Reduced LTV limit for HDB housing loans could dampen sales of expensive resale flats, experts say

SINGAPORE: The recent change in the Loan-to-Value (LTV) limit for HDB housing loans is set to impact the resale market, particularly for high-end flats. On Aug 20, the Ministry of National Development (MND) reduced the LTV limit from 80% to 75%. 

According to Singapore Business Review, property consultancy OrangeTee stated that the new limit means buyers will “need to allocate more cash to purchase a resale flat.”

OrangeTee added that, as a result, potential buyers are expected to be more cautious and reconsider how much they are willing to spend on a resale flat.

PropNex echoed these concerns, suggesting that the new LTV limit could dampen sales at the higher end of the resale market. They noted that buyers would need to come up with additional funds to make up for the shortfall in the loan amount they could secure.

PropNex also expects a temporary drop in million-dollar transactions as buyers reassess their options and finances.

However, OrangeTee offered a different perspective, suggesting that the higher end of the market, especially million-dollar transactions, may see little impact from the changes.

They noted, “Many buyers may not be taking HDB loans. Some may have deep pockets and may not be affected by the drop in LTV.” 

However, PropNex pointed out that the full impact of the recent cooling measures will only become apparent in the coming months. The government also mentioned that the reduced LTV limit would only affect around 10% of buyers who rely on HDB loans.

While some experts believe the cooling measures could cause a temporary dip in demand for resale flats, Huttons remains optimistic the market will stay strong in 2024.

Huttons noted that the limited availability of 5-room and larger flats in Singapore’s Central Region leaves buyers with little choice but to pay over a million dollars for these units.

They estimate HDB resale transactions to fall between 26,000 and 28,000, with prices expected to rise by up to 8% in 2024. They also expect the number of million-dollar flats to exceed 1,000, making up 3% to 4% of the total market volume. /TISG

Read also: Desmond Lee: HDB loan limits in new property cooling measures are to encourage prudent borrowing and dampen higher-end market demand

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