The measures, which include a lower loan-to-value limit on financing from the public housing authority, are aimed at promoting a “stable and sustainable” market, according to a joint statement late on Monday from the Ministry of National Development and the Housing & Development Board.
The affordability of public housing has become a contentious issue for the ruling People’s Action Party, which has governed the city state since independence in 1965 and has seen its popularity decline. Almost 80 per cent of households live in public housing units, which are built and sold at subsidised prices by the state.
Under the new measures, loan-to-value limits, which determine the maximum amount an individual can borrow from the HDB, will be lowered to 75 per cent of a property’s price or value from 80 per cent. The limit on loans from commercial banks will remain at 75 per cent. The changes kicked in from Tuesday and will apply to transactions in the secondary market as well as new units known as Build-To-Order flats starting in October.
“Given the sustained, strong, broad-based demand for HDB resale flats, these measures will help cool the market and encourage prudent borrowing,” according to the statement.
The government will also increase housing grants by as much as S$40,000 to improve affordability for lower-to-middle income first-time homebuyers.
The government likely acted as it saw outlier prices in the second-hand public housing market, said Alan Cheong, executive director of research for Singapore at Savills Plc. But the impact is limited especially since buyers for expensive flats are likely high-income types who are less sensitive to loan limits, he said. The market will “continue to set records”, he said.
The curbs marks the third time in less than three years authorities are tightening rules for HDB housing loans. Such mortgages offered by the public housing authority have lower interest rates than banks. The loan-to-value limits were lowered from 90 per cent in late-2021, and further reduced again in 2022.
The government has also sought to allay voter discontent about the issue by ramping up supply, with a pledge to launch 100,000 public housing flats from 2021 to 2025.
But the measures have so far failed to tame the market significantly. A price index of second-hand public housing has risen for 17 consecutive quarters, while the number of transactions at or above S$1 million doubled to a record of 419 in the first half. Wong acknowledged on Sunday that such deals has become “a big concern for homebuyers”.
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Wong also pledged on Sunday to keep housing affordable, including raising a public housing grant for lower-income couples, and said his government will see what more can be done to allay housing concerns among singles.
The Monetary Authority of Singapore last month played down the need for more cooling measures in the private property market as there aren’t signs of overexposure to real estate in the banking sector. “We don’t see the need to move at this time,” central bank chief Chia Der Jiun said then.