Is a soft landing in sight for the Housing Board resale market, with the latest round of property measures?
Analysts are saying: Yes - finally. Yesterday, the Singapore Real Estate Exchange (SRX) announced that the overall median cash over valuation hit a four-year low of $18,000 last month.
This is the cash premium buyers pay above the valuation price of a flat.
Overall median HDB resale prices also slipped 0.7 per cent last month, the first time prices have dropped for four consecutive months since January 2006.
The HDB resale market 
proved quite resistant to six rounds of property cooling measures starting from 2009 to October last year - until this year's curbs.
Earlier cooling measures helped reduce volumes of transactions, but HDB resale prices continued to hit new highs.
Volumes dropped from 37,205 resale deals for the whole of 2009 to just 9,570 in the first two quarters of this year, the lowest since 1997.
According to SRX data, however, median HDB resale prices rose from $315,000 in January 2009 to $460,000 in January this year.
The HDB resale price index kept rising. From 138.3 points in the first quarter of 2009, it hit a record high of 206.6 points in the second quarter of this year.
But the pace of growth at least has slowed, in response to measures introduced by the Monetary Authority of Singapore (MAS).
The 0.5 per cent increase in the resale price index in the second quarter of this year was the lowest since the first quarter of 2009.
In January, MAS tightened the loan eligibility of buyers by capping the mortgage servicing ratio at 30 per cent and 35 per cent for bank loans and loans from the HDB respectively.
These percentages refer to the proportion of a buyer's gross monthly income that can be used for loan repayments.
Then, just last month, the mortgage service ratio for HDB loans was tightened to bring it into line with loans from private banks.
In addition, maximum loan tenures for HDB loans were reduced from 30 years to 25 years, and from 35 years to 30 years for private bank loans.
Permanent residents were also required to wait for three years after getting their residency to be eligible to buy an HDB resale flat. Previously, there was no wait.
These moves were in addition to the introduction in June of a total debt servicing ratio for property loans.
This capped the total debt obligations of a borrower at 60 per cent of his gross monthly income if he wanted a mortgage.
Unlike the mortgage servicing ratio, this ratio included all debts being serviced.
As a result of these latest measures, the property market is expected to cool even further in the coming months.
National Development Minister Khaw Boon Wan said last month that the new measures to curb loans were meant to help stabilise and "restore the balance in the HDB market".
To draw demand away from the HDB resale market, the Government has also expanded its Special Housing Grants to households earning less than $6,500 a month.
This is on top of earlier moves to ramp up its building programme and delink new flat prices from resale ones.
About 83 per cent of resident households live in HDB flats.
In an earlier interview, Mr Khaw said: "You can do a vertical hard landing - a crash. But we want a soft landing and a long runway which, in this case, means time. So you need more time, and therefore you need multiple measures over time."
A soft landing is necessary because some buyers have been taking advantage of low interest rates, and putting themselves at considerable financial risk, in an effort to purchase a pricey flat.
The bull run in housing prices has led to flats being less affordable across most income groups in recent years, said National University of Singapore economist Tilak Abeysinghe.
He has written a paper with fellow researcher Gu Jiaying that charts housing affordability based on the ratio of median lifetime income to average HDB resale prices.
In 2006, a median priced HDB four-room resale unit ($246,000) was affordable to the bottom 20 per cent of income earners. However, the same unit last year (at about $460,000) is no longer affordable to this group.
The research paper says this can be attributed to the differential increase between housing prices and incomes.
Median housing prices have gone up about 11 per cent a year since 2006, outpacing annual average growth in median lifetime income of 4 per cent.
However, the Government's moves on the housing market this year have had an impact, with affordability indicators flattening out, said Associate Professor Tilak, noting that the median price for four-room flats is now about $450,000.
Experts say larger flats such as five-room units are likely to see less demand. This is because borrowing restrictions will eliminate buyers who normally go for larger flats with the intention of renting out spare rooms for added income.
PropNex chief executive Mohamed Ismail expects a price drop of up to 10 per cent for bigger flats.
All in all, these moves show the continued determination of the Government to discourage excessive consumption, particularly when it comes to basic housing needs, say Citigroup analysts Adrian Chua and Ivan K. Lim.
A weaker HDB resale market, they add, will also affect the private resale sector as HDB upgraders typically go for mass market condo units.
SLP International's head of research Nicholas Mak points out that it is not in the Government's best interest to let the resale market fall too drastically.
"A flat is typically a household's largest asset. If market conditions are good and property prices still go down severely, home owners will be stuck."
This story was first published in The Straits Times on Sept 7, 2013
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