New Measures To Curb Residential Property Speculation

New Measures To Curb Residential Property Speculation

Imposition of Sellers’ Stamp Duty
(‘SSD’)

In February 2010, the Government imposed SSD
for sellers who buy residential properties on/after
20 February 2010 and sell the properties within 1
year of acquisition.

The date of Purchase or Sale refers to the date
on which the Option to Purchase (‘OTP’) is
exercised or the date on which the Sale &
Purchase Agreement (‘SPA’) is signed, whichever
is earlier.

For instance, if A exercises an OTP on 25 Feb
2010 and proceeds to issue an OTP to B which is
exercised on 25 June 2010, A has to pay SSD. A
will not be liable for SSD only if he disposes of
the property on/after 25 Feb 2011.

On 30 August 2010, there was a further
announcement that SSD will be imposed on
residential properties which are purchased on/
after 30 August 2010 and sold within 3 years of
acquisition.

The SSD rates would be tiered according to the
duration of the holding period so the seller pays
the full conveyance rate if the property is sold
within the 1st year of purchase, 2/3 the amount if
the sale is in the 2nd year and 1/3 the amount if in
the 3rd year.

For instance, if C exercises an OTP on 20
September 2010 and proceeds to issue an OTP to
D which is exercised on 30 September 2011, he is
considered to have disposed of the property within
the 2nd year of purchase. So if he has sold the
property at S$ 1.5 million, he will be liable for SSD
of S$24,600, payable within 14 days from the
exercise of the Option.

Further Changes to SSD

On 13 January 2011, the Government yet again
announced the extension of the holding period for
imposition of SSD from 3 years to 4 years based
on new rates. These new rates apply to properties
purchased on/after 14 January 2011.

For properties disposed of within 1 year of
Purchase, SSD payable is 16% of the sale price or
the market value of the property, whichever is
higher.

For properties disposed of within 2 years of
Purchase, SSD payable is 12% of the sale price or
the market value of the property, whichever is
higher.

For properties disposed of within 3 years of
Purchase, SSD payable is 8% of the sale price or
the market value of the property, whichever is
higher.

For properties disposed of within 4 years of
Purchase, SSD payable is 4% of the sale price or
market value of the property, whichever is higher.
Of course, if the property were disposed of only 4
years after purchase, no SSD will be payable.

For instance, if E purchases a property for S$3
million on 18 January 2011 and subsequently
sells it to F for S$4 million on 16 January 2012.
E is liable for SSD amounting to S$640,000. E will
not need to pay SSD if he sells the property on or
after 18 January 2015.

The consideration or market value has to be
rounded up to the nearest $100 before applying
the stamp duty rates and SSD payable is to be
rounded down to the nearest dollar. Where only
part of the property is for residential use, only that
part relating to residential use is subject to SSD.

There are some exemptions however. For
example, residential property owners need not
pay SSD when selling their residential properties
due to bankruptcy or involuntary winding up.

For inherited residential properties, SSD will not
be payable by the estate of the deceased when
the property is passed to the beneficiary by Will or
by Law.

HDB flat owners who surrender their flats to HDB
because of break-up of fiancé/fiancée relation-
ships or annulment of marriages and separations/
divorces will also be exempt from payment of
SSD.

If the seller is liable but fails to pay SSD, the OTP or
SPA is not considered duly stamped even if the
buyer has already paid Buyer’s Stamp Duty. As
such, it is in the buyer’s interest to make sure the
seller pays the SSD.

Changes to Residential Property Loans

Those buying their first home will not be affected by
changes effected by the Monetary Authority of
Singapore (‘MAS’). Households/individuals
purchasing HDB flats for the first time will still be
able to borrow up to 90% of the Valuation Limit from
their financiers whereas households/individuals
purchasing private property for the first time can still
borrow up to 80% of the Valuation Limit.

Those who are purchasing a second home and
have paid up their first mortgage will also not be
affected. They will continue to be able to borrow up
to 80% of the Valuation Limit.

However, those who are considering purchase of a
second home and have a mortgage outstanding will
only be able to borrow 60% of the Valuation Limit
from their bank. Prior to the changes effective from
14 January 2011, it used to be that such
households could borrow up to 70% of the Valuation
Limit.

Finally, companies, trusts, funds and any other
types of purchasers which are not individuals have
to pay at least 50% of the property price upfront and
can borrow a maximum of 50% of the Valuation
Limit from their Bank, regardless of whether this is a
first purchase.

It used to be that for first purchases, these entities
could borrow up to 80% of the Valuation Limit or
70% of the Valuation Limit if there were an
outstanding mortgage.