NEW restrictions on Housing and Development Board (HDB) loans for flat buyers will be implemented to cool the public housing resale market, the Ministry of National Development (MND) said on Monday (Aug 19) night.
The loan-to-value (LTV) ratio for HDB loans will be lowered from 80 per cent to 75 per cent, in line with those granted by financial institutions. The revised LTV limit will apply to completed resale applications received by HDB on or after Aug 20, and to BTO applications from the October 2024 exercise onwards.
At the same time, the HDB will extend more aid to first-time buyers in the form of bigger Enhanced CPF Housing Grants. From their current limit of S$80,000, the EHG grants will be bumped up to S$120,000 for first time families. First-time singles will be able to access up to S$60,000 in grants, from S$40,000 previously.
This means eligible first-time families buying resale flats can receive up to S$230,000 in housing grants, comprising the revised EHG of up to S$120,000, a CPF Housing Grant of up to S$80,000 and a Proximity Housing Grant of up to S$30,000.
Eligible first-time singles buying resale flats will receive S$115,000 in total – up to S$60,000 in EHG, a CPF Housing Grant of up to S$40,000 and a Proximity Housing Grant of up to S$15,000.
To qualify for the Enhanced CPF Housing Grant, first-timer households must not have an average gross monthly household income exceeding S$9,000. The average monthly housing income cap for first-timer singles is S$4,500.
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Together, the two measures announced on Monday night will “help cool the market and encourage prudent borrowing, thus making housing more affordable for lower- to middle-income first-time home buyers”, the government said.
The latest moves come after data released earlier in August showed a spike in so-called “million-dollar” HDB flat sales and strong market volume nudging resale prices up further in July.
On Monday, MND and HDB said that eight in 10 first-timer families who collected keys to resale flats in 2023 used 25 per cent or less of their monthly household income to service their HDB housing loan.
“This means they can service their monthly loan instalments with their monthly CPF contributions, with little to no cash outlay,” the authorities said.
“HDB flats that are sold at very high prices make up only a very small minority of total resale transactions.”
Latest available government data showed that prices of HDB resale flats rose 2.3 per cent from April to June 2024, accelerating from the 1.8 per cent growth in the first quarter of 2024. The Q2 spurt was the fastest rate of growth since the third quarter of 2022, when prices posted a 2.6 per cent rise before cooling measures were rolled out at the end of the quarter.
The new HDB loan restrictions come after two rounds of market interventions aimed at taming the HDB resale market, where prices have risen by over 30 per cent since the first quarter of 2021, and where news of more public housing flats changing hands at over S$1 million have raised eyebrows.
In their joint statement, MND and HDB noted that earlier rounds of cooling measures and the ramped-up Build-To-Order (BTO) flat supply worked to moderate the increase of HDB resale prices. HDB resale prices grew by 4.9 per cent in 2023, down from 10.4 per cent in 2022.
However, resale prices still rose by more than 4 per cent in the first half of 2024. “This was driven by strong, broad-based demand, coupled with some supply tightness, as fewer flats reached their Minimum Occupation Period (MOP) this year,” MND and HDB said.
Resale momentum pulled back in 2023 after tighter financing limits on HDB loans were announced at end-September 2022, when the loan-to-value (LTV) limit was cut from 85 per cent to 80 per cent. In addition, a 15-month wait-out period was required for private-property owners downgrading to an HDB resale flat.
The 2022 measures kicked in less than a year after the government raised the Additional Buyer’s Stamp Duty (ABSD) rates, tightened Total Debt Servicing Ratio (TDSR) thresholds, and reduced LTV limits for loans.
In the quarter immediately following the September 2022 lending curbs, volume shrank back in the resale market and prices posted a 2.3 per cent rise in Q4 of 2022.
Subsequently, the HDB resale market moderated, with prices continuing to move upwards but more slowly, before jumping again in Q2 of 2024. In the latest record-breaking deal, a five-room flat in Margaret Drive was sold in July for an eye-popping S$1.73 million.
Under the HDB’s new flat classification, some 8,500 flats across 15 projects will be offered from October 2024. Plus and Prime flats will have additional subsidies available, but face a longer MOP of 10 years, compared to the rest of the HDB market’s five-year MOP, as well as resale curbs and subsidy clawback to keep a lid on the resale market.
“With the planned supply of about 19,600 BTO flats in 2024, we are on track to offer 100,000 flats from 2021 to 2025,” MND and HDB said.
HDB also recently clamped down on “unrealistic” asking prices, and launched investigations into sellers and agents who had listed flats with asking prices of S$2 million. Flats were removed from listings on its HDB Flat Portal for “unrealistic pricing” or “misleading information”.
