Not yet time to ease property cooling measures, says MAS

By Jude Chan / The Edge Markets | June 29, 2017 5:04 PM SGT
Singapore’s property cooling measures are here to stay, according to the Monetary Authority of Singapore (MAS).
The central bank says residential property transactions increased in 2016 compared with 2015 due to healthy sales at project launches and better matching of price expectations between buyers and sellers in the resale market.
And the trend has continued into the first quarter of 2017 on the back of low interest rates and continued income growth. Transaction activity in 1Q increased by close to 40% compared to average quarterly transactions since the implementation of the Total Debt Servicing Ratio (TDSR) framework in 2013.
“Underlying demand for private residential properties remains firm amidst a continued low interest rate environment,” say MAS managing director Ravi Menon on Thursday as the central bank launched its 2016/17 annual report.
“It is, however, not time yet to ease the cooling measures,” he adds. “They remain necessary.”
Prices in Singapore’s residential property market have fallen by nearly 12% after 14 consecutive quarters of decline.
Since 2009, the government has implemented macroprudential measures – commonly known as property cooling measures – to promote a sustainable residential property market and financial prudence among households.
In March, calibrated adjustments were made to the Seller’s Stamp Duty (SSD) and TDSR framework to address specific feedback and market conditions.
However, Menon on Thursday stressed that the adjustments “do not signal the start of an unwinding of the property cooling measures.”
“The adjustments in March were made for very specific reasons and purposes,” Menon says.
Rates for the SSD was lowered by four percentage points and the holding periods for residential properties was lowered to three years, from four years previously.
Under the revised SSD framework, owners who sell a residential property within three years of purchase will pay a tax of between 4% and 13% of the property’s value.
Menon says the SSD rules were adjusted because “speculative flipping of properties had been declined significantly.”
In addition, the government removed the TDSR for mortgage equity withdrawal loans with loan-to-value (LTV) ratios of 50% and below.
The move was reported to have come after feedback from some borrowers that the TDSR framework has limited their flexibility to monetise their properties in their retirement years.
However, this was targeted at a very small category of people, Menon says. He estimates that mortgage equity withdrawal loans excluded from the TDSR framework made up just 1% of new private housing loans...