The Housing & Development Board's (HDB) latest measures could lead to a 10 percent drop in resale transactions and prices of larger flats, experts said. This means the resale market is set to take a beating considering its sales volume has been at its lowest since 1997.
Mohamed Ismail, Chief Executive of PropNex Realty, believes that larger flat types such as five-room and executive apartments will be hardest hit by the policy changes.
“With the HDB resale market rising in the past few years, appreciation for bigger flats has outpaced that of smaller ones…The worry is that the new measures might artificially control the resale price of bigger flats, forcing a sharper correction,” he said.
Announced by National Development Minister Khaw Boon Wan on Tuesday, the measures cut the tenure of a HDB loan to 25 years from 30 years, reduced the monthly mortgage repayments to 30 percent from 35 percent of a borrower's gross monthly income, while bank loan tenures were revised from 35 to 30 years with smaller loans offered for those exceeding 25 years, media reports revealed.
This means a household with a monthly income of S$4,000 and S$5,000 will find their HDB loans reduced by S$86,000 and S$100,000 respectively, based on calculations by analysts.
“Buyers will now need to scale down their expectations and either go for a smaller flat in the location they want, or the same flat type and size but in a less centralised area,” noted Nicholas Mak, Research Head at SLP International.
At the same time, cash premiums paid for these types of flats are expected to fall, said industry watcher Chris Koh. This comes as new permanent residents (PRs) have been removed from the market.
Newly-minted PRs who do not qualify for BTO flats are now required to wait three years before they can purchase a resale flat. Notably, this group of buyers account for a fifth of the resale market.
In fact, areas “with a higher supply of resale (flats), such as Punggol and Sengkang, are dropping in premiums that are closer to valuation”, added Koh.
Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories email firstname.lastname@example.org