Latest property cooling measure will dampen demand in the short term, say analysts
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The latest change in HDB rules have reduced the LTV limit for HDB housing loans from 80 per cent to 75 per cent.
ST PHOTO: GAVIN FOO
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SINGAPORE - The latest move to cool the property market
New measures include tightening the loan-to-value (LTV) limit for HDB loans and increasing the Enhanced CPF Housing Grant (EHG).
The latest change in HDB rules has reduced the LTV limit for HDB housing loans from 80 per cent to 75 per cent.
Financial support for first-time flat buyers in the lower- to middle-income brackets has also been boosted by raising EHG amounts – to up to $120,000 for families and $60,000 for singles.
Before this, the EHG gave a maximum of $80,000 in grants for families and $40,000 for singles buying their first new or resale flat.
Mr Ismail Gafoor, chief executive of PropNex Realty, said the latest measures were expected, given the rapid rise in HDB resale flat prices.
HDB resale prices have been rising continuously since the second quarter of 2020, and went up by 4.2 per cent in the first half of 2024.
Mr Gafoor noted that reducing the LTV to 75 per cent could help cool the upper end of the market by limiting borrowing capacity for those relying on HDB loans.
Ms Christine Sun, chief researcher and strategist at OrangeTee Group, added that lowering the LTV limit could encourage more conservative financial planning among buyers, potentially slowing price increases, especially for larger flats in mature estates.
Minister for National Development Desmond Lee said on Aug 20
The fresh curb is meant to crimp demand in this segment of the market. That said, it would not affect buyers using bank financing, as the LTV limit for bank mortgages remains at 75 per cent.
HDB loans also have a household income ceiling of $14,000 and the new measure will not affect buyers with higher incomes, said Mr Gafoor.
“It is possible that this group of higher-income buyers have contributed to the high flat prices in the resale market,” he said.
“We suspect that the new cooling measure may not capture these buyers, who may continue to be able to pay a higher price for the flat that they desire,” said Mr Gafoor.
Mr Lee Sze Teck, senior director of data analytics at property firm Huttons Asia, expects short-term demand to slow as buyers adjust to the new cooling measure.
“But over time, demand will return and prices will continue to rise,” he said.
This is because the supply of flats hitting the resale market will be lower in 2025 compared with 2024, he said, pointing out that an estimated 7,000 flats will reach their minimum occupation period (MOP) in 2025. This is fewer than the estimated 12,000 flats reaching their MOP in 2024.
Home owners have to fulfil MOP requirements before they can put their flats on the resale market.
Mr Nicholas Mak, chief research officer at Mogul.sg, noted that the reduction in the LTV limit would primarily trim the housing budgets of potential buyers.
But he also noted that the increased EHG could lead to higher demand and a cycle of raising housing grants to keep up with rising HDB resale prices.
“As the prices of HDB resale flats increase, there would be pressure on the Government to raise the public housing grants again and in even greater quantum. This could lead to a price spiral of HDB resale flats,” said Mr Mak.
PropNex head of research and content Wong Siew Ying raised a similar point, saying the larger EHG amounts may possibly spur resale flat demand, as the grant amount could be quite generous after factoring in the Proximity Housing Grant and CPF Housing Grant.
“There is a chance that some resale flat sellers may now hold on to a firm asking price for their flat, as they perceive that buyers are able to enjoy higher grants,” she said.
Meanwhile, home owners who do not qualify for the EHG are feeling the squeeze. They told The Straits Times that tighter LTV limits would mean they would have to stump up more cash for their home purchases, given the current high property prices.
Ms Sherry Lin bought her three-room HDB flat in Bedok in 2020, and took an HDB loan because of the higher LTV limits offered by HDB compared with bank mortgages.
Ms Lin, who is hoping to upgrade to a bigger flat with her elderly mother, said it would be tough with the lower HDB LTV ratio.
“Five per cent may sound little, but if you want to get a bigger flat, it can come up to a lot,” said the clinic manager, who is in her 40s.