Government Tightens Loan Limits and Imposes 15-Month Wait Period for Private Property Owners
In a fresh move to cool Singapore’s property market, the Monetary Authority of Singapore (MAS), the Ministry of National Development (MND), and the Housing & Development Board (HDB) announced a set of stringent measures on Thursday night (Sep 29). These changes aim to rein in housing demand and address concerns over rising interest rates. Notably, private property owners (PPOs) will now have to wait 15 months after selling their property before being allowed to purchase a non-subsidised HDB resale flat.
These latest measures focus on tightening loan eligibility and limiting borrowing capabilities for homebuyers, a step taken to maintain financial prudence amidst a more challenging economic landscape. The government’s decision follows increasing interest rates and the growing concern of homebuyers’ ability to service loans in the long term. Here’s a breakdown of the key elements of this latest intervention:
Impact on the HDB Resale Market
According to Tricia Song, CBRE’s head of research for Southeast Asia, the new measures will particularly affect larger HDB flats, such as 5-room and executive units. These types of properties have traditionally been popular with private home downgraders or those looking to move from en bloc sales. With the new rules in place, demand for these flats is expected to decrease, leading to a moderation in prices.
This ripple effect could also cool the private property market, as slowing demand for larger HDB flats might curtail the ability of upgraders to transition into the private sector, especially as prices for new private homes have recently seen dramatic increases, with units outside the central region now costing upwards of S$2,000 per square foot.
Stricter Loan Limits and Debt Servicing Ratio
The authorities have also announced an increase in the medium-term interest rate floor, which is used to calculate the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR). This 0.5 percentage point rise will apply to all property loans and serve to limit how much borrowers can take out in the face of rising mortgage interest rates.
For HDB housing loans, the loan-to-value (LTV) limit will be reduced from 85% to 80%, further curtailing the maximum loan amount available for homebuyers. The new LTV cap is expected to decrease affordability for potential buyers, although first-time buyers and low-income households are unlikely to be significantly impacted, thanks to continued subsidies and housing grants.
The 15-Month Wait Period for Private Property Owners
One of the most talked-about changes is the introduction of a 15-month waiting period for private home owners before they can purchase an HDB resale flat. Previously, they could buy a resale flat as soon as they sold their private home, as long as it was within 6 months. This move is aimed at limiting competition from cash-rich downgrading buyers and making the market more accessible to first-time buyers.
Notably, this wait period will not apply to seniors aged 55 and above, who are looking to downgrade to a four-room or smaller flat. However, those who are still keen to purchase within this period may need to rent in the meantime, further driving up demand in the rental market.
Analyst Predictions and Market Outlook
Many analysts believe that the new measures will slow down the rapid rise of prices in both the HDB resale market and private property sector. While there will undoubtedly be a temporary cooling effect, the underlying demand for housing remains strong due to factors such as inflation hedging, low unemployment rates, and a potential shift from the private market back to the HDB resale market.
Catherine He from Colliers Singapore predicts that while mass market projects will be most affected by these cooling measures, high-net-worth individuals may remain largely unaffected, given their reliance on less leverage.
Long-Term Effects and Market Adjustments
Experts like Wong Xian Yang from Cushman & Wakefield foresee the measures having a more immediate impact on larger flats and non-residential properties like shophouses and strata offices, which are popular among investors. However, for residential properties, especially in the private sector, the cooling measures might drive demand back into the rental market, pushing prices higher as rental demand increases.
In the longer term, the property market is expected to stabilise as the cooling measures work to ensure sustainable demand. Some analysts believe that once the immediate effects of these interventions take hold, the government may revisit these policies if necessary.
Overall, the success of these cooling measures will depend on how quickly the market adjusts to the new lending conditions and whether demand continues to outpace supply.
