January Property Cooling Measures Pack a Punch!

“TGIF”, I was thinking while gazing at my lovely chicken dinner when my handphone sang a little tune. I took a look at the SMS and learnt my lesson to not ever bring the phone to the dining table. Friday's slew of property cooling measures, unlike the previous few, strongly indicated that the Government is not happy with the pace that property prices are moving up. In fact, my gut is telling me the Government will not be happy until property prices undergo a correction.

The following is a summary of the key residential property measures and my two cents in italics.

• Reduction in the Debt Servicing Ratio to 30% if borrowing from financial institutions — a whooping 20% reduction. For loans granted by HDB, the Mortgage Servicing Ratio will also be reduced from 40% to 35%.
  
• Permanent Residents (PRs) who own a HDB flat will be disallowed from subletting their whole flat.
  
• PRs who own a HDB flat must sell their flat within six months of purchasing a private residential property in Singapore.

• HDB flats are for own-stay and certainly not for PRs to invest in. For Singaporeans, you can still keep one HDB flat for invesment but make sure your cashflow is good.

• Additional Buyer’s Stamp Duty (ABSD) rates will be raised between five and seven percentage points across the board.
  
• The ABSD will be imposed on PRs purchasing their first residential property and on Singaporeans purchasing their second residential property.

Citizenship	ABSD Rate on 1st Purchase	ABSD Rate on 2nd Purchase	ABSD Rate on 3rd & Subsequent Purchase
Singapore Citizens	Existing: NA Revised: NA	Existing: NA Revised: 7%	Existing: 3% Revised: 10%
Permanent Residents	Existing: NA Revised: 5%	Existing: 3% Revised: 10%	Existing: 3% Revised: 10%
Foreigners and non-individuals (corporate entities)	Existing: 10% Revised: 15%	Existing: 10% Revised: 15%	Existing: 10% Revised: 15%

• Loan-to-Value limits on housing loans granted by financial institutions will be tightened for individuals who already have at least one outstanding loan, as well as to non-individuals such as companies.
  
• Besides tighter Loan-to-Value limits, the minimum cash down payment for individuals applying for a second or subsequent housing loan will also be raised from 10% to 25%.

1st    Housing Loan

2nd Housing Loan

From 3rd Housing Loan

LTV Limit	Existing Rules 80%; or 60% if the loan tenure is more than 30 years or extends past age 65 Revised Rules No change	Existing Rules 60%; or 40% if the loan tenure is more than 30 years or extends past age 65 Revised Rules 50%; or 30% if the loan tenure is more than 30 years or extends past age 65	Existing Rules 60%; or 40% if the loan tenure is more than 30 years or extends past age 65 Revised Rules 40%; or 20% if the loan tenure is more than 30 years or extends past age 65
Minimum Cash Down Payment	Existing Rules 5% (for LTV of 80%) 10% (for LTV of 60%) Revised Rules No change	Existing Rules 10% Revised Rules 25%	Existing Rules 10% Revised Rules 25%
Non-Individual Borrowers	Existing LTV Limit 40% Revised LTV Limit 20%

• Residential property investing is only for the very rich – millionaries can own 2 properties but for 3 or more, millionaires do not make the cut. That is only for the multi-millionaires.
• For those who still harbour the thought of making a quick buck (e.g. speculators, specu-vestors and the like) off property, the death knell has struck. Adieu speculators.

3 Things You can do for the Impoverished

It's easy to think that there shouldn't be any Singaporean living in poverty, especially with the recent Straits Times articles reporting of a $3,000 per month dish-washing job, monthly salaries of $5,000 for lorry drivers and a taxi driver who earns $7,000 a month.

The articles are misleading however. The taxi driver has since clarified that he only earned $7,000 once and his usual remuneration is $4,000 to $5000. After some sleuthing, I also discovered that $5,000 as a lorry driver is the exception rather than the norm and even then, similar to a $5,000 a month taxi driver, involves very long hours of work. For the dish-washing job, I had the chance to speak with an NTUC Union staff, who actually put forward many workers for the position subsequent to the newspaper article: not a single one got the job.

While I do believe that most people should be able to earn a decent living in Singapore, there are unfortunately some people who fall through the cracks. Many people who face constant financial difficulties are stuck in low-wage jobs, jobs that pay around $1,000 or less, as they do not possess the skills to get a higher pay one. The majority are unable to converse in English, let alone reading or writing in English. They certainly wouldn't be able to understand this article, which is where you come in. Here are 3 things you can do for these folks in 2013!

Encourage Skills Upgrading

There are a number of Continuing Education & Training (CET) Centres who offer training courses that are 90% - 95% subsidised by the Government (click here for the list of centres). Notably, Mendaki offers a 45-hour conversational English course at just $15 after subsidy. The course is held during weekends and the exact timing depends on the participants.

Some people may find it hard to attend a course, especially when they are already so tired from their struggles trying to make ends meet. Others think they are simply too old to learn new things. Encouragement and support from friends go a long way. On a side note, I used to have a 72 year-old course-mate so one can never be too old to learn!

Sell Flat or Relocate

Some people who are living in poverty may actually be asset-rich but cash-poor. Instead of living hand to mouth, they can sell their asset, free up some cash and downgrade by renting or buying a smaller flat.

These folks are probably not aware, but with HDB flat prices at an all-time high, it's a good time for them to sell their HDB flats soon. Alternatively, cash-strapped elderly (55 and above) who own flats can also sell the tail end of their HDB lease back to the Government under the Lease Buyback Scheme (LBS). Just last Thursday, the Government announced enhancements to the LBS together with the Silver Housing Bonus (elderly home-owners basically get $20,000 cash for downgrading). The improved schemes will be implemented from 1 February 2013 so the best time for these elderly to sell will be shortly after the implementation date. The public can call 1800 555 6363 for more information on these schemes.

For poor and needy Singaporeans, who do not own a flat, monthly rental of a 2-room HDB for poor Singaporeans can be as low as $50 - you can find more details on subsidised HDB rental flats here.

Seek Financial Assistance

For people without flats, financial assistance plans aplenty is a bit of a double-edged sword. Finding the appropriate financial aid may not be easy. I found this out first hand from asking about schemes for a friend, and my friend's case is supposed to be pretty straightforward. Regardless, help is there if you look close enough.

A first step would be to call the Community Chest hotline at 1800 210 2600. Community Chest will then be able to point you to specific charities or government bodies that may be able to offer assistance. Individual Family Service Centres also have schemes that can be found on their respective websites. The applicant should be completely honest when applying for aid as non-disclosure can lead to a lengthy approval process and even jeopardise their chances. For low-wage workers, the Workfare Income Supplement (WIS) Scheme (details can be found here) is a decent financial assistance scheme.