Will The New Cooling Measures REALLY Make The Property Market More Sustainable?
Published on: 1 October, 2022
On September 30, 2022, the government released new cooling measures as a measure to slow down demand for HDB flats - and also making sure homebuyers do not overextend themselves by taking loans they cannot afford.
In a nutshell:
1. Higher floor rate for MSR, TDSR and HDB loan
- MSR are used specifically for HDB loans only, capped at 30% of monthly income
- TDSR is capped at 55% of your monthly income (along with any other debt obligations)
*Floor rate does not match the actual interest rate you're paying
2. Reduced LTV limit for HDB loans from 90% - 85%
- LTV limit lowered from 85% to 80%
- Only for HDB loans, irrelevant to bank loans (assuming you don't qualify for a HDB loan)
3. 15 month wait-out for private-property-to-HDB owners
- Wait out period implemented to cool demand in the resale flat market
- ECs (that have not yet been privatised) are not affected by this ruling
*Government has stated that this is a temporary measure which could change in the near future
Frequently Asked Questions:
Am I affected by the new cooling measures?
Singapore has just introduced new cooling measures with regards to TDSR, HDB LTV and interest rate floor.
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If you have signed the Option to Purchase for your private property on or before 29 September 2022 you should not be affected.
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If there was no OTP, Sales & Purchase Agreements signed on or before 29 September 2022 should not be affected.
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For HDB, if your HLE application letter and Sale launch date (BTO & SOBF) was received on or before 29 September 2022, you should not be affected by the interest floor change.
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A 15-months wait out period for PPO and ex-PPO will be added for non-subsidised HDB resale flats with the exception of seniors aged 55 and above who want to downgrade to a 4-room or smaller flat for retirement.
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The 30 months waiting period for subsidised HDB flats will remain unchanged.
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In addition, PPOs/ex-PPOs, regardless of age, with extenuating circumstances, e.g. financial difficulties, may approach HDB for assistance, and they will assess your situation on a case-by-case basis.
How am I affected by the Stress Test Medium Term Interest Rate and HDB Loan LTV changes?
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For those taking a bank loan, the TDSR remains at 55%.
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The NEW Stress Test Interest Rate used to calculate Loan affordability for Residential Private Property is now 4%
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The NEW Stress Test Interest Rate used to calculate Loan affordability for Commercial Property is now 5%
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When buying EC from a developer, the MSR remains at 30%.
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When taking HDB loan when buying a HDB, the MSR remains at 30%.
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However, the stress test interest rate for HDB Loans will be at 3%, up from the 2.6% previous interest rate.
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LTV for HDB housing loans will be reduced from 85% to 80%
For Private Residential Property Purchase
Using this example:
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Household income: $10,000.
Borrower’s Age: 35, max 30 years tenure
Under the current 55% TDSR rule, assuming you have no other loans, your total mortgage can only be capped at max. of $5,500 a month
Previously under the 3.5% interest rate used for TDSR calculation, the loan quantum was $1,224,822.
Now after the 0.5% raise to 4%, the loan quantum is $1,152,037. -
This is around a 5.94% reduction in loan quantum.
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(Note: This % reduction varies with loan tenure, etc)
For HDB Residential Property Purchase
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HDB Loan Stress Test Interest Rate to increase from 2.6% to 3%
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HDB Loan rates still remain at 0.1% + CPF OA rate = 2.6%
This example is for those buying a HDB taking HDB loan: -
Under the current 30% MSR rule,
Household income: $10,000.
Borrower’s Age: 35, Max 25 years tenure.
Previously under 2.6% interest rate used for MSR Calculation would mean a HDB LOAN quantum of ~$661K.
Now, after an increase to 3% interest rate used for MSR Calculation, this means HDB LOAN quantum of ~$632K.
This is around a 4.33% reduction in loan quantum. (Note: This % reduction varies with loan tenure, etc.)
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Change of HDB Loan LTV from 85% to 80%
Assuming a 600K HDB flat *Subject to TDSR/MSR.
Previously with LTV 85%, would mean a loan quantum of up to 510K
Now with LTV of 80%, would mean a loan quantum of up to 480K
How does the wait-out period of 15 months for private residential property owners (PPOs) and ex-PPOs to buy a non-subsidised HDB resale flat impact me if I’m below 55 years old?
If you have sold your current private property or are in the midst of marketing your private property and are considering to relocate to a HDB, there may be changes towards your Financials, Loan Affordability, Timeline for sale and next purchase, and options for your next place of residence, etc., due to the recent measures.
If you have any questions or concerns still unaddressed, you may contact me by dropping my a message below or contacting me at +65 91474878.
I can help advise on whether you are affected by the recent cooling measures and how you can adjust your property journey to appropriately navigate these tough macroeconomic conditions.
I also have the tools to help you find out the loan quantum you may be eligible for.
