SINGAPORE - Despite continuing uncertainty created by the Covid-19 pandemic, the Government has decided to implement new property cooling measures to reduce the risk of a self-reinforcing cycle of price increases in the private and Housing Board resale markets, which will impact housing affordability, said Minister for National Development Desmond Lee.
Speaking at a briefing on Thursday (Dec 16), he noted that there is a clear upward market momentum in prices and transaction volumes, despite the near-term uncertainty about the Covid-19 situation, including the prospect of the Omicron variant spreading here.
"Left unchecked, prices are likely to run ahead of economic fundamentals. This will increase the risk of a destabilising correction later on that will hurt many households," he added.
"Borrowers will also be vulnerable to the likely rise in interest rates in the next year and beyond, as major central banks look to tighten monetary policy to respond to inflation as well as the recovery in their economies. A combination of rising prices and higher interest rates will risk a significant increase in debt servicing costs for future buyers."
Mr Lee noted that the house price-to-income (HPI) ratio in both the private housing and the HDB resale markets have been rising, but these are still below their historical averages for now.
“In particular, HPI for HDB resale flats reached 4.4 times in the first three quarters of 2021, which is well below its level a decade ago. However, it is now on a clear upward trend,” he said.
Transaction volumes in both markets have also been high. HDB Build-To-Order (BTO) demand, too, has been high, and buyers who turn to the HDB resale market are understandably concerned about the increasing prices, Mr Lee added.
His remarks come a day after property cooling measures were announced late on Wednesday night.
From today, the additional buyer's stamp duty (ABSD) that must be paid for purchases of residential properties will be raised.
The ABSD rate will go up from 12 per cent to 17 per cent for citizens buying their second residential property, and from 15 per cent to 25 per cent for those buying their third and subsequent properties.
Permanent residents buying their second residential property will see the ABSD rate rise from 15 per cent to 25 per cent. If they are buying their third and subsequent properties, the rate will increase from 15 per cent to 30 per cent.
Foreigners buying any residential property will pay an ABSD rate of 30 per cent, up from 20 per cent now.
The ABSD rate for entities, including housing developers, will go up from 25 per cent to 35 per cent. Housing developers can have this amount remitted if they fulfil certain conditions. But they will still be subject to a 5 per cent non-remittable ABSD.
The total debt servicing ratio (TDSR) for borrowers will also be tightened from 60 per cent to 55 per cent. The TDSR limits the amount that a person can spend on monthly debt repayments.
HDB loans will also be lowered from 90 per cent to 85 per cent of a property's purchase price.
In addition, the new loan-to-value limit will apply to new flat applications for sales exercises launched after today and complete resale applications received by HDB from today. The revised limit does not apply to loans granted by financial institutions where the ratio remains at 75 per cent.
“This measure will also encourage greater financial prudence among home buyers in the public housing market,” said Mr Lee, adding that the change is not expected to affect first-timer buyers significantly, especially for lower- to middle-income households.
“This is because first-timer families buying a resale flat today can benefit from generous grants of up to $160,000 and can use their CPF savings upfront to pay for their flat. This reduces the overall loan quantum that first-timer buyers will have to take to complete the flat purchase,” he explained.
The new measures are aimed at addressing both the demand and supply of housing, and will help to support a stable and sustainable property market in the medium term, and also ensure that housing remains affordable for Singaporeans, the majority of whom live in HDB flats, Mr Lee pointed out.
"Crucially, our measures seek to prioritise housing purchases for genuine owner-occupation, especially among first-time home buyers. They aim, in particular, to ensure that affordability in the HDB resale market - as measured by HPI - remains well below its historical levels," he added.
Private housing prices have risen by about 9 per cent since the first quarter of last year, while HDB resale flat prices are also recovering sharply after a six-year decline, rising about 15 per cent in the same period.
To cater to genuine demand from home buyers and address their anxieties, the supply in both the private and public housing markets will be increased.
BTO supply will be expanded to up to 23,000 flats per year in 2022 and 2023. Meanwhile, the supply of private housing will also be raised through the Government Land Sales (GLS) Programme – for the first half of 2022, there will be around 2,800 units on the confirmed list, with another 3,700 units on the reserve list.
Mr Lee added: "We will continue to monitor the property market and remain vigilant to the risk of a sustained increase in prices relative to income trends."