What the Govt property measures mean to you

With the latest round of Government measures, there might be concerns among first-time home buyers, those looking to upgrade their properties as well as property investors on how they will be impacted. Let me share my views:

First-Time Home Buyers and Property Upgraders

For first-time home buyers, you need not worry as these measures do not impact you directly. You will still be able to obtain loans of up to 80 per cent of the property value or purchase price, whichever is lower, if you fulfil the borrowing criteria of the bank.

As for property upgraders, you may still qualify for an 80-per-cent loan if the document for the sale of your existing property and the loan redemption statement can be submitted at the point of applying for a new loan.

Property Investors

The latest measures will have an immediate impact for those who are considering to invest in a second or subsequent property and have an existing mortgage loan.

Foremost, the capital outlay will be increased as a result of the drop in the permissible loan quantum at 60 per cent. The mandatory cash component remains unchanged at 10 per cent of the property value.

To illustrate, if the intended property to be purchased is $1 million, you can obtain a maximum loan of $600,000. A minimum $100,000 (10 per cent of the property value) must be paid in cash, while the remaining $300,000 can be funded with a combination of cash and CPF.

Your next concern will be the significant increase in the seller’s stamp duty. If the property is sold within the first year from purchase date, the applicable stamp duty will be a hefty 16 per cent.

This percentage reduces to 12 per cent, 8 per cent and 4 per cent, if your property is sold in the second, third and fourth year respectively.

Hence, you should be prepared to hold for a longer term, at least four years from the date of purchase. Should you wish to sell within the four-year period, you should carefully weigh your capital gains versus the stamp duty and other ownership cost such as interest, legal charges and taxation.

For those who are considering setting up an investment holding company for your property portfolio, you should note that the permissible loan quantum is now capped at 50 per cent.

Putting regulatory impact aside, it is important for you to be comfortable with the overall financial commitments, such as your home loan instalment and maintenance fees.

Hence you should carefully review the variety of loan packages in the market, in order to select one that meets your needs. Only then can you benefit from your investment.

By Phang Lah Hwa, OCBC Bank’s head of consumer secured lending.

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