Cooling measure tweaks could inject some optimism
http://www.straitstimes.com/business...-some-optimism
News analysis
Cooling measure tweaks could inject some optimism
Wong Siew Ying
Mar 13, 2017
Industry watchers say revision to seller's stamp duty a timely one
The tweaking of property cooling measures last week, a first since they were rolled out in 2009, has surprised the real estate industry which had expected the curbs to remain unchanged for some time.
The Government unexpectedly announced last Friday that it will shorten the seller's stamp duty (SSD) holding period for homes bought from March 11 to three years instead of four years. It will also cut rates for each tier by four percentage points.
It will also waive the total debt servicing ratio (TDSR) framework on mortgage equity withdrawal loans, where the ratio of the loans, including any existing loans, does not exceed half of the mortgaged property's value.
In other words, a home buyer will have a shorter wait before he can onsell the property without paying the SSD, or pay a lower rate than before if he sells it within three years of purchase.
For a retiree who does not have an outstanding housing loan, or has substantially pared it down, he can now borrow money against his property without being stymied simply because he doesn't have sufficient monthly income as stipulated under the TDSR regime.
However, other property curbs, such as the additional buyer's stamp duty (ABSD) and loan-to-value limits, remain in place, as home-buying interest remains resilient amid current low interest rates and income growth.
Moves to loosen the cooling measures, though minor, should inject some optimism in the sector.
Industry watchers said the revision to the SSD is timely. It shows the Government has recognised that the scheme is less relevant now, as other measures such as the ABSD and TDSR have been effective in stemming speculation.
Since it was introduced in 2010, the SSD has weighed on the number of property subsales, an indicator of speculative activity.
Subsales as a percentage of total private property transaction has been stable at under 5 per cent in each quarter over the last four years, sharply down from more than 10 per cent a quarter in the years before the SSD's implementation.
Last Friday's tweaks are also targeted, and seek to address some of the unintended consequences of the measures on certain groups.
For instance, the SSD could hurt home owners who need to sell their property due to unforeseen events, such as deaths, divorces and job losses - situations the SSD regime never intended to target.
And unlike a capital gains tax, the SSD also applies to transactions where owners sell their homes at a loss.
As for the TDSR waiver, the benefit extends beyond allowing retirees to live off the value of their homes. It can also be used by any home owner to extract a lump sum from his home equity, if he has substantially paid down his housing loan. This option is useful, for example, for an employee who has worked 20 to 30 years and wants to start his own business.
The Government last week also introduced a new additional conveyance duty on the transfer of equity stakes in property-holding entities which primarily own residential properties in Singapore.
This new tax aligns the difference in stamp duty rates for the acquisition and disposal of equity interest in such entities with that of direct sale and purchase of properties.
Apart from these relatively small tweaks, other property curbs remain largely intact, reflecting the Government's intent to ensure stability in the real estate sector in the medium to long run.
These measures have nudged home prices on a cushioned decline in the past three years, and brought about a more stable home demand, leading to a soft landing for the property market.
