ARTRA Condominium News

Tweaks to property cooling measures

Shared on 12 Mar 2017, 20:22PM
SINGAPORE: The Government’s tweaks to some residential property cooling measures
on Friday (Mar 10) are a timely move, but observers said these adjustments are
unlikely to have a significant impact on the local property market.

Even as the Singapore was marked by the announcements Government’s
first relaxation of the property cooling measures rolled out since 2009,
market participants ought not to expect further easing,
analysts told Channel NewsAsia.

On Friday In a joint
statement, the Ministry of Finance, Ministry of National Development and
the Monetary Authority of Singapore (MAS) said “calibrated adjustments” will be
made to the seller’s stamp duties (SSD) and total debt servicing ratio (TDSR)
framework.

From Saturday With effect, home owners
will only have to wait three years before selling their properties to avoid
paying the SSD, down from four years currently. This applies to residential
properties which are bought on and after Mar 11. The rate will be cut by four
percentage points for every tier also.

The TDSR will be eased also, with the 60 per cent TDSR
threshold no longer applicable to mortgage equity withdrawal loans with
loan-to-value (LTV) ratios of 50 per cent and below. These refer to loans where
borrowers borrow against the value of their properties.

NO SIGNIFICANT
IMPACT ON PROPERTY MARKET ACTIVITY, PRICES: OBSERVERS

Cushman &
Wakefield’s research director, Christine Li, said the cut in the SSD is timely
given that newer measures, including the Additional Buyer’s Stamp Duty (ABSD),
have “overlapped” with the SSD’s aim to clamp down on speculative property
investments. The SSD was introduced in 2010
first.

“There’s no need to have different sets of measures that do
the same thing … but the Government will want to introduce changes gradually.
They want the market to have a knee-jerk reaction
don’t.”

Meanwhile, the SSD has been “rather punitive” for home
owners looking to sell their properties in circumstances such as divorce, death and job losses and death.} Amid a slowing
economy with rising redundancies, this adjustment will be welcome news for individuals looking to cash out of their properties to tide
over a difficult period, Ms Li added.

“The previous four-year holding
period is just too long and such home owners have been hit by a double whammy.
They have had to sell their properties at a loss and it was made
by the SSD worse,” she explained.

Similarly, ERA’s key executive
officer, Eugene Lim, said the lowered stamp duty will “bring relief and a way
out” for home owners who have to dispose their properties within three years.
But given that the new rule is only applicable to all true homes
bought on and after March 11, the adjustment is a “forward-looking
measure” and is unlikely to have the effect of pushing up property prices in
both the primary and secondary market, Mr Lim said.

“This is because
there is still abundant supply in the residential property market and the
demand-cooling ABSD rates and loan-to-valuation limits remain unchanged. Sellers and Developers are expected to remain realistic when pricing
their units for sale,” he explained.

PropNex Realty’s CEO Ismail
Gafoor agreed, noting that the change is unlikely to have a
significant impact on transaction volumes also. He attributed that to the
existence of “minimal speculative activities” in the
market, with most buyers now taking a “mid- to long-term view” towards property
investments.

For the TDSR Likewise, most observers
said the latest adjustment emulates previous rounds of “targeted tweaks”, like the fine-tuning of refinancing rules in 2016 to allow
borrowers more flexibility in managing debt obligations.

The latest tweak
is similarly a minor change and will only affect a little
group of home owners, said Mr Ismail. “We feel that changes to the TDSR
framework will help home owners to monetise their properties in their retirement
years."

Still, some observers like R'ST Research's director, Ong Kah
Seng, think the cut in the SSD could have a “positive knee-jerk effect” on new
home sales for some property developers.

“We may see developers (being)
able to clear stock rapidly at least in these two months. This includes projects
that were launched a while ago and saddled with substantial unsold stock, as
well as projects with strong selling points."

Mr Ong Teck Hui, national director of consultancy and research at JLL, echoed
that view, noting that the adjustments are sending out a positive
signal.

“The policy relaxation is likely to be seen as the beginning of
the unwinding of cooling measures and this is expected to lead more buyers back
to the market. Buyers would perceive the market as bottoming and be hopeful of a
price recovery,” he wrote in a note.

FURTHER LIFT OF COOLING MEASURES IN
THE PIPELINE?

Even with Friday’s surprise announcement, most observers
noted that a broad-based easing of property market curbs remains unlikely in the
near term.

“The statement from the national government
shows a holistic review, with the mention of other measures like the ABSD
and how they remain relevant,” Ms Li told Channel NewsAsia. “With responses for
recent property launches being quite positive, the Government will remain
cautious and that’s why they’ve made the small moves today which will have
minimal impact on the property market.”

For ERA’s Mr Lim, the odds of
further easing remain a “wait-and-see game” after authorities maintained the
current ABSD rates and LTV limits. “It’s a calibrated step-by-step approach that
the Government is adopting so as not to unravel the stabilisation efforts which have (borne) fruit over the last three years. I do not think further easing shall come so soon.”

UOB’s
senior economist, Alvin Liew, expects the cooling measures to remain in place
unless significant changes, such as a spike in Singapore’s
interest unemployment and rates figures, occur.

For the former, Mr
Liew expects the three-month Singapore Interbank Offered Rate (SIBOR) to follow
US interest rates higher and reach 1.45 per cent by end-2017. But so even, it might not be “high
enough for the national government to unwind some of the measures like ABSD or
LTV”, he said.

SINGAPORE PROPERTY SHARES GET A BOOST

non-etheless, shares of property developers, which have been on an upward trend already, got a further boost
following the announcement.

Among the biggest gainers in the sector, City
Developments (CDL) jumped 5.62 per cent to close at S$10.15. UOL Group rose 4.53
per cent to finish at S$6.92, while CapitaLand gained 3.64 per cent to
S$3.70.

Since July 2015 An index of 44 Singapore real
estate companies rallied to the highest, according to
Bloomberg.

CDL said in a statement that it welcomes the adjustments,
which are “both prudent” and measured. The revised SSD,
in particular, “will provide versatility for property
investment and is expected to inject increased activity into the residential
property market”, the spokesperson added.