Impact of Housing Grant Increase on HDB Resale Flat Prices, and Trend for Resale Flat Prices By Flat Type

Mr Chua Kheng Wee Louis asked the Minister for National Development (a) what is the decomposition of the HDB Resale Price Index by flat type in the year-to-date and the last five years; (b) what is the average increase in HDB resale flat prices by flat type in the year-to-date and in each year of the last five years; and (c) what are the reasons for the differences in price increases across the flat types.

My response will also cover matters raised in the question by Mr Yip Hon Weng scheduled for a subsequent Sitting.

On 20 August 2024, the Ministry of National Development (MND) implemented two measures: (a) the Loan-To-Value (LTV) limit for Housing and Development Board (HDB) housing loans was lowered from 80% to 75%; and (b) the Enhanced CPF Housing Grant (EHG) was increased to help lower- to middle-income first-timers purchase their homes. Let me first provide an update on the state of the residential property market that led to these measures before elaborating on the impact of each measure on home buyers.

State of the residential property market. MND has been closely monitoring both the private residential property (PRP) and HDB resale markets. Following a ramp-up in the supply of Build-To-Order flats and private housing in the Government Land Sales programme, as well as three earlier rounds of cooling measures in December 2021, September 2022 and April 2023, both the PRP and HDB resale markets showed signs of moderation in 2023. In the first half of 2024, the PRP market continued to remain stable. However, the resale price index (RPI) for the HDB resale market rose by more than 4%. We are unable to provide a breakdown of RPI by flat type, due to the small transaction volume and fluctuations over time for some flat types. Broadly speaking, prices have increased across all flat types, in sync with the wider market. As a proxy, the Member can refer to the HDB InfoWEB for the quarterly data on the median resale price by town and flat type.

Impact of the lower LTV limit. Mr Louis Chua asked about the LTV profile of those taking up HDB loans and the flat types they purchased. Most flat buyers who take HDB loans are already prudent in their flat purchases, with almost nine in 10 already having LTV ratios of below 75%. They will, therefore, not be affected by the LTV limit reduction. For those with higher LTV ratios of between 75% and 80%, we have observed that these buyers disproportionately bought larger flat types and paid higher prices. In 2023, amongst resale flat buyers who took HDB loans (a) about nine in 10 with LTV ratios above 75% bought 4-room and larger flats, compared to about seven in 10 for those with LTV ratios of 75% and below; and (b) depending on the flat type, the median resale buyer with an LTV ratio above 75% paid about $20,000 to $60,000 more than the median resale buyer with LTV ratio of 75% and below who bought the same flat type.

The lowering of LTV limit will, therefore, encourage more prudent borrowing and dampen demand at the higher end of the market, which should, in turn, have a knock-on effect of stabilising the rest of the resale market. History tells us that the property market moves in cycles, and those who buy at higher prices with larger loans are also hardest hit when the market cools. We will monitor the market after these latest moves and will take action if necessary.

Impact of the increased EHG. EHG is means-tested, progressive and targeted. The latest round of enhancements is tiered such that lower-income first-timer households will receive more support. This reduces the risk of fueling the wider resale market. Furthermore, sellers may not be able to size up the grant amount that flat buyers receive, as HDB does not share the personal information of flat buyers with flat sellers, including the grant amounts that buyers are entitled to.

Impact on low-income families. Mr Yip Hon Weng raised concerns about the impact of the lower LTV limit on low-income households, such as those transitioning from rental housing to home ownership. Lower-income first-timer families need not be worried, as the increase in EHG will more than offset the reduction in loan quantum from the lowering of LTV limit for these families. In other words, when the two measures are stacked together, their total housing budget has actually increased, hence making home ownership more attainable than before. There may be a small number of low-income families, including second-timers, who are affected by the lower LTV limit but are not eligible for EHG. I encourage them to approach HDB proactively to discuss their housing options. HDB has dedicated support schemes for low-income second-timer families, such as the Step-Up CPF Housing Grant or Fresh Start Housing Scheme.

These latest changes reflect the Government’s commitment to provide a diverse range of affordable housing options for Singaporeans. We will continue to watch both the PRP and HDB resale markets closely and will not hesitate to act decisively to ensure prices remain in line with economic fundamentals.