Here’s a quick update of the cooling measures implemented at 11.53 pm, 29 Sept 2022, W.E.F 30 Sept 2022.
Property Cooling Measures
30th Sep 2022
Promote Sustainable Conditions in the Property Market
Prudent Borrowing - FI
MSR (Residential) - 3.50% -> 4.00%
TDSR (Residential) - 3.50% -> 4.00%
TDSR (Non-Residential - 4.50% -> 5.00%
Prudent Borrowing - HDB
HLE MSR - 2.60% -> 3.00%
LTV cut - 85% LTV -> 80% LTV
HDB Loans will continue to be priced at 0.10% + OA rate
Moderate Demand in HDB Resale Market
Private Property Owners / Ex-Private Property Owners -> To wait 15 months before issuing an Option to Purchase for a Resale Flat
Seniors > 55yrs, downgrading to 4-Room flat or smaller, will not be affected.
Here’s my view in summary:
Borrowing / Loan
Due to the rising interest rates, and the likelihood that they will still increase in the future, the government wants to ensure people who choose to buy today stay prudent with their loan. Using a higher <FloorRatio> to approve their loan means if unforeseen circumstances take place, these buyers can still manage their loans.
We might see fewer $1M transactions for HDB. Generally, it’s not easy to own a HDB above $1M unless it is a downgrading situation where a seller sells their private property at (i.e.) $2m and downgrades to a big-sized HDB at $1M.
The temporary 15-month wait out period will stop these purchases until more physical supply surfaces in the market.
Developers / Resale Sellers might continue to lower their profit and margin.
There are some fixed costs that cannot be changed.
1. Accountability to their bank loan;
2. Increase in cost of materials;
3. Increase in labour cost;
4. Government taxation;
5. And many more.
Therefore, the only variable they can control is their profit.
Knowing that borrowing will be challenging for potential buyers, if you are a seller and need to move sales, what will you do?
Who will benefit from these cooling measures?
1. Buyers who have readied their financial information. This means they have got all the deposits ready (cash), understand how much CPF can be used for the purchase, and have spoken to a banker with clarity to get a clarity on much they can borrow.
2. People with multiple properties. They will most likely take advantage of the situation to sell any properties they have invested in and start looking for deals and sellers who are willing to make less money.
Will there be a fire sale?
Most likely not, because property owners may consider holding longer due to strong rental income to support the mortgage.
However, a property owner who owns a bigger quantum property for their own stay and chooses to maximise their borrowing might face some challenges. This group is usually the minority.
An initiative by #BSA.