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Alvin Liew [email protected] Global Economics & Markets Research Email: [email protected] URL: www.uob.com.sg/research Flash Notes Friday, 10 March 2017 Singapore: Government Eases Some Property Market Measures For First Time Since 2009 Revising Seller’s Stamp Duty (SSD) and Total Debt Servicing Ratio (TDSR) Framework Meant To Address Specific Factors Rather Than In Response To Broad Property Market Weakness In what was a largely unexpected move, the Singapore government announced on Friday (10 Mar 2017) some easing on property market measures, a first after having delivered a series of cooling measures since 2009. Specifically, the government targeted “calibrated adjustments to the Seller’s Stamp Duty (SSD) and Total Debt Servicing Ratio (TDSR) framework, with effect from 11 March 2017.” The easing on these specific measures was in response to specific factors (such as the changes in TDSR to allow the retirees to monetize their properties more easily) rather than to address a broadly softer Singapore property market. That is why the more restrictive measures of Additional Buyer’s Stamp Duties (ABSD) and Loan to Value (LTV) Limits remains in place as the government believes that private housing demand is still firm amidst “current low interest rates and continued income growth.” The measures announced today include: 1. Seller’s Stamp Duties (SSD) Adjustments a. Reduce the maximum holding period for imposing SSD to 3 years (from 4 years) b. Reduce the SSD rate by 4ppt for each tier (see Chart 1) 3. Total Debt Servicing Ratio (TDSR) Adjustments a. The government will no longer apply the TDSR framework to mortgage equity withdrawal loans with LTV ratios of 50% and below. 3. Stamp Duties on Transfer of Equity Interest in Entities whose Primary Tangible Assets Are Residential Properties in Singapore a. To treat transactions in residential properties on the same basis irrespective of whether the properties are transacted directly or through a transfer of equity interest in an entity holding residential properties (i.e. to close a loophole where individuals buy property under a company or trust to avoid paying ABSD) Chart 1: Singapore Seller’s Stamp Duty (SSD) Rates For Residential Properties (SSD Rates on the actual price or market value based on date of purchase or date of change of zoning/use) Up to 1 year More than 1 year and up to 2 years More than 2 years and up to 3 years More than 3 years and up to 4 years More than 4 years On and after 11 March 2017 12% 8% 4% No SSD Payable No SSD Payable 14 Jan 2011 to 10 March 2017 (both dates inclusive) 16% 12% 8% 4% No SSD Payable SSD Source: MAS Flash Notes Friday, 10 March 2017 1 Page There are no changes to Additional Buyer’s Stamp Duty (ABSD) and Loan-to-Valuation Ratio (LTV). Tables appended below for reference only. Chart 2: Additional Buyer’s Stamp Duty (ABSD) ABSD Rate on Primary Purchase ABSD Rate on Secondary Purchase ABSD Rate on Subsequent Purchase na 7% 10% Permanent Residents 5% 10% 10% Foreigners and Non-Individuals 15% 15% 15% Citizenship Singapore Citizens Source: MAS, UOB Global Economics & Markets Research Chart 3: Loan-to-Valuation Ratio (LTV) LTV Individuals Non-Individuals First Mortgage Second Mortgage Third Mortgage 80% (60%*) 50% (30%*) 40% (20%*) 20% 20% 20% * For loan tenures that exceed 30yrs or past age 65 Source: MAS, UOB Global Economics & Markets Research Singapore Property Market Outlook: Any Further Easing Soon? With the first easing (since 2009), there is now greater anticipation for more easing to follow. The Singapore private property prices has been on a cushioned decline in the last three years, an outcome that is likely in line with what the government has set out to achieve 8 years ago. We continue to believe that the government will remain steadfast to its property market measures unless there are 2 significant changes in the environment: 1) sharply higher interest rates and 2) surge in domestic unemployment. We continue to see conducive macro-economic conditions underpinning the Singapore property market and we believe that only if we see markedly higher interest rates and/or a surge in domestic unemployment, then the government may ease the more restrictive property cooling measures. Singapore’s interest rates are primarily driven externally - Singapore follows US rates quite closely. While the relationship is not perfect, the direction of domestic short term rates will primarily be driven by changes in US interest rates. For 2017, we expect three rate hikes from the Fed, bringing the FFTR to 1.5% by end-2017 from 0.5-0.75% presently. While the increase will not be one-for-one, we still expect Singapore domestic rates for 3-month Singapore Interbank Offered Rate (SIBOR) to reach 1.45% by end-2017. At 1.45%, that may not be deemed high enough for the government to unwind some of the measures like ABSD or LTV. Please see the JOINT PRESS RELEASE ON MEASURES RELATING TO RESIDENTIAL PROPERTY on 10 Mar 2017. Disclaimer: This analysis is based on information available to the public. Although the information contained herein is believed to be reliable, UOB Group makes no representation as to the accuracy or completeness. Also, opinions and predictions contained herein reflect our opinion as of date of the analysis and are subject to change without notice. UOB Group may have positions in, and may effect transactions in, currencies and financial products mentioned herein. 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