What the latest cooling measures actually mean for upgraders

Every time the words “cooling measures” are in the paper I get the same message from three different people, and it is always some version of the same question: does this mean I cannot move now.

Almost always the answer is no. The measures are aimed at a small number of people buying a lot of property, and an upgrader selling one flat to buy one home is not that person. But one of them does land squarely on you, and it lands as a number you have to find in cash before anybody gives it back.

So here is the whole thing in plain English, in the order it will actually happen to you. Read the date at the top of this piece first. Of everything below, the rate in the next section is the one that has moved most often, and a post about cooling measures that does not tell you how old it is is worse than no post.

The one that touches you: ABSD

Additional Buyer’s Stamp Duty is charged on the property you are buying, at a rate set by how many residential properties you already own. Buy your second one as a Singapore citizen and it is twenty per cent, on top of the ordinary Buyer’s Stamp Duty everybody pays.

On a $1.6 million purchase that is $320,000. It is due within fourteen days of the option being exercised, and the fact that you are about to sell the flat you are standing in makes no difference to the bill. This is the single number that stops most upgrades, and it stops them at the wrong moment — after the offer, not before the search.

The remission is the whole game. A married couple with at least one Singapore citizen, buying the new home jointly, can claim that twenty per cent back if the old property is sold within six months. It is a refund, not a waiver: you pay it, then you apply. Which means for some months you are a household that is out $320,000 and waiting on IRAS.

Four things decide whether the remission works for you

None of these is new, and none of them is negotiable. They are the four I check before I let anybody talk about a shortlist:

• You have to be married, and one of you has to be a Singapore citizen. Two permanent residents do not qualify. Nor does a single buyer, however obvious the upgrade looks — the remission is written for a married couple and the wording is not flexible.
• Both names have to be on the new place. Buying in one name to keep the other free is a common piece of advice and it takes the remission off the table. Get that decision made before the option, not after.
• The old property has to be your only other one, and it has to go within six months. Six months from the exercise of the option if the new home is completed, or from TOP if it is not. A flat that does not sell in that window turns a refund into a cost.
• You need the cash for the gap. Not the affordability — the gap. Twenty per cent up front and back later is a different problem from twenty per cent you cannot afford, and it is solved with a bridging loan or with sequencing, not with optimism.

“Nobody is stopped by the rate. They are stopped by having to find it in March and get it back in September.”

Sell first or buy first, which is the real question

Everything above turns into one practical decision, and it is the one worth spending an evening on rather than reading another article about the measures themselves.

Sell first and you know your number exactly. You have the proceeds, the CPF refund is settled, there is no ABSD to find and no six-month clock. What you have instead is somewhere to live for four months and a market that may have moved while you were in it.

Buy first and you keep the home you found. You also carry the ABSD, two sets of costs, and a deadline with a $320,000 penalty at the end of it. I have had clients do it well. All of them had the cash sitting there and none of them enjoyed the wait.

What I will not do is let somebody decide that at the viewing. If you are within a few weeks of an option and you still do not know which one you are doing, you are not ready to make an offer — and that is a much cheaper sentence to hear from me now than from your banker later.

If you are going the other way

One rule catches people who read “upgrader” and mean the opposite. If you own private property and you want to buy an HDB resale flat, there is a fifteen-month wait-out period after you dispose of the private one before you can buy. Seniors aged fifty-five and above moving to a four-room flat or smaller are exempt.

Fifteen months is a long time to be renting, and this one is not a refund you get back. If that is the move you are planning, it wants to be planned around, not discovered.

What has not changed, and probably will not

The rest of the framework has been stable for years and it is the part people quote at each other as if it were news. The loan is capped at seventy-five per cent of the price for a first housing loan and forty-five if you are carrying one. Total debt servicing is held at fifty-five per cent of gross monthly income, computed against a four per cent interest floor rather than the rate you will actually be offered. An HDB purchase also has the mortgage servicing limit of thirty per cent.

Those are the numbers that decide what you can buy. The affordability calculator runs the same stress test the bank does, and it takes two minutes. If the answer surprises you, the measures were never your problem.

That is the honest summary. Most cooling-measure headlines are not about you. The one that is, you can plan around in an afternoon — and the planning is the part that has to happen before you fall in love with a floor plan.

— MG

UnapprovedMichele did not write this post. It was written to the card copy that already existed, to give the template something real to render, and the date on it is invented too. Read it as a shape to correct.