Singapore moves to rein in million-dollar public housing flats ahead of elections

The measures, which include a lower loan-to-value limit on financing from the public housing authority, are aimed at promoting a “stable and sustainable” market, according to a joint statement late on Monday from the Ministry of National Development and the Housing & Development Board.

The affordability of public housing has become a contentious issue for the ruling People’s Action Party, which has governed the city state since independence in 1965 and has seen its popularity decline. Almost 80 per cent of households live in public housing units, which are built and sold at subsidised prices by the state.

Under the new measures, loan-to-value limits, which determine the maximum amount an individual can borrow from the HDB, will be lowered to 75 per cent of a property’s price or value from 80 per cent. The limit on loans from commercial banks will remain at 75 per cent. The changes kicked in from Tuesday and will apply to transactions in the secondary market as well as new units known as Build-To-Order flats starting in October.

“Given the sustained, strong, broad-based demand for HDB resale flats, these measures will help cool the market and encourage prudent borrowing,” according to the statement.

The government will also increase housing grants by as much as S$40,000 to improve affordability for lower-to-middle income first-time homebuyers.

The government likely acted as it saw outlier prices in the second-hand public housing market, said Alan Cheong, executive director of research for Singapore at Savills Plc. But the impact is limited especially since buyers for expensive flats are likely high-income types who are less sensitive to loan limits, he said. The market will “continue to set records”, he said.

The curbs marks