Remarks by Minister Desmond Lee on the Measures to Cool HDB Resale Market & Provide More Support for First-Time Home Buyers

Aug 20, 2024


Thank you for joining us this morning. Last night, we announced two measures related to the public housing market. Let me recap them.

  1. First, we will lower the Loan-to-Value (LTV) limit for HDB loans by 5%-pts from 80% to 75%, bringing this in line with loans granted by financial institutions. This will encourage more prudent borrowing from home buyers and further stabilise the resale market.

     

  2. Second, we will increase the Enhanced CPF Housing Grant (or EHG) for lower-to-middle income first timer buyers. This will help them to buy their home, and also mitigate the impact of the lower LTV limit for this group of Singaporeans.

State of the Housing Market

We have introduced these measures against the backdrop of sustained broad-based demand from all buyer groups – from young couples looking to set up their first home, second-timers looking to upgrade, as well as more singles wanting to own their flat earlier. At the same time, COVID-19 significantly disrupted HDB’s building programme and delayed flat completions, and by next year we will complete all the delayed flats.

To address this demand-supply imbalance, we have taken several steps over the last few years:

  1. On the supply side, we have ramped up our supply of new flats, and have made good progress in catching up on delayed projects.

     

    • We are on track to meet our target to launch 100,000 flats from 2021 to 2025.

       

    • We have rolled out more Shorter Waiting Time (SWT) flats with waiting times of less than three years.

       

    • By early next year, we will have completed all  COVID-delayed HDB projects.

       

    • For those waiting for their BTO flats, we have ramped up the supply of flats under the Parenthood Provisional Housing Scheme (PPHS), and implemented the PPHS (Open Market) voucher scheme last month.

       

  2. On the demand side, we implemented three rounds of cooling measures in Dec 2021, Sep 2022, and Apr 2023. As a result, resale price growth moderated in 2023. HDB resale prices rose by 4.9% last year, which was less than half of the 10.4% increase in 2022. However, in the first half of this year, resale price rose by a faster rate of more than 4%. There are a few reasons for this:

     

    • First, there is strong, broad-based demand across all buyer groups, partly supported by strong income growth over the last two years.

       

    • Second, private property prices have grown in the past few years, so more second-timers are turning to the HDB resale market to meet their upgrading needs. With the same budget, upgraders will generally be able to purchase a comparable-sized resale flat with much better attributes than some condominiums.

       

    • Third, there is some tightness in the supply of resale flats this year, because fewer flats reached their Minimum Occupation Period (MOP) and entering the resale market.

There is also market psychology at work here. In recent months, record HDB resale prices have frequently made the headlines.

HDB flats with very high resale prices make up a very small proportion of all transactions, but they capture public attention. In the last 1.5 years, flats that cross the million-dollar mark make up about 2% of all resale transactions:

  1. These are mostly Maisonettes, Executive Apartments and Jumbo flats, or 5-room flats in very good locations, high floors, or with very long remaining leases.

     

  2. For 4-room and smaller flats, the most expensive ones are predominantly located in HDB estates in, or very near to, the city centre. They are very central, and are well served by transport connectivity and comprehensive amenities. More than half are also located on very high floors, above 30 storeys, and have good views. Such transactions make up only 0.5% of all 4-room or smaller flats transacted in the last two years.

The problem is that this has caused Singaporeans to be concerned about the affordability of resale flats as a whole. Flat sellers who are reading such news raise their expectations about how much their flat could bring, while flat buyers become anxious to secure flats before prices get higher. If we are not careful, such market dynamics can cause the resale market to run out of line with economic fundamentals, and cause a bubble. History tells us that the property market moves in cycles, and those who buy at higher prices with larger loans are also hardest hit when the market cools. This is why we are moving now to dampen demand and encourage prudent borrowing, even as we continue to inject supply at a steady pace to meet demand.

Tightening the LTV Limit

To moderate demand and to ensure prudent borrowing, we will reduce the LTV limit for HDB housing loans by 5%-points from 80% to 75%. This brings the LTV limit for HDB loans in line with loans granted by financial institutions, which remains at 75%.

We have observed that buyers who take loans at higher LTV ratios disproportionately buy larger flat types, and pay higher prices. The lower LTV limit will encourage more prudent borrowing and dampen demand at the higher end of the market – which will in turn have a knock-on effect of stabilising the rest of the resale market. But let’s watch and monitor the impact of these measures on the overall resale market.

Some home buyers may be concerned that the lower LTV limit might make it harder for them to finance their flats.

  1. First, let me assure you that the vast majority of HDB home loans will not be affected. Almost 9 in 10 of our buyers with HDB loans are already borrowing at LTV ratios of 75% or less.

     

  2. Second, the increase we are making to the EHG will help lower-to-middle income first-timer households.

Increasing the EHG

Let me now explain why we are increasing the EHG. Most first-time home buyers already receive significant housing grants when they buy a new or resale flat.

We will increase the EHG for both new and resale flat buyers with monthly household incomes up to $8,000. Taken together with other existing grants, what this means is that:  

  1. First-timer families buying a new flat can now receive up to $120,000 in grants, on top of significant market discounts. Singles receive up to $60,000.

     

  2. If they were to buy a resale flat, they can receive up to $230,000 in housing grants for families, and up to $115,000 for singles.  

     

  3. This is a significant increase from what we provided previously and will help first-time home buyers afford their first home.

     

  4. Based on past trends, about 85% of first-timer households, or more than 13,000 households, are expected to benefit from this move every year.

     

  5. This will help the lower-to-middle income households buy new flats, including flats in Prime and Plus locations. And you know that Plus flats will be launching in Oct this year. The EHG enhancements will also help them to afford resale flats.

The EHG is means-tested and progressive, and we have tiered the increase so that lower-income buyers will receive more support. This will ensure that those in need will receive more help, without inadvertently driving up the wider resale market. 

Transitional arrangements

Let me talk a little bit on the transitional arrangements, as a result of these measures. Both measures are effective from today.

  1. For new flat buyers, both measures will apply from the October 2024 BTO exercise onwards. The measures will not be applied retrospectively to past sales exercises. This means that flat buyers who have planned their finances based on the old rules and applied for flats in past sales exercises will not be affected by the new rules – even if they have received a queue number but not yet booked their flat.

     

  2. For resale flat buyers, both measures will apply to complete resale applications received by HDB on or after today. A complete resale application means that both the buyer and seller portions of the resale application have been submitted to HDB.

     

  3. I know some buyers and sellers who are in the midst of a resale transaction may be concerned that this change may disrupt their housing arrangements.

     

    • We will extend the revised EHG to them automatically, so that they do not have to cancel their resale application and re-submit their resale flat application to qualify for the increased grant amount.

       

    • Those who are concerned about the impact of LTV on their housing arrangements may approach HDB for assistance if they have extenuating circumstances, and we will assess their situation on a case-by-case basis.

       

  4. Buyers who already have a HFE letter need not re-apply for HFE. Those who are eligible for higher EHG will automatically receive a revised HFE letter from HDB and be individually notified via email. As mentioned, the higher EHG will apply to applications received from the October 2024 BTO exercise onwards, and complete resale applications received by HDB on or after today.     

Ramping Up Supply

We will continue to ramp up the supply of BTO flats to meet strong demand. The October 2024 BTO exercise will be our largest launch of the year - HDB will offer 8,500 flats across 15 BTO projects across the island, under our New Flat Classification , “Standard, Plus, and Prime”. The Plus and Prime flats will come with additional subsidies to make them affordable to a wider range of Singaporeans, and therefore come with tighter restrictions. For lower-to-middle income households, the increase enhanced EHG grant will also help them afford flats at these locations. Flat buyers can look forward to a good spread of options for their specific budgets and needs. This includes singles, who will be able to purchase 2R new flats in all locations island-wide starting from the October BTO exercise, instead of just in the non-mature estates. My colleagues from HDB will provide more details on the upcoming BTO sales exercise soon.

As PM announced during the NDR on Sunday, we will also do more to better support singles to care for their families. Today, we provide priority access to HDB flats to married children and their parents who are buying new flats to live with or near one another. In the middle of next year, we will extend such priority access to all parents and their children – married or single – buying HDB flats to live with or near each other. We will announce more details on this priority scheme soon.

Let me summarise what I have just said in Mandarin.

政府一直密切关注住房的需求和供应。

  1. 近年来，我们观察到国人对组屋的需求持续强劲 。
  2. 同时，预购组屋的施工进度，也因为疫情被延误，
  3. 导致这三年来产生了供不应求的状况。

除了迅速推出更多预购组屋，政府也推出了一系列的降温措施。

  1. 这些措施有助于缓和组屋转售价的上涨。
  2. 尽管如此，组屋转售价在今年的上半年，仍然上涨了超过4%。

主要的原因有几个：

  1. ，第一，国人对住房的广泛需求依然强劲，部分原因是收入增长。
  2. 私宅的价格持续上涨，把许多第二次购屋者推向组屋转售市场。
  3. 符合最低入住年限（MOP），进入转售市场的组屋，也比往年少了一些。

其实 高价或百万转售的组屋只占据总交易的一小部分。

  1. 但是面对这样的新闻，卖房的国人自然希望可以最高价出售，
  2. 相对的，有些买家也难免会感到焦虑，觉得必须在价格攀升之前，买到心仪的房子。

房地产市场其实是周期性的，而贷款额较高的国人，在市场降温时，也可能受到更大的冲击。

  1. 这就是为什么，我们必须抑制  需求，鼓励国人在借贷时更加谨慎，来进一步稳定组屋转售市场。

所以，政府将把 LTV《组屋贷款与估值比率》从80% 调整至75%。

  1. 这样一来，建屋局与金融机构的贷款顶限一样，定在75%。
  2. 大部分的购屋者都不会被这次的调整受影响。

同时，我们也会调高 EHG《额外安居津贴》，

  1. 确保中低收入的首次购屋者，能买得起组屋。
  2. 结合所有的补助 ，这些家庭在购买预购组屋时最高可以获得12万元的补助；
  3. 而那些想购买转售组屋的国人，可以享有高达23万元的补助。
  4. 我们预计每年，将有超过1万3,000 (more than 13,000）名首次购屋者能从中受惠。

需要更多援助的低收入家庭，将会获得更多的补助

  1. 这样一来，我们可以确保 补助金能更有效地帮助有需要的家庭，并且避免推高转售组屋的价格。

Conclusion

Let me conclude. The Government remains committed to provide a diverse range of affordable housing options to all Singaporeans. We will continue to watch the property market closely and will not hesitate to act decisively to ensure prices remain in line with economic fundamentals. Thank you.