The property market in Singapore has seen a record-breaking growth in the last couple of years. A big concern amongst Singaporeans is the affordability of housing in our tiny nation, especially with public housing HDB flats at an all time high. Let’s explore what are the new cooling measures recently implemented by the government to curb the surge in real estate prices as well as to promote more prudent spending on housing.
3 Things That Are Implemented This Time
1. Loan-to-Value (LTV) limit for HDB loans decreased from 85% to 80%
Home buyers looking to obtain a loan from HDB for public housing will now be expected to fork out more cash and/or CPF for their down payment. Those looking to take a bank loan will not be affected, remaining at 75% LTV limit.
2. Wait out period of 15 months for private homeowners looking to downgrade
Private home owners are no longer allowed to sell off their private property within 6 months of purchasing a HDB resale flat. On the contrary this group of buyers who are below age 55 are faced with the penalty of having to wait out 15 months before being able to purchase a HDB resale flat.
Those that fall into these categories will not be affected:
– 1st-Time Buyers, HDB owners selling and buying another HDB
– Senior Private Property owners aged 55 and above downgrading to 4rm or smaller
3. Increased interest hurdle rate for TDSR and MSR from 3.5% to 4%
HDB loan interest rate floor increased to 3%
This will roughly translate to a decrease of about $72,000 in loans assuming a monthly salary of $10,000 as seen below. This means that for every increase of $1,000 in income now, you are lose about $7,200 in loan.
With rising interest rates affecting the whole economy, the government has implemented a higher hurdle rate to keep home buyers prudent in their real estate purchases to avoid over leveraging.
OUR TAKE
This latest round of cooling measures seems to be largely targeted at the HDB resale market where HDB resale prices have hit an all-time high and million-dollar HDBs are becoming an increasingly common occurrence.
The decreased LTV for HDB loans and higher hurdle rates, are expected to put a cap on HDB resale flat prices, in addition to lowering the demand by fending off private property owners who have made a chunk of profit looking to snap up “cheaper” alternatives and cash out.
It is possible that 3 and 4 room HDB resale flats will continue to experience strong demand while the bigger sizes of 5 room flats and above may see a slight decline in enquiries. It may be worth considering selling off the bigger flats now while there is still a pool of eligible buyers. For HDB owners looking to upgrade, this could be an excellent time to cash out on your profits and move on to greener pastures.
With yet a new influx of potential buyers, the private property market could very well continue its strong growth.
While the above assessment gives you a brief insight, we expect readers to have more queries pertaining to your individual situation. Do reach out to us to learn more about how best you can navigate through these relatively uncertain times in the property market.
As for HDB owners who wish to seize this last opportunity in the cycle to make a profit do contact us to receive a free valuation report and consultation to plan your next steps.
