Tag Archives: TDSR

MOF press release on measures with residential property

Ministry of Finance (MOF) has issued a joint press release with MND and MAS with regard to property measures.

1. Additional Buyer’s Stamp Duties (ABSD) and Loan to Value (LTV) Limits

The Government is therefore retaining the current ABSD rates and LTV limits.

2. Seller’s Stamp Duties (SSD)
The SSD is currently payable by those who sell a residential property within 4 years of purchase, at rates of between 4% and 16% of the property’s value

The Government will therefore revise the SSD as follows:

a) Impose SSD on holding periods of up to 3 years, down from the current 4 years; and
b) Lower the SSD rate by four percentage points for each tier. The new SSD rates will range from 4% (for properties sold in the third year) to 12% (for those sold within the first year).

The new SSD rates will apply to all residential property purchased on and after 11 March 2017. Details of the revised SSD rates are in the Annex.
Existing and new 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
14 Jan 2011 to 10 March 2017 (both dates inclusive) On and after 11 March 2017
Holding Period Up to 1 year 16% 12%
More than 1 year and up to 2 years 12% 8%
More than 2 years and up to 3 years 8% 4%
More than 3 years and up to 4 years 4% No SSD payable
More than 4 years No SSD payable

3. Total Debt Servicing Ratio (TDSR)

MAS will no longer apply the TDSR framework to mortgage equity withdrawal loans with LTV ratios of 50% and below.

4. Stamp Duties on Transfer of Equity Interest in Entities whose Primary Tangible Assets Are Residential Properties in Singapore

The 2nd Minister for Finance will be introducing legislative changes in Parliament today aimed at treating 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. Significant owners of residential property-holding entities or PHEs will be subject to the usual stamp duties when they transfer equity interest in such entities, similar to what would happen if they were to buy or sell the properties directly.

 

TDSR woes to home owners

According to a news report today, home owners are finding it difficult to refinance their homes in the current backdrop of falling home prices. Many home owners who failed to meet the TDSR criteria or the banks’ credit assessment criteria could not refinance their homes.  However MAS seems not to be very worried of the implications. Accordingly less than 10% of existing borrowers have a TDSR of above 60%. This number is expected to reduce as the loans are repaid over the years.

Should the refinancing option is off the table for home owners, possibly for most the only option is to sell off the property even at a loss.

MAS stated that TDSR objectives are gradually met. Almost all new loans were below the threshold of 60%, with quite a significant number of new loans having TDSR of below 40%. The overall objective of TDSR is to encourage prudent financial management among households by reducing the growth of household debt.

More failing to repay mortgages on time: ST 19 Jul

Brief: MORE private home owners are not making their mortgage payments on time. The number of borrowers with delinquent mortgages – accounts that have not been paid for more than 30 days – hit 4,186 in May, up 20 per cent. Delinquent borrowers comprised 0.82 per cent of private home loans in May, up from 0.7 per cent in the same month last year.

http://townsingapore.wordpress.com/2014/07/23/more-failing-to-repay-mortgages-on-time-st-19-jul/

*****************Background Story *****************

DELINQUENT MORTGAGES

  • The number of borrowers with delinquent mortgages hit 4,186 in May, up 20 per cent from the 3,340 a year earlier.
  • Delinquent borrowers comprised 0.82 per cent of private home loans in May, up from 0.7 per cent in the same month last year.
  • Banks wrote off six mortgages in the first five months of the year, a touch up from the five bad loans in the same period last year.

Total Debt Servicing Ratio (TDSR) impact to date

http://www.channelnewsasia.com/news/singapore/taking-stock-of-the-total/1194772.html

The Total Debt Servicing Ratio (TDSR) was introduced in June 2013 to ensure financial prudence among borrowers and strengthen credit underwriting practices among banks. The ratio determines how much an individual can borrow from the banks.

Under it, total monthly debt payments including home and car loans cannot exceed 60 per cent of the property buyers’ income. These debt payments are wide-ranging and can include home and car loans, study loan, and even credit card debts.

In the private residential market, the impact of the TDSR on sales volume quickly became apparent. There were 482 new units bought in July 2013, a drop of 73.3% compared to 1,806 unit) in June 2013.

In total, 9,115 new homes were bought since the TDSR was implemented – that’s half the amount bought in a year-on-year comparison from Jul 2012 to May 2013.

Analysts we spoke to say the suburban homes were the hardest hit. Numbers compiled by Knight Frank Singapore showed that 63 per cent fewer new homes in the suburbs were bought in the second half of 2013, compared to the first half of the year.

As for prices, the effect of TDSR was seen later that year. The Urban Redevelopment Authority’s residential property price index slipped 0.9% in the fourth quarter of 2013, the first decline in almost two years.

Prices dipped again in the next quarter – this time by 1.3 per cent. making it the largest drop since the second quarter of 2009, when prices fell by 4.7 per cent.

In boosting sales, some developers have turned to cutting prices. One of the latest to join the fray is the Panorama condominium in Ang Mo Kio, which relaunched in May at a median price of about $1,241 per square foot.

That is about 8 per cent lower than the median price when it was first launched in January this year. But property watchers we spoke to say the discounts are typically for bigger or “less prime” units, and developers are unlikely to lower prices across their projects.

Developers may also be creating smaller units, to balance between offering palatable prices for buyers, and maintaining their profit margins. According to figures from CBRE, the median size of units in the suburbs declined from 753 square feet in the third quarter of 2013, to 732 square feet in the first quarter of this year.

The impact of the TDSR was also felt in the private residential resale market. CBRE’s numbers showed that sales volume in the secondary market dropped by 50 per cent in the first half of this year, compared to the same period last year.

But it may be increasingly difficult to find tenants, as the Government tightens its foreign labour controls and more new homes enter the market in the coming months.

The Urban Redevelopment Authority estimates that a total of 18,350 units will be completed this year, while another 21,738 units, excluding executive condominiums, are expected to be completed in 2015.