Recent Cooling Measures in 2024: How are Investors Handling ABSD Hikes?

Introduction

Real estate prices in Singapore are soaring. Just look at the news, and you’ll notice a noticeable increase in HDB flats for over $1 million. For example, a Punggol loft was sold this year at $1.22 million and attracted more than ten potential buyers. With such headliners, it’s unsurprising that the government has introduced cooling measures in 2023 to temper the heated property market in Singapore. So, let’s look at the recent changes introduced from 2022 to 2023.

Cooling measures in Singapore - what are they?

These strategies are typically set in motion by the government to stabilize soaring housing prices. Given the increase in HDB flats surpassing the SGD$1 million benchmark, the Singapore government has recognised the urgency to regulate the housing market. Cooling measures were introduced in September 2022, and more updates were made in 2023.

Cooling measures from 2022 to 2023.

The September 2022 cooling measures aimed to control the housing demand while promoting sensible borrowing. The goals were to

1. Ensure potential homeowners don’t bite off more than they chew with loans

2. Control demand and maintain affordability of resale flats.

With global interest rates climbing, domestic mortgage rates in Singapore also followed suit. This increase may lead to borrowers needing help to service their housing loans. Since housing loans are among the most significant financial commitments for many Singaporeans, the government deemed it necessary to introduce such measures to mitigate the challenge of rising interest rates.

Key components of the September 2022 announcements

1. Loan-to-value ratio adjustment

The ceiling for HDB loans was reduced from 85% to 80%. This was to encourage borrowers to exercise financial caution when taking on loans.

2. Setting an interest rate baseline

HDB loans will now have a minimum interest rate of 3%.

3. Holding period for those selling private properties

To ensure housing remains affordable and deter speculative buying, a 15-month waiting period is instituted. In the past, after selling a private resident, an owner could buy a non-subsided HB flat within six months. But the September measures have introduced a 15-month wait post-sale. This change will impact those who transit from private housing to HDB flats. Instead of immediate purchase, they will now face a 15-month gap. This leads to a temporary housing dilemma for many.

Latest 2023 cooling measures

In April 2023, an increase in ABSD (Additional Buyer Stamp Duty) was also introduced. This duty is levied with each acquisition of a property. Singaporeans are only subjected to it from their second and subsequent property, but Permanent residents and foreigners must pay ABSD on any purchase.

HDB properties are exempt from ABSD because you cannot buy an HDB flat if you own a private property. You will need to sell off your private property within six months if that is the case.

The revised ABSD rates are significant. From 27 April 2023, foreign buyers face a 60% ABSD, a significant increase from 30%.

Couples with a Singaporean partner may qualify for ABSD refunds under specific conditions. However, they will need to sell their first residential property within six months of procuring the second property, factoring in the completion status of the second property. Singaporeans and SPRs are also not exempted from this.

Additionally, if your property is a joint purchase, the government agencies have stated that the highest ABSD rate will apply. Here are the changes in summary:

Latest mortgage rates in Singapore

We have compiled current home loan interest rates across the HDB and private property market in Singapore, for both fixed rate and floating rate loans. The tables below provide references for:

Final word

It’s crucial to stay on top of these revised cooling measures as they can affect your financial planning if you’re in the market for a new home. Refer to a loan marketplace like ROSHI to find the best mortgage rates for your dream home.