I refer to the article “Govt announces new property cooling measures” (Todayonline, Jan 11).
The link to the joint press release by the three Ministries – “Additional Measures to Ensure a Stable and Sustainable Property Market” is HERE.
HDB less than 60 years left need cooling?
What is the rationale for tightening “the terms for granting HDB loans and the use of CPF funds for the purchase of HDB flats with remaining leases of less than 60 years (details of this measure are in Annex IV)“?
Played out by asset emhancement?
As more HDB flats age from the time that they were built, those who have subscribed to the “asset enhancement” policy which arguably lead to huge increases in HDB prices, may find it harder now to monetise their flats to retire.
Lower-income hardest hit?
This may especially affect lower-income Singaporeans who purchased 2 and 3-room flats and may lack the financial ability and savvy to change to a second new Build-to-order (BTO) flat or resale flat with a new or longer lease balance, in order to avoid the problems that may arise from this new cooling measure.
Enhanced HDB upgrading threat?
In the past, voters may have been afraid to vote for the opposition because of the upgrading issue.
Now, with this new cooling measure, voters may arguably be even more afraid to vote for the opposition, because if their flats are not selected for the Selective En-bloc Re-development Scheme (SERS), it may become much harder to sell them as they age beyond 34 years.
With the Minimum Occupation Period (MOP) of five years, very few people may want to buy flats with a lease balance of 65 years (more than 34 years old).
Less CPF can be used?
To illustrate this problem, for example, if a 30 year-old couple buys a flat with a lease balance of 59 years, their prorated Valuation Limit (for the use of CPF), will be only 58 instead of 100 per cent of the valuation at the time of purchase.
The 58 per cent is calculated (34 divided by 59 years) “based on the ratio of the remaining lease when the youngest buyer who can use CPF turns 55 years old, to the lease at point of purchase”
This means that they will no longer be able to use their CPF to pay once the use of CPF hits 58 per cent of the valuation. From this point onwards, only cash can be used to pay for the mortgage.
Can’t use CPF?
For flats with a lease balance of less than 30 years, use of CPF is not allowed at all.
HDB loan restrictions?
There are also restrictions on getting a HDB loan – “Lease balance of 30 – 59 years – “Allowed, if remaining lease can cover the buyer* to the age of at least 80. Loan tenure will be the shortest of: 30 years; 65 years minus average age of buyers; and balance lease at the point of purchase minus 20 years.”
Lease balance of 20 – 29 years – “Allowed, if remaining lease can cover the buyer* up to the age of at least 80.
Loan tenure will be the shortest of: 30 years; 65 minus average age of buyers; and balance lease at the point of purchase minus 20 years.”
Lease balance of less than 20 years – “No HDB housing loan.”
Why need to cool over 40 years’ old flats?
S0, in view of the serious economic and arguably political implications of this cooling measure, this policy change should be debated and reviewed, as it may make no sense to cool the property market for this segment of very old HDB flats, which as I understand it may form a very small proportion of the total number of HDB flats now.
How many such transactions?
By the way, how many ‘over 40 years old’ flats’ transactions are there in a year?
Still higher MSR for HDB loans?
If we really want to cool the public housing market, we should also reduce the Mortgage Servicing Ratio (MSR) for HDB loans from 35 to 30 per cent, to be the same as private property and HDB bank loans.
Because HDB flats not so affordable?
Unless, HDB prices are so unaffordable in terms of the price to income ratio, that we have to use a higher MSR of 35 per cent?
Leong Sze Hian
