Paul Ho
On 10th March 2017, Singapore government issued a joint press release under Ministry of Finance (MoF), Ministry of National Development (MND) and Monetary Authority of Singapore (MAS) to fine tune the property regulations and the new rules will take effect o the 11th March 2017.
Paul Ho (iCompareLoan.com) 21st March 2017.
The chronology of earlier regulations can be found here to get a full picture of the changes.
14 Sep 2009 till Aug 2013
· Singapore Property Regulations From 14 Sep 2009 till Aug 2013
Aug 2013 till Feb 2014
· Singapore Property Regulations from Aug 2013 till Feb 2014
Mar 2014 till Sep 2016
· Singapore Property regulations Sep 2016
Seller Stamp Duty (SSD) to be adjusted
Table of Contents
On or before 10th March 2017: –
· Year 1 – 16%
· Year 2 – 12%
· Year 3 – 8%
· Year 4 – 4%
· Year 5 onwards – 0%
On or after 11th March 2017: –
· Year 1 – 12%
· Year 2 – 8%
· Year 3 – 4%
· Year 4 onward – 0%.
What this means is, the Seller stamp duty only applies to properties sold within the first 3 years. This means a shorter holding period for people buying properties.
Total Debt Servicing Ratio (TDSR) Waivers
On or before 10th March 2017: –
· 60% Total Debt Servicing Ratio rule applies for all properties.
On or after 11th March 2017: –
· Properties with Loan-to-value less than 50%, TDSR rule of 60% no longer applies.
For example, a person who is 67 years old, he may own a property that has $200,000 in outstanding loan and a valuation of $2,000,000. This means that he can now go to the bank to use his property as pledge to loan up to 50% (or $1,000,000) of this property valuation of $2,000,000.
Scenario: –
Valuation = $2,000,000
Outstanding loan = $ 200,000
CPF used = Nil
Additional Equity-term-loan this person can draw upon will be: –
Loan-to-value of 50% (loan) = $1,000,000
Less outstanding loan = $ 200,000
Additional Cash out Equity-Term-loan = $ 800,000
Such Cash out Equity-term-loan is no longer subjected to the regulated TDSR assessment criteria. It is now entirely up to the individual Singapore banks to decide what criteria to use and how much to lend.
Regulations and rules pertaining to ABSD and LTV limits will remain.
You may want to find out about how you can refinance home loan to obtain cash-out equity-term-loan.
Introduction of Additional Conveyancing Duties (ACD) on Property Holding Entities (PHE)
A new stamp duty called the Additional Conveyance Duty (ACD) will be effective on or after 11th March 2017.
This regulation is targeting property holding entities such as investment holding companies, partnerships, trusts that holds on to residential properties with controlling stake above 50%.
There is additional conveyance duty for buyers (ACDB) and its associates that become controlling stake owners, i.e. owning 50% or above in shares of the entity.
And for sellers and its associates, Additional Conveyance Duty Seller (ACDS) is levied on those that already controls 50% or above in controlling stake.
The Additional Conveyance Duty Buyer (ACDB)
· Buyer stamp duty (1% to 3%) on valuation
o 1% on the first $180,000
o 2% on the second $180,000
o 3% thereafter
· 15% on the entire value
The Additional Conveyance Duty Seller (ACDS) – if sold within 3 years.
· Flat rate of 12% of valuation.
On top of that, IRAS continues to charge a stamp duty of 0.2% based on the net asset value of the firm.
This regulation applies largely to property developers, family offices, property investment holding companies, trusts and partnerships.
If in doubt, write in to IRAS for the full definition.
Info-graphic 1: Additional Conveyance Duty (Buyer and Seller), IRAS
In Summary
Except for SSD and waiver of TDSR for Loan-to-value less than 50%, the rest stays the same. This potentially free up some capital for those who are asset rich and facing cash flow issue.
References
1. Stamp duty basics for Property Holding Entities, IRAS, https://www. iras. gov.sg/irashome/Other-Taxes/Stamp-Duty-for-Property-Holding-Entities/Learning-the-basics/Stamp-Duty-Basics-for-Property-Holding-Entities/
