Singapore has recently implemented new measures aimed at cooling its public housing market, responding to rising concerns over affordability as the upcoming elections approach. Announced by Prime Minister Lawrence Wong, these measures include lowering the loan-to-value (LTV) limit for Housing Development Board (HDB) loans from 80% to 75%, according to the Ministry of National Development (MND).
With nearly 80% of Singaporean households living in public housing, the ruling People’s Action Party (PAP) has faced increasing pressure as public affordability becomes more contentious. The rise of resale HDB flat prices, with some exceeding S$1 million, has sparked concerns amid pandemic-induced disruptions and high demand.
The new LTV limit, which took effect on August 20, 2024, aims to moderate housing demand and promote more prudent borrowing habits among potential buyers. This adjustment applies to both the secondary market and the up-and-coming Build-To-Order (BTO) flats.
“Given the sustained, strong, broad-based demand for HDB resale flats, these measures will help cool the market and encourage prudent borrowing,” stated the MND. Alongside the LTV changes, the government intends to increase housing grants for first-time homebuyers by up to S$40,000, particularly for lower-to-middle income families.
The recent actions mark the third tightening of rules on HDB housing loans within less than three years, indicating the government's firm stance on maintaining affordability. Initial LTV limits had been reduced from 90% to 80% previously, alongside other cooling measures aimed at stabilizing the property market.
Analysts, including Alan Cheong from Savills Plc, express skepticism over the effectiveness of these measures for high-income buyers who are less sensitive to loan limits. He predicted the market might still “continue to set records.”
Desmond Lee, the National Development Minister, emphasized the target audience of these measures—specifically, buyers who engage disproportionately with the higher-end of the resale market. “This seeks to moderate some of the prices impacting the overall market,” he added.
Despite previous curtailing efforts, Singapore’s second-hand public housing price index has risen for 17 consecutive quarters. Wong indicated this price escalation poses significant concerns for homebuyers, especially as the number of transactions above S$1 million doubled to record highs within the first half of the year.
The recent steps coincide with Wong’s preparation for the next election due by November 2025, the first since the PAP’s lowest showing in 2020, which saw the party capture 89% of parliamentary seats. Increasing attention toward housing inequality and urban living costs may serve as pivotal issues for Singaporeans.
Wong concluded his remarks by shining light on the government's commitment to make housing accessible for all, advocating for more assistance to lower-income couples and single occupants. Prior to this, the government had already introduced measures to manage the booming private housing sector.
Tax increases on foreign property buyers and levies for second-home buyers were rolled out to curtail the private real estate market during the initial surge. Yet, the Monetary Authority of Singapore remains confident, asserting no immediate need for additional cooling measures to preserve the banking sector's stability.
With over 80% of residents relying on public housing, the government still faces the arduous task of balancing market dynamics with public demand. Authorities are also pledging to launch 100,000 public housing flats between 2021 and 2025 to increase supply.
They are keeping the promise of affordability at the forefront, with Wong citing housing costs as a top priority. He remarked on the challenges posed by this economically diverse market, where minor adjustments in policy might not affect all buyers equally.
While the rise of the resale market heightens feelings of urgency among home sellers and buyers alike, the government aims to inject financial resilience within the lower-income demographic. Supported by HDB charts, it has been indicated about 72,300 households benefited from significant housing grants since its introduction.
The Enhanced Central Provident Fund (CPF) Housing Grant is now extending to S$120,000 for families and S$60,000 for singles, offering substantial relief to first-time purchasers. This tiered system provides increased assistance to those needing it the most, circumventing potential market booms or bubbles.
Local analysts are watchfully optimistic about the impact of these measures over time, though they remain wary of market behaviors surrounding high-profile transactions influencing buyer psychology. The government acknowledges the cyclical nature of property transactions and is attempting to mitigate any burgeoning bubbles through informed policy decisions.
These latest developments indicate Singapore’s unyielding effort to navigate the complex terrain of public housing markets as election jitters loom large. The emphasis remains on fostering housing accessibility as the government seeks to heed public concerns, ensuring residents’ welfare is at the heart of its agenda.
This dynamic environment calls for constant evaluation and adaptation, leaving both buyers and sellers watching governmental moves closely. The intricacies of housing prices, aided by swift responses to market fluctuations, continue to impact Singapore’s unique property ecosystem.
