Published January 12, 2013

HDB flats, ECs will feel brunt of new measures

EC apartment floor space capped at 160 sq m, HDB loans tightened; rule on use of CPF savings for shorter-lease flats from July

By ong chor hao

THE PUBLIC housing sector, as well as the hybrid executive condominium (EC) market, will bear a significant load from the slew of cooling measures introduced by the government yesterday.

Beyond a broad range of measures that apply across residential properties, they will be subject to further specific policies announced by the authorities yesterday, which market watchers have welcomed.

The EC market, which has been in the limelight over escalating prices and whether it has served its purpose to cater to the sandwiched class, will see several measures put in place from today.

First, the maximum strata floor space for new EC homes will be capped at 160 square metres (1,722 square feet), effectively spelling the end of super-sized penthouses and the high prices that come with them.

Mohamed Ismail, CEO of PropNex Realty, said with new ECs selling at around $700 per square foot (psf), that means prices should be below $1.2 million.

"The $2.05 million EC transacted will remain in the history books forever," he said, referring to a 4,349 square feet penthouse at [email protected] that sold last month.

Also, private roof terraces and private enclosed spaces will be counted as part of the 10 per cent bonus gross floor area (GFA) for all non-landed residential developments, including ECs and private condos, and subject to payment to development charges or differential premium.

Lee Sze Teck, senior manager for training, research and consultancy at DWG, said this will increase costs for developers, who may now build these spaces for more units to distribute the costs.

"This is also a fairer approach; otherwise buyers of units with no private roof terraces and private enclosed space will be subsidising those buyers of units with such spaces."

New dual-key EC units will also be restricted to multi-generational families. This will prevent abuse by investors looking to rent out the smaller unit for income, Mr Lee said.

The final new measure for the EC market is that developers for future EC sale sites from the Government Land Sales programme can only launch units for sale 15 months from the award of the sites or after foundation works are completed, whichever comes first.

Ong Kah Seng, director at R'ST Research, said this will ensure that "developers cannot alter plans in accordance to buyers' demands, which are fast changing in today's volatile property market context."

As for the public housing sector, the Government is tightening the eligibility for loans to buy Housing and Development Board (HDB) flats.

From today, the Mortgage Servicing Ratios (MSRs) for housing loans will be capped at 35 per cent of a borrower's gross monthly income if it was from HDB, and 30 per cent if the loan was from a financial institution.

DWG's Mr Lee said it is good to instil financial prudence in buyers of HDB flats.

"The MSR can be as high as 60% in some loan applications for HDB flats and private residential properties. Buyers will be in financial trouble should one of them loses the job."

Further, permanent residents (PRs) will also be barred from subletting their entire HDB flat if they own it. This applies to existing owners, and those intending to get a resale flat, but not to those who had obtained HDB approval before today.

PRs must now also sell their HDB units within six months of buying a private residence. This excludes those who had received permission from HDB to own a private property before today.

Mr Ismail believes this will increase the supply of flats in the resale HDB market, but cautioned that this will take some time as PRs who are affected will take some time to assess how the new measures play out.

A separate measure to tighten the terms for granting HDB loans and using CPF savings to buy flats with fewer than 60 years' lease left will take effect on July 1.