In Focus
RESIDENTIAL PROPERTY | Staff Reporter, Singapore

Who are the biggest winners in the recent tweaks on property rules?

Check out what market players have to say about the move.

The recent easing of the rules in seller's stamp duties (SSD) and the total debt servicing ratio (TDSR) adjustments would benefit homeowners in their retirement years, according to market players.

In an unexpected move last week, the government decided to reduce the holding time of a property to three years to dodge paying for SSD. Currently, SSD is payable by those who sell a residential property within four years of purchase, at rates of between 4% and 16% of the property’s value. Meanwhile, the government said it will relax the rules and will no longer apply the TDSR framework to mortgage equity withdrawal loans with LTV ratios of 50% and below.

"We feel that changes to the TDSR framework will help homeowners to monetise their properties in their retirement years," PropNex CEO Ismail Gafoor said.

For Citi Research, the adjustments ease liquidity constraints for a minority, with other potential consequences.

“This gives an additional avenue for asset-rich but cash-poor retirees to monetise their properties, apart from selling existing larger properties to downgrade, and thus should be viewed in the context of similar moves (e.g. lease buyback schemes). But rather than a sustainable boost for consumption, which fell year-on-year in 4Q16 for the first time since the GFC, relaxing asset-based lending rules could unlock a low-cost source of financing for investments, or even SME owners who face tighter credit conditions,” Citi said.

Meanwhile, Krishna Guha of Jefferies said this will give flexibility to monetise properties in the retirement years for affected households, that is to borrow against the value of their properties to obtain additional cash. However, she noted that this is not expected to have much of an impact as such new loans will still be affected by TDSR.

"It is a small tweak and should not be viewed as any change to overall TDSR measures. In addition, ABSD rates and LTV limits are unchanged," she argued.

On the other hand, Alex Toh, a finance and property lawyer at Withers LLP said most of the mortgage equity loans that are taken up by homeowners are usually for those who use the loan proceeds for investments or if they are business owners, for the working capital for their businesses.

"Hence, the lifting of the total debt servicing ratio framework in relation to mortgage equity loans may help such business owners obtain more loans to support their businesses in this current uncertain economic climate. However, business owners may reconsider doing so in light of the possibility of interest rate hikes in the near future," Toh noted.

On the SSD adjustments, ERA key executive officer Eugene Lim said it brings relief and a way out for investors and property owners who may have to dispose of the property bought in the short term without the additional burden of SSD.

However, the tweak will only be applicable to residential properties bought after the implementation of the adjustment.

"So this measure is a forward-looking measure that allows prospective residential property purchasers to recalibrate their calculations, expectations, and holding period, going forward. Whilst it may change slightly how investors and homebuyers look at the timeline on holding the properties, we do not expect this tweak to have the effect of pushing up property prices in both the primary and secondary market. This is because there is still abundant supply in the residential property market and the demand-cooling ABSD rates and LTV limits remain unchanged," he said.

He furthered, "Developers and sellers are expected to remain realistic when pricing their units for sale. Market transaction data is likely to show that attractively or reasonably priced properties will find buyers much quicker; whilst overpriced ones are likely to remain on the shelf.”

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