Government restricts HDB loan restrictions to calm resale market, helps low- to middl

Government restricts HDB loan restrictions to calm resale market, helps low- to middle-income first-time buyers

Aug 19, 2024

On Monday (Aug 19) night, the Ministry of National Development (MND) announced new HDB loan limitations for flat purchasers to calm the public housing resale market.

In accordance with financial institutions, HDB loans will have an LTV ratio of 75%, down from 80%. HDB resale applications submitted after August 20 and BTO applications from October 2024 will have the new LTV restriction.

The HDB will also increase Enhanced CPF Housing Grants for first-time purchasers. First-time families will get S$120,000 EHG subsidies, up from S$80,000. First-time singles may now get S$60,000 in subsidies, up from S$40,000.

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First-time families purchasing resale apartments may get up to S$230,000 in housing subsidies, including the updated EHG of up to S$120,000, a CPF Housing Grant of up to S$80,000, and a Proximity Housing Grant of up to S$30,000.

First-time singles purchasing resale apartments may get up to S$115,000 in total, including up to S$60,000 in EHG, S$40,000 in CPF Housing Grant, and S$15,000 in Proximity Housing Grant.

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First-timer families must earn more than S$9,000 per month to qualify for the Enhanced CPF Housing Grant. The average monthly housing income limit for first-time singles is S$4,500.

The administration said the two measures announced Monday night would “help cool the market and encourage prudent borrowing, thus making housing more affordable for lower- to middle-income first-time home buyers”.

The new initiatives follow a jump in “million-dollar” HDB flat sales and robust market activity that raised resale prices in July.

MND and HDB reported on Monday that eight in 10 first-timer families that received keys to resale apartments in 2023 utilised 25% or less of their monthly family income to finance their HDB housing loan.

Authorities claimed this allows them to pay their monthly loan payments with CPF contributions with little to no cash spend.

High-priced HDB apartments make up just a tiny proportion of resale transactions.”

Latest government statistics indicated that HDB resale flat prices grew 2.3% from April to June 2024, up from 1.8% in the first quarter. The Q2 surge was the fastest since the third quarter of 2022, when prices rose 2.6% before cooling measures were implemented.

The new HDB loan limitations follow two rounds of market interventions to calm the HDB resale market, where prices have surged by over 30% since the first quarter of 2021 and more public housing units are selling for above S$1 million.

MND and HDB underlined in their joint statement that prior cooling measures and the increased Build-To-Order (BTO) flat supply moderated HDB resale prices. HDB resale prices rose 4.9% in 2023, down from 10.4% in 2022.

Still, resale prices grew over 4% in the first half of 2024. This was driven by robust, broad-based demand and some supply constraint, as fewer flats attained their Minimum Occupation Period (MOP) this year, MND and HDB noted.

At the end of September 2022, HDB loan-to-value (LTV) ceilings were reduced from 85% to 80%, slowing resale momentum in 2023. Downgrading to a HDB resale unit requires a 15-month wait for private property owners.

The 2022 changes took effect less than a year after the government hiked ABSD rates, tightened TDSR standards, and lowered lending LTV limits.

After the September 2022 lending limitations, resale volume dropped and prices rose 2.3% in Q4 2022.

The HDB resale market softened, with prices rising more slowly, until rising again in Q2 2024. The last record-breaking sale was a five-room Margaret Drive apartment for S$1.73 million in July.

From October 2024, the HDB will provide 8,500 units in 15 projects under its new flat categorisation. Plus and Prime apartments will have higher subsidies, a 10-year MOP, not five like the rest of the HDB market, and resale limits and subsidy clawback to control the resale market.

With 19,600 BTO units scheduled for 2024, MND and HDB expect to provide 100,000 from 2021 to 2025.

HDB has cracked down on “unrealistic” asking prices and investigated sellers and brokers over S$2 million units. It deleted flats from the HDB Flat Portal for “unrealistic pricing” or “misleading information”.