Singapore tightens loan Limits to Cool Public Housing Resale Market

Singapore: In a move to stabilise the public housing resale market, Singapore has reduced the maximum loan amount that home buyers can borrow for Housing Development Board (HDB) flats. Effective from Tuesday, the loan-to-value (LTV) ratio for HDB loans will be lowered from 80 percent to 75 percent , as announced in a government press release issued late Monday. This adjustment aligns the LTV limit for HDB loans with that of loans provided by financial institutions, which also stands at 75 percent.

The HDB and the Ministry of National Development explained that the new measures are intended to cool the market and encourage more prudent borrowing practices among buyers. In addition to the LTV limit change, the government is increasing the Enhanced CPF Housing Grant by up to SG 40,000 dollars ($30,500) for eligible first-time buyers, bringing the maximum grant amount to SG 120,000 dollars ($91,600).

Under existing rules, most HDB flat owners are required to occupy their property for at least five years before reselling it. Second-hand flats are particularly attractive to buyers due to the possibility of immediate occupancy, in contrast to built-to-order flats, which can take up to six years to complete.

Singapore's resale home prices have surged by over 4 percent in the first half of this year, fueled by strong demand and limited supply, according to government data. Authorities emphasised that the new LTV limit is unlikely to significantly impact first-time buyers, particularly those from lower-income households, who benefit from substantial housing grants such as the Enhanced CPF Housing Grant.

“These measures will help cool the market and promote responsible borrowing, making housing more affordable for lower-to-middle income first-time home buyers,” the press release stated.

Housing affordability remains a critical issue in Singapore, with more than 80% of the population living in public housing flats built and subsidised by the government. Prime Minister Lawrence Wong highlighted the importance of addressing housing affordability during his National Day Rally speech on August 18, acknowledging ongoing government efforts to moderate prices.

The median price for a three-bedroom resale HDB flat in Singapore’s central area currently stands at SG 500,000 dollars.