Oral answer by Ministry of National Development on impact of 15-month wait-out period on private property downgraders

Oct 20, 2022

Questions No: 3582 and 3661

Questions by: Mr Alex Yam Ziming and Ms Nadia Ahmad Samdin

*3582 Mr Alex Yam asked the Minister for National Development with the recent announcement of further cooling measures for the property sector (a) how many Singaporeans are estimated to be affected by the 15-month wait-out period for a resale HDB flat; (b) what assistance may be provided to those who are caught out by circumstances but may genuinely require housing urgently; and (c) how will the new measures cool the property market.

*3661 Ms Nadia Ahmad Samdin asked the Minister for National Development (a) for the past three years, what has been the number of HDB resale flat transactions involving buyers who are private property owners (PPOs) or PPOs who have disposed of a private property prior to submitting an application to buy a HDB resale flat; and (b) of such buyers, what is the percentage of purchasers who paid cash over valuation and who are above 55 years old.

Answer:

          Mr Speaker, the public housing market has been buoyant since the first quarter of 2020. The HDB resale price index, or RPI, had declined by 9.9% over five years, between 2014 and 2018, and remained flat in 2019. The increase in resale HDB flat prices during the last two years of the pandemic reflects broad-based demand for housing, supported by the previously low interest rate environment.

In December 2021, the Government announced a package of measures to cool the private residential and HDB resale markets, including tightening the loan-to-value, or LTV limit, for loans from HDB.

In the immediate quarters, following the implementation of these measures, the HDB resale price index reflected a lower increase of 2.4% in 1Q2022, and 2.8% in 2Q2022, compared to 3.4% in 4Q2021. The Government has been watching the property market closely.

Sustained property price increases, if left unchecked, could run ahead of our economic fundamentals and increase the risk of a destabilising correction later, which will adversely impact many existing home owners.

On 29 September 2022, HDB announced further measures to, first, encourage home buyers to exercise greater financial prudence when taking home loans, as higher interest rates were expected over the medium term; and second, to moderate demand in the HDB resale market.

We expect these measures to slow the pace of HDB resale price increases, but we will continue to monitor the housing market closely.

One of the measures that we have implemented is the 15-month wait-out period before current and former private residential property owners can buy a non-subsidised HDB resale flat, that means, without taking the CPF housing grant.

Mr Alex Yam asked how this measure will help to cool the HDB resale market. The 15-month wait-out period is a temporary measure to moderate demand for resale flats and help to prioritise access to affordable public housing for Singaporeans with more urgent housing needs, such as first-time home buyers.

We will review this measure after monitoring overall demand and market conditions. To be clear, the 15-month wait-out period is a new measure for those buying resale flats without grant. There is an existing long-standing measure for private property owners buying HDB resale flats with grant, and they have to wait out 30 months. This measure, the long-standing measure, has been in place since 1975.

Members have asked about the number of private property owners who may be affected by this new wait-out period. The number of private property owners buying HDB resale flats has doubled in 2021 and the first three quarters of this year, compared to 2019 and 2020.

This group, which includes those who had sold their private property up to 15 months before their resale flat application, accounts for about one in 10 resale flat buyers in the past three years.

Proportionately, more current and former private property owners pay COV, or Cash-Over-Valuation, compared to other resale flat buyers, and they also pay higher COV amounts. This is, generally, because many of these private property owners have more financial means to pay for their resale flats, compared to first-time flat buyers or HDB upgraders. Some may not even need to take housing loans to complete their flat purchase.

Mr Alex Yam asked about the assistance provided to home seekers who own or have recently disposed of, their private property, but who urgently need housing support. Indeed, we recognise that not all private property owners are in exactly the same situation and not all have the same financial means. And that is why, to support this group, we had introduced two measures when we made this move to introduce the new wait-out period.

First, we exempted seniors who are moving from private property to a 4-room or smaller resale flat from the wait-out period, if both the senior and his spouse are 55 years old and above. This helps our seniors right-size their homes and improve their retirement adequacy. These seniors make up about three in 10 of the private property owners who had bought resale HDB flats in the past three years. Of these seniors, slightly less than one in five also paid a COV when buying a resale flat. So, that is the first – the exemption for seniors.

Second, regardless of their age, current and former private property owners who face extenuating circumstances can approach HDB for assistance and we will assess their situation on a case-by-case basis. Pursuant to this, HDB received some 650 appeals since the wait-out period was introduced. Two hundred and twenty of these home seekers had obtained an Option to Purchase (OTP) to buy an HDB resale flat before the wait-out period was put in place. For these home seekers, HDB has exercised flexibility and waived the 15-month wait-out period for all of them.

A second group of home seekers are those who have not obtained an OTP to buy an HDB resale flat, but who may have committed to sell or have recently sold their existing private property. HDB will assess these appeals on a case-by-case basis.

Mr Saktiandi Supaat asked about the possible impact of this move on the HDB resale market. As I explained earlier, the aim of this move is to moderate demand from private property owners cashing out and going to the HDB resale market, in order to give priority to first time home buyers, particularly during this period.

We will, however, consider the prevailing economic and market conditions, including the impact of the 15-month wait-out period, as we plan our half-yearly Government Land Sale (GLS) supply for private housing.

We have already increased the supply of private housing on the confirmed list of the GLS programme by 75%, from about 3,600 units in 2021, to around 6,300 units in 2022. We are prepared to increase the GLS supply further if needed. The Government will continue to monitor the housing market conditions and act decisively, but also carefully, to ensure the stability of the wider Singapore property market and to keep public housing inclusive, affordable and accessible to Singaporeans.