Supply of BTO flats to be increased over next 2 years

The supply of Build-To-Order (BTO) flats will be ramped up over the next two years to meet the strong demand for public housing and keep prices in check.

Up to 23,000 flats will be launched each year in 2022 and 2023 - a 35 per cent jump from the 17,000 flats launched this year.

More private housing will also be made available under the Government Land Sales programme.

The increase in housing supply comes on the back of property cooling measures announced late on Wednesday night, just 20 minutes before they kicked in at midnight.

National Development Minister Desmond Lee said the measures aim to reduce the risk of a self-reinforcing cycle of price increases in the private and Housing Board resale market.

Mr Lee told the media that there has been a clear uptick in home prices and transaction volumes, despite the Covid-19 situation.

"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 said.

Since yesterday, the additional buyer's stamp duty (ABSD) that must be paid for purchases of residential properties has been raised for citizens and permanent residents buying their second and subsequent residential properties.

Foreigners buying any residential property will pay an ABSD rate of 30 per cent, up from 20 per cent.

The total debt servicing ratio for borrowers was also tightened, while HDB loan limits will be lowered from 90 per cent to 85 per cent of a property's purchase price.

Mr Lee said yesterday that the measures will help to support a stable and sustainable property market in the medium term.

First-time buyers are not expected to be significantly affected, especially those in lower-to middle-income households, he added.

He noted that private housing prices have risen by about 9 per cent since the first quarter of last year, while HDB resale flat prices have also increased sharply by about 15 per cent in the same time period.

Mr Lee said the increased supply of new homes in both markets is to cater to genuine demand from home buyers, which has risen even in the midst of the pandemic.

HDB is prepared to launch up to 100,000 new flats from this year to 2025 if demand calls for it, he said.

Supply for private housing will also be stepped up if demand remains strong, said Mr Lee.

While the measures will help to improve affordability for first-time home buyers, and reduce the risk of a hard landing when interest rates rise in the near future, affluent buyers may be deterred from buying additional properties for investment, CBRE's head of research (South-east Asia) Tricia Song noted.

Mr Ismail Gafoor, chief executive officer of PropNex Realty, said that the 10 percentage-point increase in ABSD to 30 per cent for foreigners appears to be too harsh.

"Looking at the caveats lodged, foreigners accounted for only about 4.5 per cent of non-landed new private home sales this year - the majority of the demand was from Singaporeans," he said.

"Developers may well take a breather and may decide to hold off launches till after the Lunar New Year. This will also give buyers some time to understand how the measures will affect them and reassess their buying options."

Ms Wong Siew Ying, head of research and content at PropNex Realty, said: "The measures will certainly crimp the growth momentum in the property market in 2022.

"Given the hefty ABSD for foreigners, we expect prices in (the prime district) to face more pressure."

She added: "Some developers of (prime district) projects may trim average prices by 5 per cent to 8 per cent in 2022 in response to the measures, slowing demand from foreign buyers and the ample unsold supply."