Singapore introduces measures to cool the public housing market

Singapore has tightened the maximum loan that home buyers can take out in a bid to cool the country’s public housing resale market.

From Tuesday, buyers of HDB flats won’t be allowed to borrow as much as before. The loan-to-value limit for Housing Development Board loans will be lowered from 80% to 75%, according to a press release released by the government late on Monday. HDB is the city-state’s public housing authority.

“This brings the LTV limit for HDB loans in line with loans granted by financial institutions, which remains at 75%,” HDB and the Ministry of National Development said in the joint press release, adding that the move is aimed at stabilizing Singapore’s resale market and encouraging flat buyers to borrow prudently.

The Enhanced CPF Housing Grant will also be increased for eligible families who are buying for the first time, by up to SG$40,000 ($30,500) to a maximum of $120,000 ($91,600), the government added.

Under local rules, most HDB flat owners can only resell after occupying the property for a period of five years.

The main draw for buying second-hand flats is the increased likelihood of immediate occupancy, compared to built-to-order flats which can take up to six years to complete.

Prices of Singapore’s resale homes rose by over 4% in the first half of the year, driven by strong demand and tight supply, according to the government.

Authorities stressed that first-time home buyers, especially lower-income households, will be less affected by the new LTV limit as they receive significant housing grants, such as the Enhanced CPF Housing Grant.

“Given the sustained, strong, broad-based demand for HDB resale flats, these measures will help cool the market and encourage prudent borrowing, thus making housing more affordable for lower-to-middle income first-time home buyers,” the release stated.

More than 80% of Singapore’s residents live in public housing flats, which are built, sold and subsidized by the government.

Housing affordability remains a key concern for Singaporeans, with the country’s Prime Minister Lawrence Wong addressing the issue during his National Day Rally speech on Aug. 18 and noting government efforts to cool prices.

The median price of a 3-bedroom resale HDB flat in Singapore’s central area costs S$500,000.