From iTODAY: HDB restrictions to ‘instil financial prudence’

Sumita Sreedharan | 12 Jan, 2013 6:00 AM

Minister Khaw advises buyers to be patient, with 200,000 homes expected to be completed over the next four years

SINGAPORE – The Government yesterday introduced fresh measures to moderate the rise in prices of re-sale Housing and Development Board (HDB) flats and instil financial prudence among buyers, while giving the assurance that there are enough homes in the pipeline for Singaporeans.

Only last week, estimates from the HDB showed prices of resale flats rose by 2.5 per cent in the last three months of 2012, and at their fastest pace for the year.

Starting today, eligibility for loans to buy HDB flats will be tightened. Bank loan repayments for public housing – known as the Mortgage Servicing Ratio (MSR) – will be capped at 30 per cent of the buyer’s monthly income. For loans granted by the HDB, they will now be capped at 35 per cent of a flat buyer’s gross monthly income, instead of the current 40 per cent.

At a press conference yesterday, National Development Minister Khaw Boon Wan said that the enhanced restriction on borrowing is aimed at instilling greater financial prudence among buyers. “Excessive credit doesn’t do anybody any good,” he said.

The MSR can be as high as 60 per cent in some loan applications for HDB flats and private residential properties, noted Mr Lee Sze Teck, DWG’s Senior Manager for Training, Research and Consultancy.

PropNex Chief Executive Mohamed Ismail felt the move could further moderate HDB resale prices.

“With the new MSR, people will be exposed to a lesser amount of loans. And that means people will be cautious about the amount of COV (Cash-Over-Valuation) they want to pay. Against this backdrop, the HDB (resale) market is heading for greater moderation of prices,” he said.

Ownership rules for Permanent Residents (PRs) would also be tightened starting today. PRs will be barred from subletting their whole flat, even though they will continue to be able to sublet rooms. Previously, a PR could sublet his whole flat after meeting the minimum occupation period.

PRs who have been approved by the HDB to sublet their whole flats prior to today will be allowed to continue with their subletting arrangement for the remainder of the approved duration.

Under the new measures, PRs who purchase private property must now sell their HDB flats within six months of the completion of the purchase of the new property or after they are granted their Temporary Occupation Permit or Certificate of Statutory Completion.

These moves will help “restrain some of the demand”, Mr Khaw said, as PRs can currently only purchase resale units and make up a significant proportion of buyers.

“If we are able to dampen it, the demand should ease,” he added.

The minister also advised home buyers to be patient, noting some 200,000 units – both public and private housing – are expected to be completed over the next four years.

“Unless you are desperate for a home, desperate for a room, you can hold on for a while. I think it’s better for you, otherwise you jump in high and the market corrects itself, you’ll regret your decision,” said Mr Khaw.