The swift actions by the government bodies in response to the Executive Condominium fiasco discussed in our earlier article and the continued escalation of property prices are probably welcomed by many.  Of course there will be those who will not agree with the need for new cooling measures, but we reckon that it is prudent for the long-term benefit of Singapore and Singaporeans.

With the new cooling measures effective today, the Loan-to-Value (LTV) Limit has been lowered and the Minimum Cash Down Payment is raised.  Please see the table below.

Lowering the Loan-to-Value (LTV) Limit and Raising the Minimum Cash Down Payment on Housing Loans

 

From today, the bar for entry is further raised for many looking to buy residential properties in Singapore.  The above LTV changes together with the new Additional Buyer’s Stamp Duty (ABSD) will require buyers to have very deep pockets of cash to contemplate a second Singapore home.

What do I mean by that? Well, let’s say for investment purposes, you want to buy a second property. An average private apartment these days will cost you about SGD1 millon, give or take. With these new rules in place, you will need to first need to have 25% of that as cash on hand! That’s $250,000 in cold hard cash. Not only that, the loan amount can only be 50% of the total value, which means you’d still have to come up with another $250,000 in cash, or from your CPF account. On top of that, we have the new ABSD of 7%…

For a small-time investor hoping to maximise leverage, a second property is no longer an option. For bigger investors with high liquidity, the returns on property are no longer as attractive, especially with a possible market correction in the future. Overall, this will exert significant downward pressure on both volume and prices.

It will be interesting to see the market’s response and the price movements to come.  What will your projections on home prices look like?  We are very interested and hope you can share with us by commenting below or in our social media channels, FacebookTwitter, and Google+.

 

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  One Response to “New Cooling Measures Affect Loan-to-Value (LTV) Limits and Minimum Cash Down Payment”

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