SINGAPORE — The Government has raised Additional Buyer’s Stamp Duty (ABSD) rates as well as tightened the Loan-to-Value (LTV) limits for Singapore citizens and permanent residents, in order to “cool the property market and keep prices in line with economic fundamentals”.

With immediate effect, the ABSD rates will be raised by 5 percentage points for all individuals, and 10 percentage points for entities, said a joint statement issued on Thursday (July 5) from the Ministry of Finance, the Ministry of National Development and the Monetary Authority of Singapore.

An additional ABSD of 5 per cent that is non-remittable will be introduced for developers buying residential properties for development.

This means that ABSD rates for Singapore citizens buying their second home will be raised from 7 per cent to 12 per cent, while those buying their third or subsequent home will be raised from 10 per cent to 15 per cent.

Singapore permanent residents who are buying their second property will have to pay a higher ABSD rate of 15 per cent, up from the current 10 per cent.

ABSD rates for foreigners will be raised from 15 per cent to 20 per cent.

There will be no change in ABSD rates for Singapore citizens or permanent residents buying their first property.

Meanwhile, LTV limits will be tightened by 5 percentage points for all housing loans granted by financial institutions. These revised LTV limits do not apply to loans granted by the Housing and Development Board .

Previously, the LTV limit for a buyer’s first housing loan is 80 per cent, or 60 per cent if the loan tenure is more than 30 years or extends past age 65. This will be cut to 75 per cent, or 55 per cent respectively. Similarly, the limit for a second housing loan will be reduced from 50 per cent to 45 per cent, or 30 per cent to 25 per cent if the loan tenure is more than 30 years or extends past age 65.

There will be a transitional provision for cases where an Option to Purchase (OTP) has been granted by sellers to potential buyers on or before Thursday, and this OTP has not been varied on or after Friday.

For such cases, the previous ABSD rates, instead of the revised ones, will apply if the OTP is exercised within three weeks of the announcement or the OTP validity period, whichever is earlier.

The joint statement noted that private residential prices began rising in the third quarter of last year after declining gradually for almost four years.

“Prices have increased sharply by 9.1 per cent over the past year. Demand for private residential property has also seen a strong recovery, as transaction volumes continue to rise,” it added.

“The sharp increase in prices, if left unchecked, could run ahead of economic fundamentals and raise the risk of a destabilising correction later, especially with rising interest rates and the strong pipeline of housing supply.”

Commenting on the issue, Minister for National Development Lawrence Wong said that the “government has been monitoring the property market closely.”

He added:  “We are very concerned that prices are running ahead of economic fundamentals. There is a large supply of units coming on stream and interest rates are going up. We want to avoid a severe correction later, which can have more destabilising consequences.  Hence we are acting now to maintain a stable and sustainable property market”.