Cooling Measures

The Singapore government has introduced several rounds of cooling measures since 2009 to moderate the growth of property prices and ensure long-term stability of the housing market. The cooling measures aim to discourage speculation, curb excessive borrowing, and promote a more equitable distribution of housing wealth.

Loan-To-Value Ratio

The most recent round of cooling measures was announced on 29 September 2022, following the previous round on 16 December 2021. The new measures include:

• Increasing the interest rate floor used to calculate the maximum loan quantum for bank loans and HDB loans. This means that borrowers will have to meet a higher income requirement to qualify for the same loan amount as before. The interest rate floor for bank loans will be raised from 3.5% to 4%, while the interest rate floor for HDB loans will be raised from 2.6% to 3%. This measure is to ensure prudent borrowing and avoid future difficulties in servicing home loans amid rising interest rates.
• Lowering the loan-to-value (LTV) limit for HDB loans from 90% to 80%. This means that buyers of HDB flats will have to pay a higher downpayment of at least 20%, of which at least 5% must be in cash. This measure is to encourage financial prudence and reduce the risk of negative equity for HDB flat owners.
• Introducing a new 15-month wait-out period for downgraders from private properties to HDB resale flats. This means that buyers who sell their private properties and buy HDB resale flats will have to wait for at least 15 months from the date of sale of their private properties before they can purchase for an HDB resale flats. This measure is to prevent arbitrage opportunities and ensure a fair allocation of public housing subsidies.

Additional Buyer Stamp Duty New Rates

These new measures are in addition to the existing cooling measures, such as:

• The additional buyer’s stamp duty (ABSD), which is a tax levied on buyers of residential properties based on their citizenship and number of properties owned. The ABSD rates were revised upwards on 16 December 2021 for Singaporeans and permanent residents buying their second and subsequent properties, as well as for foreigners and corporate entities. The ABSD rates range from 5% to 35%, depending on the buyer profile.
• The seller’s stamp duty (SSD), which is a tax levied on sellers of residential properties and residential lands that are bought on or after 20 February 2010 and sold within the holding period. The SSD rates range from 4% to 12%, depending on the date of purchase and the holding period.
• The total debt servicing ratio (TDSR), which is a framework that limits the total amount of debt obligations that a borrower can take on to 55% of his or her gross monthly income. The TDSR applies to all property loans granted by financial institutions, including refinancing loans.
• The mortgage servicing ratio (MSR), which is a framework that limits the amount of monthly mortgage repayments that a borrower can take on to 30% of his or her gross monthly income. The MSR applies to property loans granted by HDB or financial institutions for the purchase of HDB flats (including DBSS flats) or executive condominiums (ECs).
• The qualifying certificate (QC) scheme, which is a rule that requires foreign developers who buy residential land in Singapore to complete and sell all units within a specified period, or pay extension charges. The QC scheme aims to prevent land hoarding by foreign developers and ensure a steady supply of housing units.
• The ABSD remission for developers, which is a rule that requires developers who buy residential land in Singapore to develop and sell all units within a specified period, or pay ABSD on the land cost. The ABSD remission for developers aims to align the interests of developers with those of home buyers and moderate the supply and demand of housing units.
• The EC purchase restrictions, which are rules that limit the eligibility and ownership of ECs, which are hybrid public-private housing developments. The EC purchase restrictions include income ceiling, minimum occupation period, resale levy, ownership restriction and essential occupier scheme.

What To Expect

The cooling measures have had varying effects on different segments of the property market, such as private residential, HDB resale, landed, luxury and mass market. Some of the effects include moderating price growth, reducing transaction volume, increasing rental demand, shifting buyer preferences, changing market sentiments and creating opportunities for bargain hunting.

The cooling measures are expected to remain in place until there are signs of significant changes in market conditions or macroeconomic factors. The government has stated that it will continue to monitor the property market closely and adjust its policies as necessary to maintain a stable