Between 2010 and 2013, the Singapore government implemented a series of measures to cool the residential property market, including the Seller’s Stamp Duty (SSD), Additional Buyer’s Stamp Duty (ABSD), reduction of borrowing limits and Total Debt Servicing Ratio (TDSR). The effect of the cooling measures was a two-thirds fall in sales volume between 2010 and 2014 while prices eased by a moderate 11.3 per cent from 3Q13 to end-2016.

Previous appeals by the industry to relax the cooling measures had been unsuccessful, so it came as a surprise that on 10 March 2017, the authorities announced tweaks to the cooling measures.

The first relaxation was to the SSD, with the holding period being reduced to three years and the rates to between four and 12 per cent. Prior to this, SSD had been payable by those who purchased a residential property and sold it within four years, at rates of between four and 16 per cent of the purchase price.

The second relaxation was to the TDSR, which was lifted for mortgage equity withdrawal loans with loan-to-value ratios of 50 per cent and below to enable some owners, especially those in their retirement years, to borrow against the value of their properties to obtain additional cash.

While the adjustments to the SSD and TDSR by themselves may not have a significant impact on the market, it is the signal that they are sending that is expected to have a positive impact. The policy relaxation is likely to be seen as the beginning of the unwinding of cooling measures and this is expected to lead more buyers back to the market. Buyers would perceive the market as bottoming and be hopeful of a price recovery. Transaction volumes which have been increasing in the last two years, are likely to pick up further and we expect some upside to prices.

Another announcement was the Additional Conveyance Duties (ACD) for purchase which is identical to the buyer’s stamp duty of up to three per cent and ABSD of 15 per cent and payable for the transfer of equity interest in a property holding entity instead of just the 0.2 per cent stamp duty for share transactions. This would prevent developers under pressure from Qualifying Certificate extension charges and ABSD remission claw-back from disposing of unsold stock through the transfer of equity interest with minimal penalty.

The ACD for sale is at a flat rate of 12 per cent if the interest is transferred within three years, making it more punitive than SSD for individual sellers. The effect of the ACD is that bulk purchases by investors could be at wider discounts.

The long-awaited easing of cooling measures has finally begun but the adjustments of the other measures are likely to be cautious and gradual, with the authorities sizing up the impact of each adjustment before moving on to the next. For now, there is ‘candlelight at the end of the tunnel’, possibly leading to a revival in the Singapore residential market.

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