New ABSD after market picks up

New ABSD 2018 cooling measure

The Government announced today to adjust the Additional Buyer’s Stamp Duty (ABSD) rates on all residential property purchases, to cool the property market which has recently saw a slight recovery from the previous drop.

After 4 years of decline, recent enbloc sales and new launches have boosted the property market since 3Q of 2017 and volumes of transaction have increased substantially.

Why do the government want to increase the ABSD when Singapore property has recently started to recover in 2018?

The new ABSD of 2018 does not apply to first time Singaporean Citizen (SC) and Singapore Permanent Residents (SPRs) home buyers while the rest of the home buyers will see a 5% increase to pay for the Stamp Duty and Entities will see a 10% increase (Developers will have an additional 5% non remittable increase).

How much ABSD to pay if you are a SC and SPRs household?
SC buying their second property will have to pay 12% ABSD while SPRs have to pay 15% ABSD thus such a combination will have to pay 15% ABSD, the higher of the ABSD counts.

How much ABSD to pay for upgrading or downgrading to next property?
In such cases, ABSD is still payable. This is usually for a couple who are changing their property, maybe upgrading to a bigger flat. This household may apply for a ABSD refund provided they meet the criteria.
– sell their first residential property within 6 months after the date of purchase of the second residential property or the issue date of the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) of the second residential property, whichever is earlier

Does the new ABSD make sense to be introduced at this stage?

Some cheered and most cursed, it depends on which stage are you at. This is definitely good news to First Time home buyers. Prices will definitely be affected, and many showrooms are opened till late today as property buyers rush to avoid paying the additional 5% of the new ABSD.

Is it wise to purchase on the 5th July?

Why not? Those action takers may not have save the 5% because this is definitely going to the developers pocket but they are able to select choice unit, which are of better facing. On the other hand, developer may only introduce “discounts” or “Starbuys” for units which are harder to sell. Nonetheless, buying a premium investment brings better returns or serves as better choices for future tenants.

New ABSD 2018 (5th July) Table:

Rates on or before 5 July 2018 Rates on or after 6 July 2018
SC buying first residential property 0% 0% (No change)
SCs buying second residential property 7% 12% (Revised)
SCs buying third and subsequent residential property 10% 15% (Revised)
SPRs buying first residential property 5% 5% (No change)
SPRs buying second and subsequent residential property 10% 15% (Revised)
Foreigners buying any residential property 15% 20% (Revised)
Entities buying any residential property 15%
25% (Revised)


Plus additional 5% for developers
(New, non-remittable)

The Government said that being entities, developers will also be subject to the ABSD rate of 25% for entities. Developers may apply for remission of this 25% ABSD, subject to conditions (including completing and selling all units within the prescribed periods of 3 years or 5 years for non-licensed and licensed developers respectively). Details are provided under the Stamp Duties (Non-licensed Housing Developers) (Remission of ABSD) Rules and the Stamp Duties (Housing Developers) (Remission of ABSD) Rules.

 

That’s not all… Loan Limitation

Loan to Value (LTV) tightening

All LTV limits will be tightened by 5 per cent-points for housing loans granted by financial institutions.

1st Housing Loan 2nd Housing Loan 3rd Housing Loan Onwards
Individual Borrowers
LTV Limit Existing Rules

80%; or 60% if the loan tenure is more than 30 years* or extends past age 65

 

Revised Rules

75%; or 55% if the loan tenure is more than 30 years* or extends past age 65

 

Existing Rules

50%; or 30% if the loan tenure is more than 30 years* or extends past age 65

 

Revised Rules

45%; or 25% if the loan tenure is more than 30 years* or extends past age 65

 

Existing Rules

40%; or 20% if the loan tenure is more than 30 years* or extends past age 65

 

Revised Rules

35%; or 15% if the loan tenure is more than 30 years* or extends past age 65

Minimum Cash Down Payment

No change to existing rules

 

5%; or 10% if the loan tenure is more than 30 years* or extends past age 65                                 25%
Non-Individual Borrowers
LTV Limit                                   Existing Rule

                                        20%

                                  Revised Rule

                                        15%

How will the market perform from here?
There will still be buyers, mostly enbloc home owners who have the cash and will be looking to save from the new ABSD and LTV will unlikely affect them. This could lead a trend to boost the sales volume, and market may keep moving gradually with prices in checked. Demand will definitely slow down and may look like plenty of supply, more discount may arise thus moving the market. Developer may even absorb the new ABSD slightly by reducing the prices, also making it affordable for the LTV.

Speak your mind by leaving a comment below