Property cooling measures: 15-month wait-out for private home owners to keep HDB resale flats affordable, says Desmond Lee

SINGAPORE — A 15-month wait-out period was imposed on private home owners who wish to buy a Housing and Development Board (HDB) resale flat because they generally have more means to make such purchases, compared to first-time buyers or existing HDB flat owners, National Development Minister Desmond Lee said on Friday (Sept 30).

"They therefore tend to pay higher amounts of cash over valuation (COV) when they buy resale flats," Mr Lee said as he sought to explain the rationale behind the property cooling measures that were announced on Thursday night, shortly before they kicked in. 

The new wait-out period will thus moderate demand for HDB resale flats and keep them affordable, "especially for first-time home buyers who may have more pressing housing needs", Mr Lee said in a video on his ministry's YouTube channel — his first comments on the new measures.

Apart from the wait-out period for both current and former private home owners intending to buy a non-subsidised HDB resale flat, the maximum loan amount limits were also tightened while the loan-to-value limit for HDB housing loans reduced.

"We are making this move to ensure that flat buyers borrow prudently and do not overstretch themselves," said Mr Lee.

"This helps reduce the risk of them facing future difficulties in servicing their home loans amidst the uncertain economic outlook and rising interest rate environment."

Seniors and their spouses who are 55 years old and above are exempt from this wait-out period when they move from their private property to a four-room or smaller resale flat. 

Those with genuine housing needs or those who face extenuating circumstances, regardless of their age, may also be given exemptions on a “case-by-case basis”, Mr Lee said.

"We intend for this measure to be temporary. We will review this, depending on overall demand and market changes."

On the rationale for tightening the maximum amount that can be taken for home loans, Mr Lee said that this is to help buyers avoid difficulties in paying back their loans, given that "market interest rates have risen significantly" over the past year and borrowing costs will go up for home-buyers.

So for property loans granted by private financial institutions, the medium-term interest rate floor used to compute the total debt servicing ratio and mortgage servicing ratio was raised by 0.5 percentage points to 4 per cent.

For housing loans granted by HDB, an interest rate floor of 3 per cent for computing the eligible loan amount was introduced.

On lowering the loan-to-value limit for HDB housing loans from 85 per cent to 80 per cent, Mr Lee said that this is to ensure that flat buyers borrow prudently and not overstretch themselves.

He also stressed that the move will not affect first-timer and lower income home buyers significantly.

“They may receive housing grants of up to S$80,000 when buying a subsidised flat directly from HDB, or up to S$160,000 when buying a resale flat, and they can tap on their CPF savings to pay for the flat purchase,” he said.

This change will not apply to those who have applied and balloted for a flat in sales exercises before Sept 30, even if they have not yet selected and booked a flat under those previous exercises.

Mr Lee said that the Government remains committed to keeping public housing inclusive, affordable and accessible to Singaporeans.

"We will continue to monitor the property market and ensure that they remain relevant and in line with economic fundamentals," he added.