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Tightening Housing Loan Limits and Enhancing Grants: A Calibrated Approach in Singapore
Only hours after Prime Minister Lawrence Wong's inaugural National Day Rally, the government unveiled measures med at tightening the maximum loan-to-value LTV ratio for Home Development Board HDB loans from 80 to 75, with immediate effect on Tuesday, August 20.
The Ministry of National Development and HDB further detled updates on Mr. Wong's announced Enhancing CPF Housing Grant EHG, increasing the grant quantum up to S$40,000, with a heightened allocation towards lower- and middle-income households.
Do these measures int to cool down Singapore's robust HDB resale market?
More specifically, will this impact the surge of million-dollar properties in the resale sector? And how might it affect the private housing market, if at all?
Let us break down the implications:
The LTV rule targets high- transactions within the resale market, while the EHG offers means-tested assistance. Only households with an average monthly income below S$9,000 can receive this grant, providing larger sums for those with lesser earnings.
A typical middle-income family looking to purchase a BTO flat priced at S$500,000 would see their down payment rise by S$25,000 from S$100,000 to S$125,000 due to the reduced LTV limit. However, this middle-income family could receive a maximum grant of S$65,000 under the new EHG – more than enough to offset the increase in down payment.
For first-time buyers from lower and middle-income brackets who might opt agnst upgrading in the resale market, the enhanced EHG provides additional financial support that widens their range of choices. This includes opting for larger Standard flats or even Plus and Prime units in more sought-after locations with the introduction of a new housing classification starting October 2024's BTO exercise.
The government's recent moves are implemented to prevent impulsive transactions from inflating prices within the high-price segment of the resale market. In doing so, it stabilize price trs for the long term.
It's expected that this cooler environment in the resale HDB sector will not directly trigger price hikes in the private housing market. Instead, any potential negative impact could come from public housing owners potentially delaying their upgrading decisions, which might consequently reduce transaction volumes within the private housing market.
The implementation of these measures reflects a balanced approach designed to stabilize Singapore's housing market by restrning speculative transactions and enhancing support for financially constrned lower- and middle-income families without significantly impacting market dynamics.
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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