New property cooling measures announced
Tighter loan limits and longer waiting periods for private property owners to purchase public Flats these are among the latest cooling measures as Singapore has introduced to keep housing affordable for more our reporter Michelle Teo joins us in the studio a show uh short and sweet why are these moves.
Necessary well you know you’re really looking at ensuring housing affordability which has become quite an issue of late and that’s because interest rates have been rising across the board and that has a trickle-down effect on Singapore’s interest rate market now we prepared a little chart earlier and you can take a.
Look at the board here now this is what we’re about to show is the Singapore three-month compounded so this is a three months compounded Singapore overnight rate average so it started off this year at about what 0.19 today it is at 1.97 so that is quite a significant region increase and besides this increase in rates we’re also seeing.
An increase in property prices you know year to date you’ve seen over 260 million dollar Flats exchange hands so those two factors coupled with the fact that perhaps new homeowners might not really want to wait for a build to order flats that that brings them into the hdb resale Market putting pressure on prices and with more rate hikes on the way this.
Situation is just going to get a lot tighter financially as you said it’s going to get tighter so who’s going to be affected the most well you’re looking at people who are hdb owners or upgraders or downgraders because these cooling measures significantly I would say are more geared towards the public housing market rather than the private.
Property market and anecdotally we’ve seen for example some condominium owners they say you know what I’m going to postpone downgrading or sellers of larger resale Flats thinking about either holding off the market for a little while because they’re just afraid that they might not be able to get the price that they want now that’s because.
The amount that buyers would be able to get will be lower as a result of tighter loan limits are we prepared a table earlier again this is the uh oh this is the amount that you would have been able to pay previously and the loan that you would have taken so previously at 3.5 you could have taken a maximum loan of 1.2 million now you can only take a.
Maximum loan of 1.15 million and the difference is you would have to you would only be able to pay uh you you would only be able to loan six percent less than what you previously would have been able to same for the purchase price previously you could have done 1.6 now you can only do 1.5 and um one analyst that I spoke to earlier says that.
Because of this title loan limit she expects a major reaction in the short term and and that sales momentum will likely slow down they had to cope out more cash since they can only borrow a much lesser amount from either the bank or the hdb so because of that the cash over.
Valuation or COV that people are willing to pay were likely for so in general uh in terms of prices of hdb resale Flats we can expect that uh the pace of price growth uh will slow down and in fact um for the fourth quarter of this year prices may even move into a negative territory I’m gonna show you talk about sales.
Momentum slowing down of course buy or rent so what do you think would be the knock-on effect on the rental market well the rental market itself is actually already seeing quite record highs of rental prices you know we are seeing 26 quarters of consecutive growth in hdb rents 20 quarters to the private property market and that momentum is.
Expected to continue because you don’t have the the current demand is really from say foreigners who are working in Singapore or even those well reasonable to buy a flat so you have that current pool of demand which is not being alleviated and at the same time you have a new pool of buyers from CA private property owners who now have to wait 15.
Months before they can buy an hdb resale flat so that really increases the pool of demand and that would keep the prices of rental property relatively stable uh but one the analyst I spoke to earlier says that the impact for from these uh private property downgraders in a way is likely to be relatively muted let’s say demand or prizes or five room.
Flats or executive condos you’ll notice that uh this segment of the market is not as big as compared to you know like the four room flats or three room Flats so uh although some of them may be put off by the 15 month waiting period and they’ll be renting I don’t think that it will be so significant that it’s going to like check up the rental price very.
High and Michelle Hubble price growth as well as sales volume be affected well because this is a temporary measure of the it’s likely that the market will take a short-term hit so during the last cooling measures that were introduced in December 2021 we saw an immediate impact the foot the next quarter that is q1 of.
This year where you know sales and Retail retail resale prices and volume had gone down but then it rebounded quite quickly after the the next quarter so it’s it’s a matter of of um you know whether for the rest of the year because there are no major launches as well that the market could really be taking a little bit of a wait and see approach.
We are expecting prices to maybe to move between zero to even minus two percent and for sales volume we may drop about uh more than ten percent the one that most likely will have more Major Impact will likely be the mass Market because they are dependents or on the hdb uh uh upgrade market and these people may be affected because of uh they may find uh.
More difficulty selling their homes I’m going to push you on that point you made about a market having a short-term hit do you expect these measures will have a longer term impact and of course Define for me what that longer term might be well you know we really need to look at the state of play here you’re looking at not just interest rates.
Rising you’re also looking at an impending Global recession we see already in the U.S a technical recession two consecutive quarters of GDP decline in the Eurozone eighty percent chance of a recession so and and these countries are our top 10 trading partners so if there is a global economic recession that happens it will invariably affect.
Singapore’s economic performance so having these measures to limit loan limits really does help to cushion the impact should financing become a trouble for some of us and that that having said that there’s another aspect which is the hdb concessionary rate scheme which is currently at 0 0.1 percent above the cpf ordinary account levels and that’s at.
2.6 to the rest of the year but you know what happens after that it’s anybody’s guess well thanks for explaining what’s happening right now though Michelle to speak to us about the latest measures to cool Singapore’s housing market moderating demand and ensuring a prudent borrowing amid Rising interest rates so.
That is the aim of the latest property cooling measures which took effect today first the medium-term interest rate flaw was raised by a 0.5 percentage points for private bank loans it is used to compute the total debt servicing ratio and the mortgage servicing ratio these determine a borrower’s ability to repay their loans raising the medium-term.
Interest rate flow aims to help prevent Mass defaults if interest rates Spike next a lower loan to value limit for public housing loans it will now be 80 instead of 85 so here’s how that will work at 80 percent LTV borrowers can take a home loan of up to four hundred thousand dollars for a flat that costs five hundred thousand dollars the.
Remainder can be paid using cash or the central Providence fund under the previous limit borrowers could take out of 425 000 loan finally the sellers of private properties have to wait 15 months before they can resell the public they can buy a resale public flat now this temporary measure aims to cool demand in the.
Resale Market but there is an exception to this rule it will not apply for those aged 55 and older who buy a four room or smaller unit the government will continue to monitor the property market and adjust policies to ensure public housing remains affordable National development Minister Desmond Lee adds if there is a need.
Private housing Supply will be increased his comments come after a series of property cooling measures took effect today aimed at dampening demand this move is not expected to affect first timer and lower income home buyers significantly as they may receive housing grants of up to eighty thousand dollars when buying a subsidized flat.
Directly from hdb or up to 160 000 when buying a resale flat and they can tap on their cpf savings to pay for the flat purchase Mr Lee says the measures are a result of rising resale prices and mortgage rates yet the new rules can better protect home buyers and help them avoid potential difficulties in paying their.
Home loans this new without period of 15 months will seek to moderate demand for hdb resale flats and keep them affordable especially for first-time home buyers who may have more pressing housing needs we intend for this measure to be temporary we will review this depending on overall demand and Market changes.