SINGAPORE — In the latest round of property cooling measures, the government announced on Monday (Aug 19) that the maximum loan amount available from
SINGAPORE — In the latest round of property cooling measures, the government announced on Monday (Aug 19) that the maximum loan amount available from the Housing and Development Board (HDB) will be lowered starting the next day.
Speaking to reporters on Tuesday (Aug 20), National Development Minister Desmond Lee explained that this change, which reduces the loan-to-value (LTV) limit from 80% to 75%, aims to promote more prudent borrowing and dampen demand in the higher end of the HDB resale market.
Lee noted that the ministry observed buyers who take loans at higher LTV ratios “disproportionately” purchase larger flats at higher prices, contributing to escalating overall prices in the HDB resale market. He mentioned that in the past year and a half, million-dollar flats accounted for only about two percent of all transactions.
“This has caused concerns among Singaporeans regarding the affordability of resale flats as a whole,” Lee remarked, referring to the apparent “market psychology.” He cautioned that if the situation is not managed carefully, such dynamics could lead to a misalignment of the resale market with economic fundamentals, potentially resulting in a bubble.
‘Welcome Reprieve’
Joel Lim, associate head of research at 99.co, described this property cooling measure as a “welcome reprieve” from the rising public housing resale prices. According to the Ministry of National Development (MND) and HDB, resale prices surged by four percent in the first half of the year due to strong, broad-based demand.
Mohan Sandrasegeran, head of research and data analytics at Singapore Realtors Inc, emphasized that the adjustment to the LTV limit is likely to have “significant” effects. “With a tighter borrowing limit, buyers are encouraged to manage their finances more conservatively, potentially reducing the risk of market overheating,” he noted, adding that he anticipates resale prices stabilizing by the end of the year.
Cooling Measures Have ‘No Difference’ for Some Buyers
During his media briefing, Lee stated that most buyers utilizing HDB loans will not be affected, with nearly 90% borrowing at LTV ratios of 75% or less. He added that the increase in the Enhanced CPF Housing Grant (EHG) will assist lower- to middle-income households in offsetting the impact of the lower LTV, raising the EHG to up to $120,000 for families and $60,000 for singles.
While Lee mentioned that the lower LTV limit is expected to stabilize the overall resale market, several property analysts told AsiaOne that the long-term impact of the cooling measures—now in their fourth iteration since December 2021—may be minimal on resale prices.
Lee Sze Teck, senior director of data analytics at Huttons, predicted that resale demand may slow temporarily as buyers adapt to the new measures. “However, over time, demand will return, and prices will continue to rise,” he asserted. Lee noted that an estimated 7,000 BTO flats will reach their minimum occupation period (MOP) next year, which is fewer than the anticipated 12,000 flats.
He projected that HDB resale prices could continue to rise in 2025, particularly for two-room and three-room flats. For larger four-room and five-room flats, he mentioned that many buyers do not benefit from increased grants and tend to utilize bank loans for their purchases, suggesting that the latest cooling measures would have “no difference” for them.
Heikal Shafrudin, co-founder of Herohomes, acknowledged a potential slight dip in transaction volumes as buyers and sellers adjust to the new financing constraints. However, he suggested that this would be a temporary phenomenon, as buyers recalibrate their budgets and proceed with their purchasing plans.
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