Just before midnight on 30 September 2022, a joint press release by the Monetary Authority of Singapore (MAS), the Housing and Development Board (HDB), and the Ministry of National Development (MND) caused the phones of many property agents in Singapore to buzz.
New Cooling Measures for Singapore’s Property Market
I too, was about to retire for the night when the news broke. Needless to say, I was kept awake answering many questions from my clients and members of the public in the hours that followed.
Unlike previous shake-ups to the rules and regulations governing the property market, some of the new measures took effect almost immediately on 30 September 2022. Thus, many buyers and sellers were, understandably, in a state of panic.
For ease of reference, I summarised the key points from the press release, which set out a new slate of cooling measures for the property market in Singapore, in a 5-point message to my Telegram channel about an hour after the frenzy.
On 8 September 2022, approximately 3 weeks before the new cooling measures were released, I sent a message to my Telegram community to inform them of my inkling that cooling measures may have been on the horizon.
This inkling was not an isolated one. For those who have been following me on TikTok, where I am most active, you will know that I had published a 5-part series on why I thought there will be a market correction in the property market in early September. My simple message in the past couple of months, if it may be summarised in one sentence, was that sellers should act and buyers should wait.
For that matter, in a press release dated 16 December 2021, MND itself alluded to the possibility that if prices are left unchecked, they may “run ahead of economic fundamentals” and increase the risk of a “destabilising” correction down the road.
@thatproperty.guy Cooling measures hit us on 30 september 2022 for hdb and private properties in singapore. It was predicted and expected. Prices have been unsustainable. But we have to move forward and learn how to adapt. Ill be doing a 5 part series explaining each measure and a summary video. So do stay tune for more information! You can join my tele group if you need live updates. #sgrealtor #sgrealestate #sgpropertyagent #sgrealestateservices #sgviral #sgproperty #thatpropertyguy #hdb #sghdb #hdbtok #coolingmeasures #coolingmeasures2022
♬ original sound – Property Guy – HDB Helpline – Shaik Amar – That Property Guy
Now that the dust has somewhat settled, it is time for us to critically examine this new slew of measures. In doing so, we will also see who are the groups of people who will be most affected and who will be relatively undisturbed.
Now, unlike other content creators, I have no interest in withholding information or making you read an entire article to know my take. So, I’ll begin with my personal conclusion on the latest measures – most of these measures will NOT affect the average Singaporean. The people who may be affected most are:-
- Persons looking to downgrade from Private Properties to HDBs; and
- HDB Buyers who are ineligible for HDB loans; and
- BTO applicants who are ineligible for enhance housing grants with insufficient CPF funds.
I have broken down my analysis of the latest measures into 5 parts, so feel free to jump over to the section that you feel is most relevant to you.
For those of you who prefer a brief overview in the form of a video, you may refer to the video below.
@thatproperty.guy Replying to @Property Guy – HDB Helpline HOW THE PROPERTY COOLING MEASURES AFFECTS THE AVERAGE SINGAPORE PART 1. Here is a summary on the measures and a brief explaination as to why it happened! #sgrealtor #sgrealestate #sgpropertyagent #sgviral #sgproperty #thatpropertyguy #hdb #sghdb #coolingmeasure
♬ original sound – Property Guy – HDB Helpline – Shaik Amar – That Property Guy
The Average Singaporean will be relatively unaffected
To better understand the effect of these measures, we first turn to their publicised purpose. As set out in the title of the press release – Measures to Promote Sustainable Conditions in the Property Market by Ensuring Prudent Borrowing and Moderating Demand – these measures seek to:-
- Moderate demand for the HDB Resale Market; and
- Ensure prudent borrowing amidst rising interest rates
With these 2 goals in mind, credit must be given to the relevant authorities for surgically crafting this new slew of regulations to meet those ends. If they work as intended, the average Singaporean in the property market will not be affected much.
Loan-to-Value limits for HDB Loans to be lowered from 85% to 80%
The first measure we will take a closer look at is the lower loan-to-value (LTV) limits for HDB loans. This new limit will apply to applications received by HDB on or after 30 September 2022.
The last time the LTV was lowered was in December 2021, when it was lowered from 90% to 85%. The new LTV only affects loans from HDB. The LTV for loans from banks remains at 75%.
To illustrate this new measure, we shall use the example of an hypothetical 5-room flat that costs SGD 600,000. Under the old LTV, the down payment would have been SGD 90,000. With the new measures, the down payment would increase by 30,000 to SGD 120,000.
Many applicants will now need to budget for a SGD 30,000 to SGD 50,000 increase in down payment. For most buyers, the grants and CPF contributions would be sufficient to cover this increase in down payment. This will affect people who have been planning on a tight budget and people who have less access to grants the most.
In the press release itself, the authorities predicted that this measures will not affect first-time applicants and lower income applicants significantly as they may receive grants “of up to $80,000 when buying a subsidised flat directly from HDB, or up to $160,000 when buying a resale flat”.
This measure also will not affect those who have applied for the August 2022 BTOs. HDB has made it clear that it will only apply “to new flat applications for sales exercises launched and complete resale applications which are received by HDB on or after 30 September 2022.”
For avoidance of doubt, in a previous press release, MND defined a “complete application” as one where “HDB has received both sellers’ and buyers’ portions of the resale application
HDB Loan Approval “Stress Test” to be based on 3% interest rate
Second, we turn to the new stress that will be applied for buyers seeking a loan from HDB. Although there will be no change to the actual HDB interest rate of 2.6% (from 1 October 2022 to 31 December 2022), the stress test will be based on an interest rate of 3% to “encourages flat buyers to borrow prudently”.
In my personal opinion, the new stress test helps to account for the possibility that interest rates may increase in the future. In the event of such an increase, due to this robust stress test, the ability of buyers to service their mortgage-related debt should remain undisturbed.
In its press release, HDB states that this new stress test encourages “flat buyers to borrow prudently as purchasing a flat is a long-term financial commitment”.
It bears noting that HDB’s interest rate is reviewed quarterly and the current rate of 2.6% is for the period of 1 October 2022 to 31 December 2022.
HDB’s interest rates, which are pegged pegged at 0.1%-point above the prevailing CPF OA interest rate, have increased before. For periods of time in 1986 and 1999, the HDB concessionary loan rate was above 5% and 4% respectively.
When we analyse the effects of the new stress test, we must also bear in mind the lower LTV ratios. Because the maximum loan you can take from HDB has been reduced by 5%, a 0.4% increase for the interest rate in the stress test would not affect the budget calculations much.
It is now time for some quick math. Going back to the example of an hypothetical, and increasingly elusive, 5-room flat that costs SGD 600,000…
With a stress test of 3%, and a maximum loan of SGD 480,000 under the new LTV ratio, the combined income needed for the applicants would be SGD 7586. This is calculated using a mortgage servicing ratio (MSR) of 30% – that is to say, the mortgage payments should not exceed 30% of monthly income.
For the sake of comparison, under the new stress test of 2.6% and the higher LTV ratio, the combined income needed for a loan of SGD 510,000 would have been SGD 7710 (based on a MSR of 30%).
As is clear from the above, the more robust stress test is offset by the lower LTV ratio. Again, this is aligned with the overall goal of encouraging more fiscally responsible borrowing.
For those of you who prefer these illustrations and calculations in the form of a video, here you go.
@thatproperty.guy Replying to @Property Guy – HDB Helpline HOW THE PROPERTY COOLING MEASURE AFFECTS THE AVERAGE SINGAPOREAN PART 3! #sgrealtor #sgrealestate #sgpropertyagent #sgviral #sgproperty #thatpropertyguy #hdb #sghdb #hdbtok #hdbmop
♬ original sound – Property Guy – HDB Helpline – Shaik Amar – That Property Guy
Increased “Stress Test” for Bank Loans
Similarly, the Stress Tests for bank loans have increased as well. Before 30 September 2022 it was 3.5%, and it is now 4%. Unlike the LTV for loans from HDB, which was lowered, the LTV for loans from the bank remain unchanged at 75%.
As the LTV for loans from banks remains at 75%, there will be a notable increase in the minimum income required before 30 September 2022 and after. However, some people have no choice but to take a loan from a bank due to their high income ceiling that renders them ineligible for a HDB loan.
Again, we turn to the example of the SGD 600,000 4-Room flat to illustrate how this will work in practice.
So, with a LTV of 75%, the maximum loan one can get from a bank for our hypothetical flat is SGD 450,000. Based on a floor interest rate of 4%, and 30% MSR, the combined household income needed would be SGD 7916. 
Before 30 September 2022, the combined income needed, with a similar LTV of 75% and a lower floor rate of 3.5%, would be approximately SGD 7506.
In our hypothetical, the difference in income needed as a result of the more robust stress test is about SGD 410. This is not an insignificant sum, and this may cause some people to change their plans for their target property. For those who may be stretching their budget, now may be the time to start considering tapping into more of your CPF. However, using a larger proportion of CPF has it’s own risks and benefits. I will cover this in a separate future article.
@thatproperty.guy Replying to @Property Guy – HDB Helpline HOW THE PROPERTY COOLING MEASURES AFFECT THE AVERAGE SINGAPOREAN PART 4! small pinch from the stress test! #sgrealtor #sgrealestate #sgpropertyagent #sgviral #sgproperty #thatpropertyguy #sghdb #sghdb #hdbtok #hdbmop #coolingmeasures
♬ original sound – Property Guy – HDB Helpline – Shaik Amar – That Property Guy
The 15-month waiting period for Private Property Downgraders
Now, it is time to address the measure that no one saw coming. This is also the measure that will affect many private property owners (PPOs).
Under the new measures, most PPOs and ex-PPOs will need to serve a wait-out period of 15 months after selling their private properties before they are eligible to buy a non-subsidised resale flat. Seniors who are are aged 55 and above who are moving from their private property to a 4-room or smaller flat, and persons facing extenuating circumstances, may be exempt from this rule.
Previously, they were allowed to buy a non-subsidised HDB resale flat on the open market as long as they sold their private property within 6 months of the purchase of the said resale flat.
Needless to say, this is a gamechanger. Although HDB’s press release states that this is a “temporary measure to moderate demand”, it is unclear when this measure will be lifted or reviewed.
OTPs and Deposits may need to be returned
Overnight, as a result of this particular measure, many PPOs and ex-PPOs who were in the process of buying a resale flat will be made ineligible.
Based on footnote 1 of the press release, the date that seems to matter is the date of submission on the HDB resalenet portal and not the date the OTP was entered into. Thus, many who already have an OTP but did not submit the relevant paperwork before midnight on 30 September 2022 may find themselves in quagmire.
In this aspect, with respect, I felt that the authorities could have done better in 2 ways. First, as a “grace period” of sorts, they could have given more time for those who already have an option to purchase to finalise their paperwork. Second, they could have given a 2-week timeframe for the measures to take effect to allow those who are on the verge of buying and/or selling to wrap things up.
However, I can understand why they choose the submission date as the operative one instead of the OTP date as the latter may be illegally amended retrospectively by errant actors.
In any case, it is what it is and we will need to understand the reality of the situation.
According to clause 16 of the OTP contract – HDB_OTP_20221001T154319Z – where HDB’s approval is not obtained or revoked, and no one is at fault, the Option shall become null. That is to say, the seller must return all fees, including the option fee and option exercise fee, to the buyer. Each party will bear their own costs.
As this is a situation that may reasonably be described as one where the HDB’s approval is not granted due to the fault of neither the buyer nor the seller but the latest slew of measures, it is likely that clause 16 would be applicable.
It also remains to be seen whether HDB is open to hearing appeals on a case-by-case basis from buyers and sellers who are on the verge of selling or buying who may already have an OTP. In their press release, it was stated that:-
In addition, PPOs/ex-PPOs, regardless of age, with extenuating circumstances, e.g. financial difficulties, may approach HDB for assistance, and we will assess their situation on a case-by-case basis
How will the wait-out period affect the market?
Due to this wait-out period, I foresee that there may be several knock-on effects.
First, older and smaller condos may increase in value as more PPOs may look to downgrade to an older and smaller condo due to the wait-out period.
Second, prices for 5-room flats, executives, jumbos, and larger flats may stabilise or increase at a much lower rate due to a smaller pool of buyers. There will be lesser COV buyers for these units. In other words, we may see less million-dollar flats.
Third, the rental market, which has already been increasing for many months on end, may see a further increase due to an increased demand from PPOs who are serving the 15-month wait-out period.
Fourth, for resale flats in general, we may see a decreased volume in sales which may also be followed by a smaller increase in profits from the sale of resale flats.
Fifth, specifically for 4-room flats, if the measures are not reviewed or lifted within the next 6 to 12 months, prices and demand for 4-room flats may increase due to PPOs aged 55 and above being eligible to downgrade to one.
Remember, at the core of it all, public housing should be, first and foremost, affordable. HDB’s mission statement reads “We provide affordable, quality housing and a great living environment where communities thrive”. The press release also makes reference to affordable housing:
“The Government remains committed to keep public housing inclusive, affordable and accessible to Singaporeans. We will continue to monitor the property market and adjust our policies to ensure that they remain relevant.”
Again, if you would like this final section of this article in a video format, you may access it at this link.
@thatproperty.guy Replying to @Property Guy – HDB Helpline HOW THE PROPERTY COOLING MEASURES AFFECT THE AVERAGE SINGAPOREAN PART 5! This is the most shocking cooling measure! #sgrealtor #sgrealestate #sgpropertyagent #sgviral #sgproperty #thatpropertyguy #hdb #sghdb #hdbtok #sgcondo #sgcondominimums #coolingmeasures
♬ original sound – Property Guy – HDB Helpline – Shaik Amar – That Property Guy
As with all new measures, the market will take some time to react and adapt. Only time will tell whether these new measures can achieve their intended outcomes.
In the meantime, if you have any questions or opinions on the latest slate of cooling measures, feel free to reach out to me on Instagram, TikTok, or Telegram!
Shaik Amar is a writer with Wake Up Singapore and is a CEA licensed realtor in Singapore under the Estate Agent, ERA Realty Pte Ltd. The ideas, suggestions, general principles, examples and other information presented here are for reference and educational purposes only.
This article and all of the articles written are not in any way intended to provide investment advice or recommendations to buy, sell or lease properties or any form of property investment/transaction. Shaik Amar & Wake Up Singapore shall have no liability for any loss of expense whatsoever, relating to the investment and property decisions made by the consumer & reader of this article. We strongly urge each reader to always seek professional opinion from any CEA licensed professional property consultant before making property related decision. CEA Licence No. L3002382K • R058640H
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