Background Previous rounds of cooling measures, along with an increased supply of Build-To-Order (BTO) flats, have successfully slowed the pace of rising HDB resale prices. Despite these efforts, resale prices still climbed by over 4% in the first half of 2024 due to strong demand and limited supply, partly because fewer flats met their Minimum Occupation Period (MOP). HDB Loan curbsThe recent HDB cooling measure, announced on 20 August, aims to slow down the rising HDB resale prices. To achieve this, the loan-to-value (LTV) ratio for HDB loans will be reduced from 80% to 75%, aligning with bank loans.
The LTV refers to the maximum amount of the flat’s price or valuation (whichever is lower) that can be covered by the loan. E.g., for a flat priced at $500,000, the maximum loan quantum would now be $375,000. The remainder of this can be covered in any combination of cash and/or CPF.
For private bank loans, the LTV was already 75 per cent before this, so there’s no impact on bank loans. Impact
Take a 4-room resale flat in Yishun, for example, which can go for as high as $700,000. With the loan curb, that's a minimum down payment of $175,000! This might just encourage buyers to hold out for a BTO flat or think twice before making a generous offer on a resale unit.
How about the impact on the high end HDB market?
Most of the high end HDB buyers aren't young first-timers; they're older, with higher incomes or more wealth accumulated. They're not relying on HDB loans anyway, so a 5% reduction in LTV limits won't faze them. And if they're using private bank loans, the LTV is already at 75%.
So, we don't see this move making a dent in the high-end HDB resale market. But here's the thing: million-dollar flats are the exception, so not HDB focus. HDB's probably more focused on making flats priced between $500,000 to $800,000 more affordable. These flats need to become more affordable to cater to the needs of middle-class Singaporeans.
More housing grants for lower and middle-income Singaporeans
The maximum Enhanced Housing Grant (EHG) has been increased from $80,000 to $120,000. For singles, the grant has also been raised, from a previous cap of $40,000 to a new cap of $60,000, since there’s only one recipient.
This shouldn’t be confused with the CPF Housing Grant, which remains unchanged. Also, the Proximity Housing Grant stays the same at $30,000/$20,000 for families and $15,000/$10,000 for singles.
The grant amount depends on household income, regardless of the flat type or location. You can check the HDB website to see how much you qualify for. Remember, the EHG is tiered – the lower your income bracket, the more significant the subsidy. Here’s a look at the difference based on the latest policy:
This new rule means that those earning less will get more help from the government when buying a home. This is especially helpful now that it's harder to get a loan. It also means that lower-income families can spend less on their home and have more money for other things. But there might be a downside. Because of the extra government help, the prices of cheaper flats could go up. This makes it harder for people who aren't in the lowest income group to buy a home. So while this is good for some, it might make things tougher for others. And if you're looking at expensive HDB flats, you might see prices going up even more.
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