Cooling Measures To Promote Sustainable Conditions In The Property Market

Aspiring HDB resale flat buyers scramble to make new plans after property cooling measures were introduced on 30th September 2022

Initially, it was shocking, then a mad scramble to make new plans.

Some aspiring Housing Board resale flat buyers downgrading from private properties are abandoning their plans altogether, after a new slew of property curbs aimed at cooling the public housing market kicked in on 30th September 2022.

Others, especially those who have already sold their private properties but have yet to purchase an HDB resale flat, are biting the bullet to rent an interim home to serve out the 15-month wait-out period, which was one of the measures introduced. From 30th September 2022, private home owners must wait 15 months after the sale of their current home before they can buy a non-subsidised HDB resale flat. The authorities said it is a temporary measure that will be reviewed, depending on overall demand and market changes.

On top of a 15-month wait-out period, two big moves to tighten the maximum amount that can be taken for home loans kicked in on 30th September 2022, as the Government moves to moderate demand in the HDB resale market and ensure prudent borrowing.

The first is raising the medium-term interest rate floor used to compute and assess borrowers' abilities to repay, and therefore qualify for, a loan. The second is lowering the loan-to-value limit, which means buyers can borrow less than before from HDB to finance their home purchase.

The new slew of cooling measures comes as hot money from private property downgraders flowing into the public housing market, coupled with pandemic-related disruptions in the construction sector, helped fuel a 12.7 per cent increase in Housing Board resale prices in 2021 and a further rise of 5.3 per cent in the first half of 2022.

With interest rates set to rise further, fresh limits on home loans to encourage more prudent borrowing came as little surprise. Apart from cooling the HDB resale market directly, the measures will indirectly cool the private residential market, particularly the mass market segment. A slowdown in the HDB resale market could shrink the pool of HDB upgraders for private homes in the suburbs, which have seen new launch prices exceeding $2,000 psf - a price level more commonly seen in the prime and city fringe condo markets.

The new measures are also likely to impact the collective sale market, which was just starting to perk up in recent months. Those selling en bloc, facing fewer replacement home options in the public housing market, may try to raise their reserve price in order to secure enough funds to buy their next home from the private market. Developers will likely be put off, especially after being recently hit with higher land betterment charges.

The cooling measures have been summarized in the attached document for your ease of reference.