Hot property: People walking along the Boat Quay in Singapore. Demand for housing in the city-state has been steadily climbing since 2020. — AFP
SINGAPORE: The maximum loan that home buyers can take from the Housing Board to purchase their flats will be tightened – in a move to cool the Housing and Development Board (HDB) resale market.
HDB will also provide more financial support for first-time flat buyers in the lower-to-middle income brackets, by increasing the Central Provident Fund Enhanced Housing Grant to up to S$120,000 for families and S$60,000 for singles.
Currently, the EHG gives a maximum of S$80,000 in grants for families and S$40,000 for singles buying their first new or resale flat.
HDB and the National Development Ministry (MND) announced these changes in a statement on Aug 19, in what will be the fourth round of property cooling measures since December 2021.
The loan-to-value limit for HDB housing loans will be lowered from 80% to 75%.
This means that buyers will be allowed to borrow less than before – up to 75% of the flat value compared with 80% before.
This brings the HDB loan limit in line with mortgages granted by financial institutions, which remain unchanged at 75%.
“Given the sustained, strong, broad-based demand for HDB resale flats, these measures will help cool the market and encourage prudent borrowing, thus making housing more affordable for lower-to-middle income first-time home buyers,” said HDB and MND in the statement.
During his National Day Rally speech on Aug 18, Prime Minister Lawrence Wong had addressed concerns about housing affordability, pointing to efforts by the government to ramp up flat supply in order to tamp down prices.
He had also announced that the EHG would be raised to help first-time home buyers – especially those from lower-income groups. HDB resale prices have been rising continuously since the second quarter of 2020, according to official data released in July.
A five-room flat in Margaret Drive was sold for S$1.726mil in July, setting a record for the highest transacted price for a resale flat.
In its statement, the government said earlier rounds of cooling measures and efforts to ramp up flat supply have helped to moderate the rise in HDB resale prices.
It pointed out that HDB resale prices grew by 4.9% in 2023, down significantly from 10.4% in 2022.
But it also said resale prices continued to rise by more than 4% in the first half of 2024, attributing this to “strong, broad-based demand, coupled with some supply tightness, as fewer flats reached their minimum occupation period this year”.
It is tightening HDB loan-to-value limits in order to “further stabilise the HDB resale market and encourage flat buyers to borrow prudently”.
The revised loan limit will apply to complete resale applications received by HDB on or after Aug 20, and applications for build-to-order flats from the upcoming October launch onwards.
HDB loan limits were last lowered in September 2022 from 85% to 80%, as part of several property cooling measures announced then.
On Monday, HDB and MND pointed out that the impact of loan limits on first-time buyers, especially those from lower-income households, will be cushioned as they receive significant housing grants. — The Straits Times/ANN
