Are you planning to buy or sell your property? If so, are you aware of the new property cooling measures in Singapore and how they will affect you?
Starting from 30th September 2022, a series of property cooling measures has been put in place by the Housing Development Board (HDB), Ministry of National Development (MND) and Monetary Authority of Singapore (MAS) to moderate the demand in the HDB resale market.
Here’s a summary of the updated property cooling measures:
1. 15-month Wait Out Period For Private Property Owners
Before 30th September 2022, private property owners who sell their private properties within 6 months of purchasing a HDB flat can buy an HDB resale flat on the open market. However, this will no longer be allowed.
Private residential property owners and those who had sold a private property before applying for a resale flat must now wait 15 months before they can buy a non-subsidised HDB resale flat.
This means that if you had exercised your Option to Purchase (OTP) before 30th September 2022, you’ll have to wait 15 months to buy a resale flat.
So, what if you’ve already sold your private property?
Well, HDB will be flexible enough to waive the 15-month wait-out period for those who have proof that they’ve obtained an OTP to buy a HDB resale flat.
All you have to do is to file an appeal to HDB with the following documents:
- Proof of Option Fee* payment
*An option fee of $1 to $1,000 in cash is paid to the seller to ‘reserve’ the property*
- Proof of Option Exercise Fee** payment
**Within the option period of 21 days, the buyer can exercise his OTP, which means he has legally agreed to buy the flat, and this fee should not exceed $5,000 when the Option Fee is included. Once the option has been exercised, the buyer has legally agreed to purchase the property and cannot back out of the property transaction**
However, if the OTP has NOT been obtained before 30th September, but the resale buyer has committed to selling or has sold their existing private property, HDB will assess the situation on a case-by-case basis.
In the event where the resale flat buyers are no longer eligible for the purchasedue to the 15-month wait-out period, the OTP will become invalid and void. Sellers will then be required to refund the Option Fee paid to the buyer.
Note: This measure WILL NOT BE APPLIED to seniors who are 55 and above who are moving from their private property to a four-room or smaller resale flat.
2. Lower HDB Loan-to-Value Limit
For HDB housing loans, the Loan-to-Value (LTV) will be reduced from 85% to 80%. This is a further reduction in the LTV limit for HDB loans, which was previously lowered from 90% to 85% in December 2021, and now to 80%.
This lower LTV limit will apply to both new flat and resale applications.
For first-time HDB buyers and lower-income flat buyers, you may be eligible for more housing grants when buying a subsidised flat directly from HDB; or up to $160,000 when buying a resale flat; or you can use your CPF savings to pay for the flat purchase, reducing the loan amount you may need to take.
This also means that if you don’t use your CPF, you’ll have to pay more cash in advance.
Lastly, for loans offered by private financial institutions (e.g., banks), this revised LTV limit will not be applicable and their LTV limit will remain at 75%.
3. Changes to Interest Rate Floor
Bank Loans Interest Rate Floor
If you’re looking to take up property loans from banks and other private financial institutions, do note that the MAS will increase the medium-term interest rate floor used to calculate the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) by 0.5%.
This revised medium-term rate floor is meant to ensure that homeowners borrow wisely for their purchases in the higher interest rate environment, and that they choose a loan size appropriate for them to manage, particularly when interest rates increase.
This higher interest rate floor is applied to all property loans, not just home loans.
HDB Interest Rate Floor
For those who’re looking to apply for a HDB loan, the statutory board has implemented a 3% interest rate floor for calculating eligible loan amounts.
In other words, the interest rate used to calculate the eligible loan amount for HDB’s concessionary housing loan will be greater than 3% p.a., or 0.1% above the current CPF Ordinary Account (OA) interest rate of 2.5%.
In summary, the 3% interest rate floor will be applied to flat buyers who applied for a HDB housing loan at the concessionary interest rate AND whereby the commercial interest rate is charged. For example, flat buyers who are taking a second HDB housing loan and buying a HDB flat before selling their existing one. After the flat buyer has sold the existing flat and used the CPF refund and 50% of the cash proceeds received to reduce the second HDB housing loan amount, the interest rate will be converted to the concessionary rate.
Additionally, this only applies to new applications for a HDB Loan Eligibility (HLE) Letter.
The actual HDB concessionary interest rate, at 2.6% p.a., will remain unchanged from 1st October to 31st December 2022.
All in all, we hope that you’ve gained a clearer understanding of the revised new property cooling measures in Singapore that took effect on 30th September 2022, and how it may affect you when buying or selling your property. For further details on the revised measures, please visit the Ministry of Development website or here.
Alternatively, if you’re interested in learning more about the new property cooling measures, you can also contact us here.
[Source: Ministry of Development and Seedly]
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