Could surprise easing of property cooling measures spark turnaround? - The Edge Markets

SINGAPORE (March 13): A surprise letup of property cooling measures – albeit minor and targeted tweaks – on Friday sent property developer stocks soaring to the highest in more than 20 months.

But analysts believe that while the move is largely positive and buying sentiment can be expected to lift slightly, the impact on the property market is likely to gradual.

(See also: Singapore property stocks soar to 2015 high as curbs eased)

Singapore on Friday announced minor tweaks to the property cooling measures by way of a reduction of Seller’s Stamp Duties (SSD) and changes to the Total Debt Servicing Ratio (TDSR).

The government will reduce the holding periods for residential property purchased on or after March 11, 2017, down to three years. SSD rates have also been lowered by four percentage points.

It also announced the removal of the TDSR framework for mortgage equity withdrawal loans with Loan to Value (LTV) ratios of 50% and below.

“The TDSR tweaks are mainly targeted at retirees who are looking to monetise their assets amid challenging economic conditions,” says RHB Vijay Natarajan in a Monday report.

(See also: Govt relaxes SSD, TDSR rules for residential properties; introduces new stamp duty for property-holding entities)

“While we do not expect a significant shift in buying sentiment due to the changes in policy, we anticipate sales volumes over the near term to pick up slightly,” says Natarajan.

RHB is keeping its “neutral” stance on the Singapore property sector. With the latest changes, however, the research house now expects property prices to fall by between 1-5% in 2017, compared to previous forecasts of a decline of 3-7%.

Maybank Kim Eng Research, too, is keeping its “neutral” call on the sector.

“We see the change in SSD as a positive for the property market,” says Maybank analyst Derrick Heng in a Friday report. “This has potential positive implications on sales volumes and prices.”

“However, we believe the market should curb their enthusiasm as home buying demand will remain constrained by the ABSD (Additional Buyer's Stamp Duties), LTV and TDSR requirements,” Heng adds.

On the other hand, DBS Group Research sees this as a sign of more easing of property cooling measures to come.

“Although the adjustments are marginal and the impact to the property market should be gradual, we see this as a signal of a turn in policy stance which could lead to further relaxation in the future,” says DBS lead analyst Rachel Tan in a Monday report.

RHB’s Natarajan points out that the changes are likely to have been a pre-emptive strike to counter any sharp deterioration of the property market ahead on an anticipated increase in interest rates.

To this end, Tan adds that “a potential risk in the horizon is more than expected aggressive Fed rate hike momentum which may marginally dampen the euphoric sentiment.”

“However, when that happens, we believe that the government stand ready loosen further measures which will continue to support prices and spur transaction volumes,” she says. “This move confirms expectations that the government is ready to act pre-emptively to stabilise the property market.”

By: 

Jude Chan

Source: The Edge Markets (14 Mar 2017)

Singapore property market finally sees slight easing - and a new stamp duty - SRX

SINGAPORE announced on Friday targeted tweaks to property market measures and a new stamp duty - moves that observers said are in response to recent developments in the property market and the wider economy.

The release by government agencies said that Singapore will lower the seller's stamp duty (SSD) by four percentage points for each tier and shorten its holding period.

The Total Debt Servicing Ratio (TDSR) will also no longer apply to mortgage equity withdrawal loans with loan-to-value ratios of 50 per cent and below.

But even as the government eased these measures, a new stamp duty called the Additional Conveyance Duties (ACD) was introduced to plug a loophole in residential property transactions undertaken via transfer of shares in property-holding entities.

These changes take effect on March 11.

They are the Singapore government's first major response in four years to recent developments in the property market. But unlike Friday's measures, those unveiled in early 2013, including the TDSR, were aimed at cooling a red-hot market.

Market response to Friday's measures, announced just before noon, was swift. The FTSE ST Real Estate Holding and Development Index was up 3.8 per cent at the day's high of 838.24 at 12.39 pm.

Stressing that developers have gone through an "arduous" time since 2013, R'ST Research director Ong Kah Seng said: "These slight relaxations were indeed very hard-earned."

However, industry players say that the impact on the property market will be limited, as the Additional Buyers' Stamp Duties (ABSD), loan-to-value (LTV) and TDSR will still curb demand. They also say that Friday's measures are aimed at ensuring that the property market's development is in line with wider economic trends. Interest rates will be rising amid Singapore's slower growth; the construction sector has also been performing badly.

Christine Li, director of research at Cushman & Wakefield, said: "Once certain segments in the property market fall out of line with the wider developments, the government will try to release the pressure, tweak it to make it more equitable."

The joint statement, issued by the Finance Ministry, the National Development Ministry and the Monetary Authority of Singapore (MAS), said the current set of property market measures are still needed to promote a sustainable residential property market and financial prudence.

Thus, there will be no changes to the ABSD rates and LTV limits.

The release noted that transaction volumes in the private residential property market remain healthy, as interest rates are low and income grows. But analysts expect interest rates to rise at a faster pace this year. Last week, US Federal Reserve chairman Janet Yellen said that a hike this month would be "appropriate".

So while growth in Singapore's outstanding housing loans has slowed, households should still be "prudent" in shoring up financial buffers, said the release.

Even so, the government noted that property sales within a four-year window timeframe has fallen significantly over the years since the SSD was introduced. The SSD, a transaction cost, must be paid by those who sell a residential property within a holding period. This was extended in 2011 to a four-year window.

Now, the holding period is shorter at three years. Rates are also lowered by four percentage points for each tier. They now range from 4 per cent to 12 per cent. These rates will apply to all residential property purchased on and after March 11.

Industry watchers point out that the impact from these changes will be minimal - as buyers are used to a mindset of longer-term investment, shortening of the holding period is unlikely to encourage a speculative mindset. But for those under financial stress, "easing of this measure would reduce or remove the SSD penalty", said JLL director of research Ong Teck Hui.

Also coming into effect on March 11 is a slight easing of the TDSR framework. Mortgage equity withdrawal loans with LTV ratios of 50 per cent and below are not subjected to the TDSR. These are loans that allow borrowers to use residential properties as collateral to get cash.

This comes after MAS received feedback from borrowers that current rules restrict their flexibility to monetise their properties in their retirement years.

But observers say this move is unlikely to stoke demand. "It would likely only promote property purchases by asset-rich individuals," said Desmond Sim, head of CBRE Research for Singapore and South-east Asia.

Even as the market reacted positively to the new easing measures, the government moved swiftly to ringfence a loophole seen in transactions of residential property.

CapitaLand had in January sold its 100 per cent stake in Nassim Hill Realty, which owned the remaining 45 units at The Nassim, to Wee Cho Yaw's family firm Kheng Leong for S$411.6 million.

Only a tax of 0.2 per cent of the net asset value was levied for this transfer. If it was a direct purchase of a residential property, it would have incurred a buyer's stamp duty and also the ABSD.

In an extremely rare move on Friday, an amendment to the Stamp Duties Bill was introduced - and passed - within the same sitting in Parliament. This will close up the stamp duty rate differential, said Lawrence Wong, Second Minister for Finance, who introduced the amendment.

The last time a Finance Ministry measure saw such a rushed treatment is understood to be for the introduction of the SSD in 2010. "We adopt this approach because the measure involved is market sensitive and needs to be effected shortly after the bill has been announced," said Mr Wong.

Starting March 11, the ACD will be levied on the transfer of shares by significant owners of certain property holding entities (PHE). Significant owners are those who presently hold at least a 50 per cent equity interest in the PHE, or else hold at least 50 per cent interest after the transfer.

Such PHEs are defined as those with residential properties here that form at least 50 per cent of its total tangible assets, and will be captured under this new requirement. This can include partnerships, trusts, or companies.

The Business Times

Source: SRX (13 Mar 2017)

Seller’s stamp duties cut as Government eases some property cooling measures - Channel NewsAsia

SINGAPORE: Home owners will only have to wait three years before selling their properties to avoid paying seller’s stamp duties (SSD), down from four years currently, under several adjustments made to property cooling measures.

With effect from Saturday (Mar 11), those who sell their properties within three years will also pay less in SSD, according to a joint press release by the Ministry of Finance, Ministry of National Development and Monetary Authority of Singapore on Friday.

The rate will be cut by four percentage points for each tier - properties sold in the third year will be subject to SSD of 4 per cent, while those sold in the first year will be subject to SSD of 12 per cent, down from 16 per cent currently.

According to the agencies, the decision to revise the SSD was made after the number of property sales within the four-year window fell significantly since the measure was introduced.

The Total Debt Servicing Ratio (TDSR), which was implemented to encourage prudent borrowing by households, will also be eased. Currently, property loans should not exceed a TDSR threshold of 60 per cent.

However, some retirees have given feedback that because of the TDSR, they are unable to borrow against their properties to obtain more cash, the release said.

With the easing in rules, the TDSR will no longer apply to mortgage equity withdrawal loans with loan-to-value (LTV) ratios of 50 per cent and below.

NO CHANGE IN ABSD, LOAN-TO-VALUE LIMITS

The Government has decided to retain the current Additional Buyer’s Stamp Duties (ABSD) rates and LTV limits, the release said.

“Transaction volumes in the private residential property market remain healthy. There is firm demand for private housing, in part because of current low interest rates and continued income growth.

“While the growth in outstanding housing loans has moderated, it is prudent for households to further build up their financial buffers to protect against future interest rate increases or any losses in income. The Government is therefore retaining the current ABSD rates and loan-to-value limits,” it said.

The “calibrated adjustments” made to the SSD and TDSR are part of the Government’s review of conditions in the residential property market, the release said, adding that the current property measures are necessary to “promote a sustainable residential property market and financial prudence among households”.

- CNA/cy

Source: Channel NewsAsia (10 Mar 2017)