Singapore is a fast-paced society, with English the dominant language. Most Chinese here have an English name. All the places, road names, organizations go by English.
That undoubtedly is the case too when it comes to the property market, where the terminology is all in English.
The more property market abbreviations, acronyms you know has a correlation to the level of your proficiency. It can also give you a big help in avoiding being sidelined. So you stand to lose out if you don’t understand the acronyms!
Here’s some you will definitely come across when dealing with property transactions.
It means Additional Buyer’s Stamp Duty. It is a counter-measure by the government to cool down the property market. This ABSD is activated, where a buyer needs to pay this amount to broker this transaction.
Currently, Singapore citizens will need to pay an additional 7% and 10% ABSD respectively when buying second-hand and third-hand housing property. For permanent citizens, it will be 5% and 10% respectively. As for foreigners, it will be at least 15%.
Cash Over Valuation. This was a popular term used during the property boom in 2007. Though seldom in use, there’s no harm in knowing it.
In the past, when a flat owner intends to sell his flat, he can first get a valuation price and try to reach an agreement with the seller. The seller and buyer will then negotiate about the amount to be paid above the valuation.
COV is the cash premium that buyers pay in excess of the valuation of an HDB flat in the resale market. As it is a willing transaction between two markets, it often accurately reflects the current market.
But as of March 2014, the HDB has made adjustments to this COV.
Currently, HDB will accept valuation requests only from buyers or their salespersons, after the buyers have been granted an Option to Purchase by the flat sellers.
Loan to value. It is the value of the housing loan to the true value of the property.
For example, the buyer is interested in getting a loan to get his dream home. That is valued at $1m with a LTV of 80%. That means he can get a housing loan up to $800,000. This 80% rule currently applies to those getting their first piece of property. For second and third property, it’s scaled down to 50% and 40% respectively.
For private and public, the loan repayment period must not exceed 35 years. If it’s over 30 years or if the owner is still unable to clear the loan by the age of 65, he/she is only allowed to obtain a LTV of 60%. And if he/she has more than a housing loan to clear, the subsequent LTV will be reduced to 40%.
Option to Purchase. This is one procedure both buyer and seller will have to go through before signing the contract. The buyer will need to hand over a deposit to the seller, which is normally 1% of the resale value. Otherwise, by default, it will be $5000.
Upon receiving the deposit, the seller is not to sell the flat within 14 days to other parties except the buyer. The buyer can then think more carefully whether to go ahead with the transaction.
If he dream of a ghost in the flat that he’s going to move in, he will probably be scared and regret the decision. But sorry hor, the deposit will be confiscated by the seller. So be careful when signing this OTP!
Sales & Purchase Agreement. When the buyer decide to push ahead with the transaction, both parties will head into this S&P. On the day of the contract signing, also known as the purchase date, details must be stated very clearly as you would need to pay the ABSD!
Upon signing this S&P, the buyer is also required to hand down a deposit, normally set at 9% of the flat. Add on the OTP, and this will come up to 10%!
The buyer’s lawyer will also need to cross-check the financial records and the housing deed before going ahead with the signing.
Standard Stamp Duty. Based on the resale value, the IRAS will seek the SSD from both parties. The buyer will need to pay several layers: 1% of the first $180,000, 2% of the next $180,000, and 3% of the remainder, if any.
In some cases, the buyer will need to pay additional SSD, varying from 5% to 15%. On the other hand, the seller will also need to pay SSD as the government aims to cool down the property market. This is done to prevent profiteering within a short time frame.
For the seller, if he sells his flat within the first year, he will need to pay 16% of selling price or market value, whichever is higher.
That will be 12%, 8%, 4% respectively for the second year, third year and fourth year time frame. He/she won’t be required to pay any SSD from the fifth year onwards.
So then, do you understand the SSD? Is it really stylo milo to rattle off these acronyms? Any more you would like to add on? Comment below now!