Singapore's Housing Cooling Measures: Targeting Million Dollar Flats and Supporting Low Income Families

The recent announcement by Prime Minister Lawrence Wong that the maximum amount one can borrow from the Housing and Development Board HDB for a loan will be reduced to 75 of the property's value, from the current limit of 80, has sparked discussion about its potential impact on Singapore's robust HDB resale market.

In tandem with this measure, the government also revealed enhancements to the Enhanced CPF Housing Grant EHG, increasing it by up to S$40,000 and distributing more benefits towards lower-income families. The question at hand is whether these new cooling measures will slow down prices in Singapore's high-demand HDB resale market?

Are these new regulations med specifically at curbing the recent surge of million-dollar flats? Will they affect the overall real estate sector or just target specific segments?

One must consider that while the loan-to-value LTV ratio targets transactions involving high-priced properties, the EHG is income-based and provides more d to families with lower average monthly incomes. Only those with an income under S$9,000 can receive these grants.

The increase in CHG from S$50,000 to S$80,000 for first-time buyers purchasing resale flats was uniform across the board, unlike the EHG which varies based on income level. This means that low and middle-income families benefit more from this enhancement by getting financial assistance when buying BTO flats, including additional grants worth up to S$230,000.

For instance, a medium-income family with an average monthly income of S$5,000 looking at purchasing a BTO flat priced at around S$500,000 will see their down payment increase by S$25,000, from S$100,000 to S$125,000 due to the reduced LTV limit. However, they can then offset this rise with an additional grant of up to S$65,000 under the new EHG.

These new measures m to temper high-income buyers from driving up prices in pricey resale markets and simultaneously provide more financial support for low and middle-income families. This could help make housing markets more inclusive by facilitating access for these families to homes in desirable locations without being constrned by their finances.

The cooling measures are introduced with the intent of discouraging irrational transactions that might otherwise lead to overheating the resale housing market, ensuring a stable long-term price tr.

It's unlikely that this 'cooler' HDB market will trigger price increases in Singapore's private real estate sector; instead, it may potentially have a negative impact if public housing owners delay their upgrading plans which could reduce transactions activity in the private market further.

The article initially appeared on CNA.
This article is reproduced from: https://bizbeat.nus.edu.sg/thought-leadership/article/tighter-hdb-loan-limits-and-enhanced-housing-grants-come-together-in-a-calibrated-move/

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