Singapore tightens public house loan caps to 75% of property value to cool market

General view of apartment blocks consisting of private and public housing, in Singapore, Sept. 27, 2018. Photo by Reuters

This change was announced on Monday in a joint press release by the HDB and the Ministry of National Development, as reported by CNBC.

It was set to be effective from Tuesday for secondary market transactions and will also apply to new Build-to-Order flats starting in October, Yahoo! Finance stated. Commercial bank loan limits, however, will remain at 75%.

The authorities also noted that this new LTV [loan-to-value] limit is unlikely to negatively impact first-time buyers, who can take advantage of substantial housing grants, such as the Enhanced CPF Housing Grant. In a broader context, the LTV change is part of ongoing efforts to ensure the stability of Singapore’s housing market and to promote prudent borrowing among potential homeowners, authorities said.

Another supportive measure is the increase in the Enhanced CPF Housing Grant for eligible first-time buyers by up to S$40,000 (US$30,579), which raises the maximum grant from S$80,000 to S$120,000. This boost is designed to make home ownership more accessible, especially for lower-income families.

Together, these newly introduced measures are crafted to "cool the market" and "encourage prudent borrowing," thus aiding in keeping housing more affordable for lower-to-middle income first-time buyers, the release elaborated.

Housing prices in Singapore have risen by over 4% in the first half of the year, fueled by strong demand and limited supply. The median price for a three-bedroom resale HDB flat in central Singapore is currently S$500,000.

Alan Cheong, executive director of research for Singapore at Savills Plc., told Bloomberg that the government’s decision likely came in response to outlier prices in the second-hand public housing market, which is attractive due to its shorter wait times compared to new, Build-to-Order flats, that can take up to six years.

"But the impact is limited especially since buyers for expensive flats are likely high-income types who are less sensitive to loan limits," Cheong said, adding that he anticipates the market will "continue to set records."