Waiting time of 15 months to control HDB resale flat demand and assure affordability: Desmond Lee's

Sep 30, 2022

According to National Development Minister Desmond Lee, the 15-month wait-out term imposed on current and former private property owners would control demand for Housing Board resale apartments and keep them cheap, particularly for first-time home purchasers.

This is because private residential property owners have greater resources to purchase resale flats than first-time home purchasers or current HDB flat owners, according to Lee in a video statement posted on his ministry's YouTube website on Friday (Sep 30) evening.

"Some may not even require loan financing to complete their acquisition." As a result, when they acquire resale flats, they prefer to pay more in cash-over-value (COV)."

COV is the difference between a resale flat's sale price and its real HDB value. The buyer may only pay the difference in cash.

Private house owners must now wait 15 months after selling their present home before purchasing a HDB resale apartment as of Friday.

Those aged 55 and over who are transferring from a private home to a four-room or smaller HDB resale flat, a two-room flexi flat, or a community care apartment designed for seniors are exempt.

According to Lee, HDB would also exclude people with legitimate housing requirements or who suffer mitigating circumstances on a case-by-case basis.

"We want for this (15-month waiting period) to be a temporary measure." "We will revisit this based on overall demand and market trends," Lee added.

The newest batch of cooling measures, which went into effect on Friday, aims to prevent over-borrowing as both the HDB resale and private housing markets show indications of overheating.

Noting that some have voiced fear that the restrictions will make it more difficult for first-time and lower-income families to buy a home, Lee stated, "This is not the case."

"This move is not likely to have a large impact on first-time and low-income house buyers because they may get housing assistance... and use their CPF funds to pay for the flat purchase."

On Friday, two major changes to the maximum amount that may be borrowed for a house loan went into effect.

The first is to raise the medium-term interest rate floor, which is used to calculate and analyse borrowers' ability to repay and therefore qualify for a loan.

The second change is a reduction in the loan-to-value (LTV) limit, which implies that purchasers can borrow less from HDB to fund their property purchase than previously.

Lee stated that these actions are being taken to help safeguard property purchasers by encouraging them to borrow responsibly and not overextend themselves.

"This helps decrease the danger of people having future difficulty servicing their house loans in an uncertain economic climate with rising interest rates," he added.

Mr Lee noted that the changes occur at a time when market interest rates have risen dramatically in the previous year, compared to the years of very low interest rates from 2013 to 2021.

"This will help them avoid problems servicing their long-term house loans, as we believe mortgage interest rates will climb more in the future, along with US interest rates," Mr Lee added.

Housing prices have continued to rise after the previous set of cooling measures in December 2021, prompting some concern about affordability, particularly among young families trying to purchase their first house, according to Mr Lee.

Recognizing that increasing housing prices have been a source of concern for Singaporeans, Lee stated that the recent measures, together with an increase in new flat supply, will assist to stabilise prices and fulfil high demand.

"We will continue to watch the real estate market to ensure that it remains relevant and in accordance with economic fundamentals," he added.