SINGAPORE – Despite continuing uncertainty created by the Covid-19 pandemic, the Government has decided to implement new property cooling measures to reduce the risk of a self-reinforcing cycle of price increases in the private and HDB resale markets, that will impact housing affordability, Minister for National Development Desmond Lee said.

Speaking at a briefing on Thursday (Dec 16), he noted that there is a clear upward market momentum in prices and transaction volumes, despite the near-term uncertainty about the Covid-19 situation, including the prospect of the Omicron variant spreading here.

“Left unchecked, prices are likely to run ahead of economic fundamentals. This will increase the risk of a destabilising correction later on, that will hurt many households,” he added.

“Borrowers will also be vulnerable to the likely rise in interest rates in the next year and beyond, as major central banks look to tighten monetary policy to respond to inflation as well as the recovery in their economies. A combination of rising prices and higher interest rates will risk a significant increase in debt servicing costs for future buyers.”

His remarks come the day after property cooling measures were announced late on Wednesday night.

From today, the additional buyer’s stamp duty (ABSD) that must be paid for purchases of additional properties will be raised.

The ABSD rate will go up from 12 per cent to 17 per cent for citizens buying their second residential property, and from 15 per cent to 25 per cent for those buying their third and subsequent properties.

Permanent residents buying their second residential property will see the ABSD rate rise from 15 per cent to 25 per cent. If they are buying their third and subsequent properties, the rate will increase from 15 per cent to 30 per cent.

Foreigners buying any residential property will pay an ABSD rate of 30 per cent, up from 20 per cent now.

The ABSD rate for entities, including housing developers, will go up from 25 per cent to 35 per cent. Housing developers can have this sum waived if they abide by certain conditions, but will still have to abide by the existing rule under which they must pay an extra 5 per cent of ABSD that cannot be waived.

The total debt servicing ratio (TDSR) for borrowers will also be tightened from 60 per cent to 55 per cent. The TDSR limits the amount that a person can spend on monthly debt repayments.

Housing Board loans will also be lowered from 90 per cent to 85 per cent of a property’s purchase price.

Mr Lee said the measures will address both demand and supply of housing, and will help to support a stable and sustainable property market in the medium-term, and also ensure that housing remains affordable for Singaporeans, the majority of whom live in HDB flats, he pointed out.

“Crucially, our measures seek to prioritise housing purchases for genuine owner-occupation, especially among first-time homebuyers. They aim in particular to ensure that affordability in the HDB resale market – as measured by HPI – remains well below its historical levels,” Mr Lee said.

Private housing prices have risen by about 9 per cent since the first quarter of last year, while HDB resale flat prices are also recovering sharply after a six-year decline, rising about 15 per cent in the same time period.

To cater to genuine demand from homebuyers and address their anxieties, the supply in both the private and public housing markets will be increased.

Mr Lee added: “We will continue to monitor the property market and remain vigilant to the risk of a sustained increase in prices relative to income trends.”

Last modified: December 16, 2021