MND introduces new cooling measures to curb rising property prices

A new stipulation states that private homeowners will now have to wait 15 months after selling their private properties, before they can purchase a resale HDB flat.

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On 29 September 2022, the Singapore government introduced a slew of new cooling measures that aim to moderate demand amid rising mortgage interest rates.

According to the Ministry of National Development (MND), Monetary Authority of Singapore (MAS), and Housing Development Board (HDB), these property cooling measures include lowering the Loan-To-Value (LTV) limits, tightening of loan amounts, and introducing a new wait-out period of 15 months for private homeowners buying HDB resale flats.

It’s being noted that the objective is to keep public housing affordable and also accessible to Singapore citizens and to encourage households to be more prudent when comes to taking up any new mortgages.

Lowering of LTV limit for all HDB loans

First up, the LTV limit for loans obtained via HDB will be lowered from 85 percent to 80 percent.

This is the second time in less than 10 months that the government has adjusted the LTV limit for HDB Loans.

The HDB LTV limit was previously lowered from 90 percent to 85 percent back in December 2021.

This new LTV limit will be applied to all new and resale HDB applications that are received by HDB on or after 30 September 2022.

Although the LTV limit for HDB loans has been reduced, this revised limit will not be applied to mortgages granted by financial institutions (FIs) – which remains at 75 percent.

Analysts believed that this adjustment for HDB loans is unlikely to affect first-timers or flat buyers with lower incomes.

That is because they generally receive housing grants (up to $80,000) from the government when buying a subsidized flat from HDB, or a maximum of $160,000 when purchasing a resale flat from the open market.

Adjustment of the TDSR framework

Another measure will see changes being made to the existing Total Debt Servicing Ratio (TDSR) framework which was first introduced back in June 2013.

Over the last 9 years, private home buyers who are applying for residential loans from FIs would have to undergo a stringent financial assessment.

Through TDSR, their affordability or maximum loan limit will be assessed based on a 3.5 percent interest rate.

From 30 September 2022 onwards, the computation will be using a 4 percent interest rate instead, up from the previous 3.5 percent.

In addition, there will also be an interest rate floor of 3 percent being introduced for all HDB loans.

The eligible amount of HDB loan will be assessed using this new floor interest rate, or 0.1 percentage point more than the prevailing interest rate for the CPF Ordinary Account (OA) – whichever is higher.

However, these new measures don’t affect the existing HDB loan interest rate, which has always been 2.6 percent per annum.

Introduction of 15-month wait-out period

Given a significant upward trend in resale flat prices, the government has imposed a new wait-out period for private property owners who are looking to buy a non-subsidized HDB resale flat.

The wait-out period will be set as 15 months and it will kick in immediately after they have sold off their private property.

Previously, these property owners were allowed to purchase an HDB resale flat from the open market – on the condition that they sell their private properties within 6 months of their HDB flat purchase.

But this rule will not be applied to seniors who are aged 55 years old and above and are moving out from their private property to a 4-room or smaller HDB resale flat.

For those who are first-timers and are applying for grants or a subsidized flat, the wait-out period remains at 30 months.

Source MND Release
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