The LTV ratio for bank loans has been 75% while the LTV ratio for HDB loans before 20 Aug 2024 is 80%. This change will achieve parity in loans granted for the purchase of a HDB flat.
In the near term, the resale demand may slow temporarily as buyers take stock of the new measures. But over time, demand will return and prices will continue to rise.
In 2025, an estimated 7,000 flats will reach their MOP. This is even lower than 2024’s estimated 12,000 flats fulfilling the MOP. HDB resale prices may continue to rise in 2025.
The changes may not achieve the intended cooling effect on the HDB resale market.
There is a possibility that there may be more gains in the prices of 2-room and 3-room resale flats. For the 4-room and larger flats, most buyers do not see an increase in grants and utilise a bank loan for their purchase. There is no difference to them. But because of the lower supply of newly MOP 4-room and 5-room flats, the prices are likely to continue to increase.
There is no impact on the million-dollar flats market and it is unlikely to cool the market.
Impact on BTO market
There is unlikely to be any impact on the BTO market. As the purchase is on a deferred payment scheme, any shortfall is mitigated by the time buyers collect their keys to the BTO flat.
Impact on HDB resale market in general
The change is necessary because HDB is increasing the Enhanced CPF Housing Grants by up to $40,000. This effectively gives buyers more cash to buy a HDB resale flat.
To counter against a possible heating up of the HDB resale market, the LTV ratio for HDB loans is reduced by 5% so that buyers have to use part or all of the increase in grants for the downpayment.
The table below shows potential scenarios and how the increase in grants and lower LTV ratio will affect the market.
Table 1: HDB loan
| 2-room | 3-room | 4-room | 5-room | Exec | |
|---|---|---|---|---|---|
| Avg Resale Price (2024 YTD) | $336,000 | $432,000 | $616,000 | $718,000 | $865,000 |
| Estimated income (30% MSR, HDB 2.6% interest, 25 years loan tenure) | $3,900 | $4,900 | $7,000 | $8,200 | $9,900 |
| Increase in downpayment (5%) | $16,800 | $21,600 | $30,800 | $35,900 | $43,250 |
| Increase in grant | $25,000 | $20,000 | $5,000 | $0 | $0 |
| Shortfall (if any) | +$8,200 | -$1,600 | -$25,800 | -$35,900 | -$43,250 |
Source: HDB, Huttons Data Analytics
For buyers using a bank loan, the change in LTV ratio has no impact on them. These buyers can use the increase in grants to help with the purchase of a resale flat. The increase in grants will benefit the lower income groups more.
Because of the disparity between HDB and bank loan tenure, more buyers may switch to a bank loan to take advantage of the higher grants.
If the US FED rate cut results in lower interest rates for bank loans, some buyers may switch to a bank loan since they can use the increase in grants for the purchase of their flat.
There is a possibility that there may be more gains in the prices of 2-room and 3-room resale flats. There is no impact on the larger flats. Due to the reduced supply of newly MOP flats, the 4-room and larger flats may continue to see price gains.
Table 2: Bank loan
| 2-room | 3-room | 4-room | 5-room | Exec | |
|---|---|---|---|---|---|
| Avg Resale Price (2024 YTD) | $336,000 | $432,000 | $616,000 | $718,000 | $865,000 |
| Estimated income (30% MSR, Bank 2.9% interest, 25 years loan tenure) | $3,900 | $4,900 | $7,000 | $8,200 | $9,900 |
| Increase in downpayment (5%) | $0 | $0 | $0 | $0 | $0 |
| Increase in grant | $25,000 | $20,000 | $5,000 | $0 | $0 |
Source: HDB, Huttons Data Analytics
Impact on HDB million-dollar flats
There is no impact on the million-dollar flats market. Most of these buyers use a bank loan and do not qualify for any grant. They also do not borrow up to 75% of the purchase price or valuation price. Some of them don’t even use a loan to buy.
Table 3: Million-dollar flats
| $1 million | $1.1 million | $1.2 million | $1.3 million | $1.4 million | $1.5 million | $1.6 million | |
|---|---|---|---|---|---|---|---|
| Avg Price (2024 YTD) | $1 million | $1.1 million | $1.2 million | $1.3 million | $1.4 million | $1.5 million | $1.6 million |
| Estimated income (30% MSR, Bank 2.9% interest, 25 years loan tenure) | $11,300 | $12,400 | $13,500 | $14,600 | $15,700 | $16,900 | $18,000 |
| Increase in downpayment (5%) | $50,000 | $55,000 | $60,000 | $65,000 | $70,000 | $75,000 | $80,000 |
Source: HDB, Huttons Data Analytics
Impact on private residential market
There is likely no impact on the 4-room and larger flats market and these owners tend to make up the bulk of HDB upgraders.
Hence the private market is not likely to see any impact.
Impact on EC market
There is unlikely to be any impact on the new EC market as HDB upgraders do not need to sell their flat when they purchase a new EC.
Similar to the private market, there is unlikely to be any impact on the resale EC market.
