Things about Private Residence's cooling measures

With the new cooling down measures that our government implements recently, there are a few things that we may need to be aware of before investing in private residential properties (e.g. landed bungalows, semi-d, terrace house, condos, etc).

• Seller's Stamp Duty (SSD) is now imposed on residential properties sold within 3 years (used to be 1 year this Feb). [I think it's to encourage the residential properties owner to hold their properties for longer duration so as to reduce speculation]
• Within 1 year - Full SSD
• Between 1 to 2 years - 2/3 SSD
• Between 2 to 3 years - 1/3 SSD
• According to one of my mentors, the SSD is calculated from the date the Option to Purchase is being exercised. So do take note on that if you didn't want to incur the fees. Because it's a date that few people will remember.
• For property buyers with 1 or more outstanding  housing loans
• There's also a new rule that increased the minimum cash payment from 5% to 10%. [So more cash is required to buy such properties, especially for property investors, those CPF richer investors with less cash on hand will need to be aware of this]
• The loan amount has dropped from 80% to 70% [So now, more CPF or cash is required for down-payment. As a result, those that didn't have enough cash or CPF due to the new rules may take longer to enter the market]
• Overseas private property investors will need to take note that having such properties directly under their names will affect their eligibility in buying even resale HDB flats, as they will need to sell off their overseas property within 6 months. (The same goes for locate private property owners.)

Although the price hasn't drop yet, but I think with the new measures, it should decrease gradually until the market is more stabilize and sustainable. During the course I attended on Saturday, one of the instructors mentioned that due to this ruling, our stock market went up as funds are redirected. Hence, I think if that's the case, when those investors accumulate enough funds through whichever other means of investments, like the stock market, the redirection of such funds back into the property market might probably affect the stock market more than the property market, due to the liquidity level of stocks. Which means, the stock market might become even more fluctuating.

I personally do hope that our government can release the new measures much earlier than on the effective date itself so that we can have more emotional preparation when the time comes. So that it's a more gradual process.

Reference:
Measures to Maintain a Stable and Sustainable Property Market

Things about HDB flat's cooling measures

Our government has announced some new measures to ensure that our property market to be more stable and sustainable on 30 Aug 2010. I think their aim is to cool down the property market so that middle and low income group can afford the property in the long run and to reduce over speculations. Here's my summary of the overall picture in my knowledge:

• Concessionary HDB Loans (as in direct loan from HDB themselves)
• Still granted at up to 90% of the valuation limit¹. [I think it's good]
• Only offered to eligible 1st time flat buyers and 2nd time buyers that are right-sizing their flats to meet their housing needs. [Looks like not change here to me]
  
• For 2nd time buyers must use 100% of their CPF refund and 50% of the cash proceeds from their 1st HDB flat sales to pay off the new flat before they can get a loan. [This is something you may want to take note of. I think they are just trying to reduce speculations.]
• 10% down-payment is required
• Bank Loan
• 20% down-payment is required. [I personally find it strange that the person can loan more money from HDB than from the bank.]
• General:
  
• For Build to Order flat (Aka BTO, DBSS - Design, Build and Sell Scheme) and EC, your option fee is 5% of the purchase price to be paid in cash only.
• As HDB flats owners needs to stay in the flat for at least 3 years before they can sell, they are not affected by the new Seller's Stamp Duty (SSD)'s regulations.
• Additional HDB Housing Grant is available to help the lower income family buy their 1st subsidized flat. (Only for those family with annual average gross income of less than $5K/month, subsidy varies from $5K to $40K)
• For private residential property owners, they must dispose off their private residential property within 6 months after they buying their resale flat. (Even overseas property must be disposed, if it's under their name.)
• For such owners, they will only be allowed to take up bank loans and if they currently have any outstanding loan from the bank, they can only take up to 70% of the valuation limit. Of which, 10% of the down-payment must be made in cash! [I think that this rule is to deter the private property owners from buying HDB properties so that the prices will cool down more as usually such owners have more money to buy flats]

*Note: Please note that my comments are in [...]. Feel free to correct me if you have any opinions. :)

Footnotes:

1. Valuation Limit is the purchase price of the property or the valuation of the property at the purchased date, whichever is lower.

Reference:
Measures to Maintain a Stable and Sustainable Property Market
Additional CPF Housing Grant
Buy Resale Flat Finances
Foreign Homes, Same Rules

Mortgage Loan

The main source that you can get mortgage loan from is the bank. For overseas property, you may want to utilize their local banks for the loan as those banks in Singapore won't allow you to pledge overseas property for their loan.

For HDB, you have the choice of taking it from HDB itself, which charges a flat rate of 2.6% per annum. As for the various banks, they normally charge a fix rate for like 1-2 years then they will increase the rate for the rest of the loaning period. And that's when you know it might be time to re-finance your loan or re-price your loan. For the difference between refinance and reprice, please click here.

Interest rates varies from bank to bank. So far from my analysis, UOB seems to be offering the best interest rate and Standard Charted has a unique feature of offsetting your interest with the cash that you keep with them. It sounds a bit strange but you may want to find out more and see which works better for you.

And for places like geylang, you can't get a loan from Standard Chartered or OCBC. So that's quite a lot of factors and stuff that you may want to consider before taking up a mortgage loan. Whatever you do, think twice and do a basic research before taking up anything. :)

Mortgage Loan - Refinance VS Reprice

What's the difference between Refinance and Reprice? Well perhaps some of you may not even have heard of the word repricing.

Refinance means that you change your mortgage loan on your existing property to a different bank so as to enjoy a lower interest rate.

Repricing means that you change to a better mortgage loan package on your existing property with the same bank to enjoy a better interest rate.

So basically, it's actually a similar thing except for whether you use back the same bank or you use a different bank for the mortgage loan in order to get the lower interest rate. But you generally can't do that within a certain lock in period (usually within the 1st 1-2 years where you get the fixed low interest rate). This may vary with your bank so do check them out. Usually repricing is easier as your bank will certainly want to retain you as their customer.

If you don't do anything, you'll definitely pay a higher interest the longer you are servicing your loan with your existing bank. But if you do something, the interest you pay will certainly be better than if you do nothing at all. So TAKE ACTION NOW! Call your bank for a repricing if you have not done so in the pass 1-2 years that you are servicing your mortgage loan.