Let’s face it. Singapore is a really small country.
With an ever-increasing demand for houses being built at every corner of Singapore, it is no wonder prices have been rising rapidly in the past 50 years.
However, when Demand and Supply go out of whack, as seen with property private home prices rising to the highest point in four years in the April to June quarter. This news suddenly drops:
“The government has been monitoring the property market closely. We are very concerned that prices are running ahead of economic fundamentals,” said Mr Lawrence Wong, Minister for National Development on Thursday.
Here is a quick Summary on Singapore Property Cooling Measures:
This is in addition to the tightening LTV (Loan To Value) limits as well on residential property purchases. It will be increased by 5% for all housing loans granted by financial institutions.
They do not apply for loans granted by the HDB (mainly for BTOs and Resales).
What is the Additional Buyer Stamp Duty (ABSD)?
The ABSD is meant to tax private home buyers who are looking to purchase multiple properties under their name. It can be seen as a tax on the wealthy (who by right should be able to afford it) and give less reason to believe that property is meant to be an investment.
Which clearly as spelt out above, Singapore is a safe haven for all things property related. Well, this is definitely not the first time cooling measures have kicked in, but I believe that most property agents and people working in the financial mortgages sector were probably expecting this.
What is the Loan-To-Value (LTV)?
The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased. The term is commonly used by banks and building societies to represent the ratio of the first mortgage line as a percentage of the total appraised value of real property.
Here’s a quick look at the Singapore property price index:
I heard once at a family dinner. If you invest in property in Singapore, you can’t go wrong. However, that also means that the wealthy will get wealthier (potentially at the expense of the middle and lower income groups) and the income divide grows larger more rapidly.
Logically speaking, this makes a ton of sense for a few reasons:
- Always increasing population (both local and foreign)
- Attractive location for FDI (foreign direct investments) and foreign workforce
- Safe city with strong rule of law
What happens now?
- If you are a first-time property home buyer, don’t worry. You’ll still get your first bite of the pie with no additional ABSD. (however, take note of the increased LTV by 5%)
- However, that also means that you’ll need to choose your location more precisely as you will probably only have your public housing (eg HDB) and one Private property (eg Condominium) to live in for a really long time.
- Lastly, you’ll probably need to look towards the other traditional ways of investment which include Stocks, ETFs, Bonds etc. (for these type of investments, the government in 100% fully supportive of it, with little to no taxes)
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