Downgraders' 15-month wait will moderate demand for HDB resale flats: Desmond Lee

The latest round of cooling measures that kicked in on Friday aims to nip overborrowing. ST PHOTO: LIM YAOHUI

SINGAPORE - The 15-month wait-out period imposed on current and former private property owners will moderate demand for Housing Board resale flats and keep them affordable, especially for first-time home buyers, said National Development Minister Desmond Lee.

This is because private residential property owners generally have more means to buy resale flats than first-time home buyers or existing HDB flat owners, said Mr Lee in video remarks on his ministry's YouTube page on Friday evening.

"Some may not even need to take loans to complete their purchase. They therefore tend to pay higher amounts of cash over valuation (COV) when they buy resale flats," he said.

COV refers to the difference between the sale price of a resale flat and its actual HDB valuation. The difference can be paid for only in cash by the buyer.

From Friday, private home owners must wait 15 months after the sale of their current home before they can buy a non-subsidised HDB resale flat.

Exceptions are made for those aged 55 and above who are moving from a private property to a four-room or smaller HDB resale flat, a two-room flexi flat or a community care apartment intended for seniors.

HDB will also, on a case-by-case basis, exempt those with genuine housing needs or those who face extenuating circumstances regardless of their age, said Mr Lee.

"We intend for this measure to be temporary. We will review this, depending on overall demand and market changes," said Mr Lee, referring to the 15-month wait-out period.

The latest round of cooling measures aims to nip overborrowing as both HDB resale and private home markets show growing signs of overheating. It comes just nine months after the last tranche of measures was implemented.

Two big moves to tighten the maximum amount that can be taken for home loans kicked in on Friday.

The first is raising the medium-term interest rate floor used to compute and assess borrowers' abilities to repay, and therefore qualify for, a loan.

The second is lowering the loan-to-value limit, which means buyers can borrow less than before from HDB to finance their home purchase.

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Noting that some have expressed concerns that the lowering of the loan-to-value limit places a larger burden on first-time and lower-income families looking to buy a home, Mr Lee said: "This is not the case.

"This move is not expected to affect first-timer and lower-income home buyers significantly, as they may receive housing grants... and tap their CPF savings to pay for the flat purchase."

Mr Lee said the move is to better protect home buyers by borrowing prudently and not overstretching themselves.

"This helps reduce the risk of them facing future difficulties in servicing their home loans amid the uncertain economic outlook and rising interest rate environment," he added.

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Mr Lee said the moves come at a time when market interest rates have risen significantly over the last year, compared with the years of exceptionally low interest rates from 2013 to 2021.

"This will help them avoid difficulties in servicing their long-term home loans, as we think mortgage interest rates are likely to rise further in future, along with US interest rates," said Mr Lee.

Since the last round of cooling measures in December 2021, housing prices have continued to gain pace, causing some anxiety about affordability, especially among young families looking to buy their first home, added Mr Lee.

Acknowledging that rising home prices have been a concern for Singaporeans, Mr Lee said the latest measures, coupled with the ramp-up in new flat supply, will help to moderate prices and meet strong demand.

"We will continue to monitor the property market and ensure that they remain relevant and in line with economic fundamentals," he said.

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