What does the recent HDB loan changes mean to Singaporeans

HDB prices are still rising despite the slew of cooling measures taken up by the HDB and MAS. Currently, supplies of new flats have been ramp up and an Additional Buyer’s Stamp Duty of 3% over the higher-value property have been imposed. These measures however have proven ineffective as the HDB resale prices continue to climb a further 2 percent in the recent quarter-to-quarter report. The latest changes to curb rising property prices is adopted by the Monetary Authority of Singapore and it:

1) Limits mortgage loans to a maximum of 35 years

2) Decreases the Loan-to-Value(LTV) ratio for loans exceeding 30 years

You may read the exact details of the new housing loan ruling here [Source]


The above measures are steps in the right direction but it could spell disastrous if the housing prices do not drop.

Singaporean HDB flats buyers will:

a) either need to pay more in cash or CPF for deposits in order to lengthen the borrowing period

b) or pay more in cash or CPF for monthly mortgage loans in order to shorten the borrowing period


Either way, both options put HDB flats buyers to pay more in the short term. It brings a question if the HDB is short of cash? This is worrying because somewhere in the national coffers could be leaking in order to warrant a drastic measure that looks like the HDB is desperate for cash. Did Temasek Holdings lose money again?


Nonetheless, the impact will be disastrous if the HDB prices doesn’t come down because the effect is equally disastrous suppose prices remain stagnant. With reference to the two options, if the HDB prices do not come down, young married couples:

a) will delay marriage and baby plans in order to save for higher deposits

b) will have to pay cash to top up the outstanding mortgage loans which will most likely exceeds their monthly CPF contribution given the increased mortgage loan due to the shortening of borrowing period. Some owners may even go homeless if they become unemployed and lose their CPF contributions.


As these moves are really risky, the PAP government better ensure this works or else it will worsen existing problems to a stage where housing prices continue rising and people either start over-stressing themselves to save more in the short term to top up the cash difference, or simply give up altogether the idea of home ownership. The low interest environment in Singapore is somewhat hinted by the Finance Minister that it is here to stay for at least the next few years. This is however seriously jeopardizing people’s retirement as the CPF continues to pay interest rate(2.5%) below inflation rate(3% to 5%).


All these seems to fit into the same old picture that the overcrowded nation simply have too many Permanent Residents and New Citizens competing for a limited resource(housing in this case). The effects of overcrowding on housing is rising property prices, and when the Prime Minister tells you Singapore can take 10% more people by 2016, we should expect to see property prices rising at least a few percentage point more in the coming years. The root cause of all these cooling measures is an overpopulation, or unpopularly, the influx of foreigners. Quick fixes like the one above doesn’t address the fact that amenities are simply insufficient to contain such a capacity demanded by the PAP in order to get more votes from new citizens to keep them in power. It is all about political domination and the PAP’s survival for the next 55 years, and this Singapore wouldn’t be a pretty sight in the years to come.


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