stamp duty rate will apply.

Read also: Will the changes to Singapore's property cooling measures affect you?

While the loosening of cooling measures has excited the real estate market and brought about a short-term rally in the stocks of real estate developers, it is likely to be a short-term effect, as long-term effects following market readjustments remain to be seen.

The key is managing affordability. So long as the TDSR and MSR are in place to enforce prudent buying activity, sellers should continue to moderate price quantum expectations while buyers remain selective in their purchase.

The Government's agenda is to promote a sustainable property market, where homes remain within reach for Singaporeans while maintaining healthy activity in the real estate market.

As with the previous implementation of cooling measures, I believe that the Government will observe and evaluate the effects of relaxing the SSD and TDSR before taking the next step to upkeep our property ecosystem.

Hence, further tweaks to the property cooling measures are unlikely in the immediate future.

The writer is the chief executive officer of PropertyGuru.


This article was first published on Mar 21, 2017.
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