The Complete Guide To The New Singapore Property Cooling Measures

What Are Singapore Property Cooling Measures And How Will They Impact You?

The pandemic greatly slowed the economic progress of Singapore, but it’s surprising to see the housing market still rising, with resale flat prices skyrocketing for the 26th month in a row. With this pattern also comes the fear of people about not being able to afford residential properties.

Considering this, Singaporeans have been expecting property cooling measures to be announced, and they finally came to fruition at the end of September 2022. The new Singapore property cooling measures are expected to reduce housing prices significantly, or at least stabilise the country’s housing market long-term.

All the latest property cooling measures are going to be discussed below, including how it will impact you.

Here at OMY, you will discover the following:

Singapore Property Cooling Measures: HDB

Three new measures were introduced in the announcement, which are as follows:

  • Reduced LTV limit for HDB loans (85% to 80%)
  • Changes to property loans interest rate floor by HDB and private financial institutions
  • 15-month wait-out period for those who own private properties

We’ll discuss these government cooling measures one by one below.

Reduced Loan To Value Limit

Last December, the LTV limit was tightened from 90% to 85%. Starting on 30 September 2022 and onwards, the Loan-to-Value limit or LTV has been further decreased from 85% to only 80%. This new change will apply to new flat applications, as well as resale applications.

So, what does this part of the Singapore property cooling measures mean?

If you’re a first-time HDB buyer or have a low income, you can receive more housing grants when you buy a subsidised flat from HDB directly, or as much as S$160,000 when you buy a resale flat.

More From OMY: Complete Guide to Buying Your First HDB BTO Flat in Singapore

You may also use your CPF savings to cover this purchase, which will further reduce your loan amount. This means that you have to settle more cash upfront if you don’t want to use your CPF for this major purchase.

It is important to note that this revised limit of the government cooling measures does not apply to private financial institution loans such as ones given by private banks, which are still 75%.

Changes To Property Loans Interest Rate Floor By HDB And Private Financial Institutions

If you are interested in taking up a property loan from banks or other private financial institutions, the Singapore property Cooling measures will affect you.

One of the latest property cooling measures in Singapore is to raise the medium-term interest rate floor which is used to compute the Total Debt Servicing Ratio or TSDR, as well as the Mortgage Servicing Ratio or MSR by 0.5%. This higher rate floor applies not only to home loans but also to other property loans.

More From OMY: Best Mortgage Home Loan in Singapore

Despite the Singapore property cooling measures, it is still up to the financial institution what the actual interest rates are.

This part of the latest property cooling measures only applies to loans where the Option to Purchase or OTP is approved on or after 30 September. If there is no OTP, this change applies to loans where the date of the Sale and Purchase Agreement falls on the said date.

It also applies to new mortgage equity withdrawal loan applications that were made or issued before this time. Furthermore, the actual HDB concessionary interest rate will be unchanged at 2.6% p.a.

For those refinancing other types of property loans, they will be subject to the prevailing medium-term interest rate when they first took their loan. Borrowers who refinanced their loans will also not be affected by the Singapore property cooling measures.

Take a look at the table below to understand this part of the Singapore property cooling measures.

Loan type Interest rate (medium term)
Non-residential property purchase loans, mortgage equity withdrawal loans 5% p.a. floor (from 4.5% p.a.) or the thereafter interest rate
Residential property purchase loans, mortgage equity withdrawal loans 4% p.a. floor (from 3.5% p.a.) or the thereafter interest rate

The thereafter interest rate refers to the highest interest rate possible that is applicable in the tenure of your loan. This excludes any promotional or introductory rates.

The authorities in Singapore stated in a press release that the interest rates of mortgages are pegged to the three-month SORA which has been increasing in the previous months. This 2023, will most likely increase once again as a response to US interest rates. Then, it’s expected to settle at a higher level compared to the lows of 2013 to 2021.

This latest property cooling measures addition is expected to ensure that new homeowners will borrow sensibly for their purchases and are choosing a loan size that is perfect for them, especially in an environment where interest rates are rising.

15-Month Wait-Out Period For Those Who Own Private Properties

Private residential property owners will be under a 15-month wait-out period. This also includes those who let go of private property before applying to get a non-subsidized HDB resale flat.

As with other government cooling measures, this only applies starting on 30 September 2022. Before this Singapore property cooling measure, property owners who sell their private property within 6 months of purchasing an HDB flat were permitted to buy an HDB resale flat in the open market. However, this won’t be allowed anymore based on the new Singapore property cooling measures.

It is worth noting that this Singapore property measure does not apply to individuals and seniors 55 years old and above who are moving out of their private property to a 4-room or a smaller resale HDB flat to improve their adequacy for retirement.

For first-time private property owners who want to apply for the CPF Housing Grant, as well as the Enhanced CPF Housing Grant, the resale flat purchase is still 30 months.

According to the Singapore government, this latest property cooling measures addition is only temporary. It will be reviewed soon and will be changed depending on the housing demand and market conditions.

Are The New Singapore Property Cooling Measures Really Necessary ?

Considering the high price increase of the HDB resale properties in recent months, it was only a matter of time before the new government cooling measures were released. It is safe to say that it was even expected by many Singaporeans.

The goal of the newly announced Singapore property cooling measures is to change the financial conditions to purchase a property, as well as recalibrate the housing demand in Singapore, especially when it comes to HDB resale properties.

As with previous Singapore property cooling measures announced by the government, these new rules are set to cause a knee-jerk reaction among Singaporeans, particularly those who want to buy or sell properties.

Many Singaporeans may complain about how the new government cooling measures on Singapore property impact their ability to borrow or buy a home, especially because many people want to get their hands on their property.

However, the new Singapore property cooling measures are simply a reminder for individuals to exercise prudence for big-ticket purchases by rethinking their finances.

For years, the country has enjoyed low interest rates. But as the rates climb, authorities are forced to release regulations (in the form of the latest property cooling measures) to ensure the stability of Singapore’s housing market.

It is worth noting that not all individuals looking for a new property will be greatly affected by the government cooling measures. People may simply adjust their budget and cater to their new trimmed borrowing capabilities.

With the new Singapore property cooling measures, the property market can grow at a more sustainable rate, which is beneficial for everyone in the long run.

With private homeowners now required to wait 15 months before buying non-subsidised HDB resale flats, the demand will settle, and soon, prices can become more affordable.

If these latest property cooling measures were not enacted, the final straw that may cause the housing market in Singapore to become completely unstable is the risk of recession, in addition to the rising interest rates and living costs in the country. During a recession, the ability of people to buy homes will be significantly lessened, and troubling sales may become more common.

Ultimately, the new Singapore property cooling measures will cause people to be more careful when selecting purchases, especially because the country’s interest rates are pegged to the rates of the US Federal Reserve.

The government cooling measures must be enacted as a pre-emptive step, while the prices are still quite affordable for many. If a recession does happen, the Singapore property cooling measures will serve as a cushion, so we will not get swept up by the global market’s chaos.

In a joint press release by MAS, MND, and HDB, the authorities said:

“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,” adding that they urge households in Singapore to be sure of their ability to pay off debts before making any long-term financial commitment.

If these latest property cooling measures were not enacted, the final straw that may cause the housing market in Singapore to become completely unstable is the risk of recession, in addition to the rising interest rates and living costs in the country. During a recession, the ability of people to buy homes will be significantly lessened, and troubling sales may become more common.

A Word From OMY

In a perfect world, potential homebuyers want properties to be affordable, and property owners want the value of their assets to increase. The new Singapore property cooling measures ensure that both parties get what they want. Now that you know more about the new government cooling measures, you can better prepare yourself for the future.

More From OMY: Is HDB Optional Component Scheme Actually Worth It?

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