Cooling Measures in Relation to HDB Resale Prices

January 4, 2022

In 2021, HDB resale flat prices have risen about 15 per cent after a 6-year decline. The House Price-to-Income (“HPI”) which measures housing affordability recorded that HPI for HDB resale flats reached 4.4 times in the first three quarters of 2021 hitting 150.6.

The announcement on 15th December 2021 by the Ministry of National Development (“MND”) on the Property Cooling Measures has every sector of the real estate in a frenzy. With purchasers thinking, “Should I buy that house I want now or wait?”, to vendors upping their effort to sell and real estate agents assisting where they can. In the latest measures, the Additional Buyer’s Stamp Duty (ABSD) rates were increased, the Total Debt Servicing Ratio (TDSR) was tightened and the Loan-to-Value (LTV) limit for HDB loans were lowered with many analysts hailing these new implementations as “tough” and “harder hitting”.

There is a saying, “history repeats itself”, whether that will be the case from the current cooling measures and the after-effects, only time will tell. There are 2 points in the past where substantial cooling measures were implemented which gives an outlook to the impact of cooling measures. Let’s see what the past can tell us, whether history repeats itself or not.

The first in January 2013 where the Additional Buyer’s Stamp Duty (ABSD) rates rose between 5 to 7 points and ABSD was imposed on Permanent Residents (PR) purchasing their 1st residential property and Singaporeans purchasing their 2ndresidential property. In addition, PRs with HDB were not permitted to sublet the whole flat and those PR with HDB flats must dispose of their HDB flat within 6 months of purchase or private residential property.

The second point to refer to is July 2018 whereby the ABSD rates rose by 5 percentage points for all except Singaporeans and PRs buying their first residential property. For non-individual entities, ABSD raised 10 percentage points.

In 2013, after the cooling measures were put into force, it did not immediately impact the prices. Then, from an analysis of HDB data, it reflected a sharp decline of HDB resale prices which continued for nine consecutive quarters. For the first time, Singaporeans had to pay ABSD on a 2nd property and the ABSD rates increased with the next property onwards and LTV limits were tightened. Looking at the data for 2015, many estates reflected that the price remains below the prices of 2013 save for few mature estates which stood resilient against the measures.

2013 Resale Price Index of HDB Flats

Infographic: Rafa Estrada
Source: Housing & Development Board


In 2018, ABSD rates were raised from 7% to 12% for purchase of 2nd properties by Singaporeans and LTV limits were further tightened with buyers only able to borrow up to 75% of the house value. However, referring to an analysis of HDB data, this set of cooling measures had only a slight effect in comparison to 2013, the HDB resale prices only dropped for four consecutive quarters, 4 years after 2018, majority estates show a price increase.

2018 Resale Price Index of HDB Flats


Infographic: Rafa Estrada
Source: Housing & Development Board


In conclusion, history doesn't repeat itself, it is clearly reflected on the impact after 2013 and 2018 whereby 2018 had considerably less effects in comparison to 2013. This brings us to this current cooling measure and what it has in store. Melvyn Xu, Director and Co-Founder of Property Giant is of the opinion that as long as there is still a long waiting period, the demand for HDB resale will remain strong. He added that HDB resale housing for first-time home buyers will face no issues, the Enhanced CPF Housing Grant (EHG) + Family Grant + Proximity Housing Grant (PHG) equals up to $160,000 based on income ceiling. The grants can be used to offset the additional 5% down-payment. In his view, HDB pricing will remain or rise gradually instead for the next quarter.





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