Singapore's new property cooling measures: Stricter HDB loan limits and enhanced support for lower-income buyers

Singapore's property market has been a focal point of government intervention aimed at ensuring affordability and sustainability. In the latest move, the government has introduced new property cooling measures that tighten Housing Development Board (HDB) loan limits while increasing grants for lower-income flat buyers. These measures are designed to moderate demand and promote prudent borrowing, especially in the context of rising interest rates and property prices.

The recent measures involve a reduction in the Loan-to-Value (LTV) limit for HDB loans from 80% to 75%. This adjustment aligns HDB loans with those offered by financial institutions, which also have an LTV limit of 75%. The reduction means that buyers can now borrow less, thereby encouraging more financial prudence when purchasing homes. This measure is part of a broader strategy to ensure that homebuyers do not overextend themselves financially, especially amid increasing interest rates.

Furthermore, the government has increased the Enhanced CPF Housing Grant (EHG) for both new and resale flats. For eligible first-time families, the grant has been raised from a maximum of S$80,000 to S$120,000, while singles can receive up to S$60,000, up from S$40,000. This increase is aimed at providing more substantial support to lower-to-middle-income households, making homeownership more accessible despite the tightened loan limits.

Impact on the HDB Resale Market

The HDB resale market has been experiencing robust demand, with prices rising significantly over the past few years. In 2023, resale prices grew by 4.9%, down from a 10.4% increase in 2022. The new cooling measures are expected to help stabilize these price increases by moderating demand. The government has also ramped up the supply of Build-To-Order (BTO) flats, which is expected to alleviate some of the demand pressures on the resale market.

Additionally, a 15-month wait-out period has been introduced for private property owners who wish to purchase a non-subsidised HDB resale flat. This measure is intended to prevent speculative buying and ensure that resale flats remain affordable for genuine buyers, particularly first-time homebuyers.

Supporting Lower-Income Buyers

The enhanced grants are a significant boon for lower-income buyers, providing them with more substantial financial assistance in purchasing their homes. Eligible first-timer families buying a resale flat can receive up to S$230,000 in housing grants, which include the revised EHG, CPF Housing Grant, and Proximity Housing Grant (PHG). For singles, the total grant amount can reach up to S$115,000.

These grants are structured progressively, meaning that lower-income households receive more support. This approach ensures that those who need the most assistance are prioritized, helping them achieve their homeownership goals.

Government's Commitment to Affordable Housing

The Singapore government remains committed to keeping public housing affordable and accessible. The introduction of these cooling measures is part of a continuous effort to balance the property market and ensure that housing remains within reach for the majority of Singaporeans. As the Minister for National Development, Desmond Lee, stated, "We will keep a very close eye on the state of the property market and will not hesitate to take measures if necessary".

The government plans to offer a wide range of affordable housing options in the upcoming BTO exercises, with a target of providing 100,000 flats from 2021 to 2025. This commitment underscores the importance of public housing in Singapore's social fabric and the government's role in maintaining its affordability.

The new property cooling measures in Singapore, which include tighter HDB loan limits and increased grants for lower-income buyers, are a strategic response to the challenges posed by rising property prices and interest rates. These measures aim to ensure that homeownership remains accessible and affordable, particularly for first-time and lower-income buyers. As the government continues to monitor the property market closely, these initiatives reflect a balanced approach to fostering a stable and sustainable housing environment in Singapore.