Could Continued Heat in the HDB Resale Market Spark a Property Bubble?

The reduction of the Loan-to-Value (LTV) limit for HDB housing loans to 75% is expected to affect around 10% of buyers. However, most of these buyers are willing to pay high prices for flats near the city centre or in prime locations. Left unchecked, such market trends could cause the resale market to decouple from economic fundamentals, potentially leading to a property bubble.

Minister for National Development Desmond Lee held a press conference on Tuesday (20 August) to explain the rationale behind the government's latest round of cooling measures for the HDB resale market.

He noted that while the growth of HDB resale prices moderated last year, authorities observed that price growth has accelerated this year. Key drivers include rising household incomes and climbing private property prices, which in turn have boosted demand for resale flats. Additionally, fewer flats reached their Minimum Occupation Period (MOP) this year, tightening resale supply.

Mr Lee said that as the resale market continues to heat up—with buyers rushing to purchase and sellers holding out for higher prices—prolonged conditions could spark a property bubble. "Buyers taking up large loans to purchase high-priced flats will be the hardest hit if market conditions turn."

Currently, about 10% of buyers take up an HDB housing loan with an LTV ratio between 76% and 80%. These buyers are generally willing to pay top dollar for larger flats, such as executive flats, 4-room, and 5-room units, in central or prime locations. The median Cash-Over-Valuation (COV) they paid across various flat types was also $20,000 to $60,000 higher than that of buyers with an LTV ratio below 75%.

Mr Lee pointed out that against a backdrop of global economic uncertainty, lowering the LTV limit by five percentage points aims to encourage buyers to exercise greater prudence in their housing loans.

Enhanced CPF Housing Grant Raised: Around 13,000 First-Timer Families Expected to Benefit Annually

At the same time, the government has enhanced the Enhanced CPF Housing Grant (EHG), providing lower- to middle-income first-time homebuyers with up to $40,000 in additional grants.

Mr Lee explained that this grant increase is more than enough to offset the impact of the lower LTV limit on these buyers, supporting them in purchasing their first home. With the revised grant structure in effect, around 13,000 first-timer families are expected to benefit each year.

Under the revised EHG framework, eligible first-timer families will receive an additional grant of between $5,000 and $40,000, raising the maximum grant amount from $80,000 to $120,000. For eligible first-timer singles, the additional grant ranges from $2,500 to $20,000, raising the grant cap from $40,000 to $60,000.