Larger HDB resale flats to bear brunt of new property cooling measures; may drive up rents

by Albert02

Larger HDB resale flats to bear brunt of new property cooling measures; may drive up rents

Larger HDB resale flats to bear brunt of new property cooling measures; may drive up rents. The most recent set of property cooling restrictions is an essential and unavoidable step toward preventing overleveraging.

With rising interest rates and a bleak economic outlook, both the resale and private property markets in the Housing Board are displaying signs of overheating. The recalculation of the 3.5 percent medium-term interest rate floor used to compute the total debt servicing ratio (TDSR) was unsurprising, given that mortgage rates have already risen to 3% in recent months, and if left uncorrected, will raise borrowers’ financing risks.

However, given that million-dollar flat sales accounted for only 1.4 percent of all HDB resale transactions as of September 30, are the new limits, which most analysts believe are primarily aimed at the HDB market, too stringent? Analysts predict a minor increase in the medium-term interest rate floor from 3.5 percent to 4% each year, based on the rate at which interest rates have risen. The Monetary Authority of Singapore would boost the medium-term interest rate floor used to calculate the TDSR and mortgage servicing ratio (MSR) for private lender property loans by 0.5 percentage point.

The TDSR is the percentage of a borrower’s gross monthly income that goes toward repaying all monthly debt obligations for private home purchases, whereas the MSR is the percentage that goes toward repaying all HDB property loans. Despite its tiny size, this could have an impact on private home sales as buyers weigh their options and evaluate their costs. “It may have a greater impact on new executive condominium (EC) sales because EC buyers pay a stiffer MSR of 30% under the TDSR, as opposed to 55% for private house buyers,” said Mr Ismail Gafoor, CEO of PropNex Realty.

The addition of a 3% interest rate floor in the calculation of the HDB concessionary loan amount is intended to keep resale flat prices under control. In December 2021, the loan-to-value limit for home loans will be reduced to 80% from 85%, down from 90%. In order to control demand for such flats, a 15-month waiting time for current and former private house owners to acquire a non-subsidised HDB resale property has been established, in addition to tightening home loan limitations. They could previously acquire an open market HDB resale flat if they sold their private properties within six months of the acquisition.

Click the image to read the full details of report.
Source:
https://www.straitstimes.com/business/property/larger-hdb-resale-flats-to-bear-brunt-of-new-cooling-measures-may-drive-up-rents



Discover Your Home Here

Come and Experience it Yourselves
Perfect Ten
Book ShowFlat Appointment


Proudly Developed by :
Japura Development Ptd Ltd
(Affiliated with
CK Asset Holdings Ltd)

You may also like

error: Content is protected !!