Impact of Recent Revisions to Total Debt Servicing Ratio on Ability of First-time Buyers to Own Homes

Mr Seah Kian Peng asked the Minister for National Development whether the recent revisions on the total debt servicing ratio will impair the ability of first-time owners to own their homes.

The adjustments to the total debt servicing ratio (TDSR) threshold was part of a package of cooling measures introduced in December last year to promote a sustainable property market, housing affordability and financial prudence.

Specifically, the tightened TDSR threshold aims to protect home buyers and ensure that they can continue to service their mortgages over the medium term. This is because interest rates are likely to rise in 2022 and beyond and a combination of rising property prices and higher interest rates will risk a significant increase in mortgage costs for buyers. The tighter TDSR threshold will encourage financial prudence among home buyers.

The vast majority of first-time home buyers are unlikely to be affected by the tightening of the TDSR threshold from 60% to 55%. HDB home buyers are already subject to the stricter mortgage service ratio (MSR) of 30%, which was not changed in the latest round of cooling measures. The tightened TDSR will encourage prospective first-time owners of private properties to right-size their intended purchases and mortgages, without overstretching themselves, so that they can better service their debt obligations.

To complement the cooling measures which are targeted at moderating demand, we will increase the supply of private and public housing. We will ramp up BTO supply to launch up to 23,000 flats per year in 2022 and 2023, an increase of 35% from the 17,000 flats in 2021. For private housing, we will have around 2,800 units on the Confirmed List for the Government Land Sale (GLS) programme in the first half of 2022, with another 3,700 units on the Reserve List. This is a 40% increase for the Confirmed List from the previous GLS programme in the second half of 2021. We will step up supply even further if demand remains strong.

Taken together, the suite of demand and supply measures will help to support a stable and sustainable property market in the medium-term, and ensure that housing remains affordable and accessible to all Singaporeans, especially for those planning to purchase their first home.