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Minimum Impact of Cooling Measures: Here’s Why

In spite of the December 2021 Cooling Measures welcomed by many home buyers, the residential property market doesn’t seem to be letting up. Resale flat prices are running at full steam, which begs the question; “Are cooling measures losing its lustre?”

Loan Curbs Less Impact on HDB Properties

The HDB resale volume is more resilient as the cooling measures have little effects on the HDB resale market, with the loan curbs having little to no impact. The lowering of the Loan-to-Value (LTV) ratio from 90% to 85% for HDB housing loan have limited effect on the demand for resale HDB flats.

Why?

First, many buyers of HDB flats wouldn’t borrow from the HDB because the private banks offer lower interest rates for the mortgages after all. Furthermore, homebuyers will have to use most of their money in their CPF Ordinary Account for their housing purchase first before HDB would grant them the loan for the rest of the price of the flat.
For eg.: For a $500,00 HDB flat, the minimum down payment using the HDB loan would be $75,000 payable with cash or CPF. Most SIngaporean home buyers (mostly in their 30s) would have more than $100,000 in their CPF combined accounts. Hence, it’s quite practice for most SIngaporeans to pay more than 15% down payment anyways. Furthermore, the homebuyer can only retain up to $20,000 in the balance of their CPF Ordinary Account, thus, it’s not common practice to leverage up to 85% of the purchase price of the flat.
The Covid-19 pandemic has led to the disruption in the supply chain of construction materials and labour in Singapore. This led to the delay in the completion of HDB BTO flats from the usual 3 to 4 years before the pandemic, to the current expected construction period of 4-6 years. Some homebuyers who couldn’t wait for the longer construction period of BTO flats would buy HDB resale flats, resulting in the higher demand and steady price increase of HDB resale flats in 2021. The latest cooling measures don’t solve the disruptions in the construction industry.

What About Executive Condominiums?

Since WFH becomes the norm, we have seen many HDB upgraders looking to upsize to a larger flat, or upgrade to an Executive Condominium (EC). And the much added perk is being spared from the Additional Buyer’s Stamp Duty (ABSD)! The prices of current resale condominiums in 2022 may be a sticker price shock of most home buyers, buying a private property may be “out of the league” for most. Hence, this may cause some upgraders to eye EC’s with larger floor plans in lieu of a private resale condo.
As a matter of fact, we have been getting unwavering interest from upgraders seeking 1000 sqft 3-Bedder & 4-Bedder floor plans and above!! It’s no surprise that there’re large groups of Singaporeans who need immediate housing but can’t afford resale condos either. As a result, the surging demand for resale ECs (and resale HDB’s alike) remains unabated!

Updates for Private Homes

The number of resale condo units sold in the 1.5-month period ending 30 January 2022 decreased by a smaller percentage of 28% yoy, compared to the rate of decline of the primary market sales volume and the number of resale landed houses sold over the same period.
In the 1.5-month period after 15 December 2021, the number of private resale landed residential units sold decreased 51% yoy to 212 units. This is partly because the prices of landed residential properties has increased 13.3% yoy in 2021, faster than condominium prices. The buyers were more cautious due to the latest cooling measures. Secondly, there could be a mismatch in expectations between buyers and sellers. Many sellers are unwilling to lower their asking prices as there is a limited stock of landed houses for sale.

Our Takeaway

The private residential property sales volume will be subdued in the short term. However, it would gradually recover as the market comes to terms with the cooling measures. Developers will launch more residential projects and buyers will return to the market.
Drop us a note on Live A Home SG, and we can find you a resale home within your expectations. Even amidst this competitive market, there’re still outliers and gem listings that remain affordable. In the interim, follow us on Live A Home SG as we stay updated on the situation, for both new launches and resale condo’s alike.

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