SINGAPORE: Barely a day after Prime Minister Lawrence Wong's maiden National Day Rally, the government announced that it would tighten the maximum amount home buyers could borrow from the Housing and Development Board (HDB). The loan-to-value (LTV) limit for HDB loans was lowered from 80 per cent to 75 per cent with effect from Tuesday (Aug 20).
The Ministry of National Development and HDB also provided more updates on the Enhanced CPF Housing Grant (EHG) that Mr Wong had announced. The government raised the quantum of the EHG by up to S$40,000, with a higher distribution tilted toward the low- and medium-income families.
Will the new cooling measures bring down prices in Singapore's red-hot HDB resale market?
More specifically, will this have an impact on the spurt of million-dollar flats of late? How will the new measures introduced also impact the private housing market?
EFFECTS OF TIGHTENING LOAN LIMITSThis latest measure is the third round of tightening the LTV limit for HDB loans. The previous two rounds in December 2021 and September 2022 saw the limit cut from 90 per cent to 85 per cent, then to 80 per cent.
The September 2022 cooling measures also included a requirement for private home owners to wait 15 months between selling private property and buying an HDB resale flat.
Still, home buyers have indeed been grappling with rising resale prices since 2020, with the HDB resale price index ticking upwards for 18 consecutive quarters. Prices have risen cumulatively by 43 per cent between the first quarter of 2020 and the second quarter of 2024.
The last two rounds of cooling measures did not dampen the overall upward price growth in the HDB resale market, but these two measures slowed down the growth rates in the resale markets. The cumulative yearly growth rates slowed down from 12.7 per cent in 2021 to 10.4 per cent in 2022 and subsequently to 4.9 per cent in 2023.
The prices could have gone out of control and caused excessive overheating in the market if the cooling measures had not been put in place.aw8
HDB resale prices. The loan-to-value limit for HDB loans was tightened a third time in Aug 20, 2024. (Data: HDB, graphic provided by author)