New LTV limit could slow sales of top-end HDB resale flats

The government reduced the LVT limit for HDB housing to 75%.

The pace of price growth for HDB resale flats, particularly larger units and those in mature estates and prime locations, may experience a temporary slowdown due to cooling measures implemented by the government.

On 20 August, the Ministry of National Development (MND) reduced the Loan-to-Value (LTV) limit for HDB housing loans by five percentage points to 75%.

With a reduced LTV ratio, OrangeTee said buyers will "need to allocate more cash to purchase a resale flat."

"Consequently, prospective buyers will likely exercise greater caution and reassess their willingness to pay more for a resale flat," OrangeTee added.

PropNex shared a similar sentiment, saying the reduced LTV limit for HDB loans may "crimp the sales of pricey resale flats at the top end of the market." 

"Buyers would have to fork out more funds to cover the difference in the amount of loan they could secure," PropNex said.

PropNex also anticipates a slight pullback in million-dollar resale transactions in the near term as prospective buyers weigh their options and review their sums.

OrangeTee had a different perspective, saying the upper end of the market spectrum, particularly million-dollar transactions, may not experience a significant impact.

"many buyers may not be taking HDB loans. Some may have deep pockets and may not affected by the drop in LTV," OrangeTee said,

PropNex, however, said the full effects of the cooling measures recently introduced will only be visible in the upcoming months.

The government has also mentioned that the LTV reduction would impact only 10% of flat buyers who use HDB loans.

Whilst some experts believe that demand for HDB resale flats may be temporarily affected by the cooling measures, Huttons expects it to remain strong in 2024.

"There is little supply of 5-room and larger flats in the Central Region of Singapore, and buyers may have no choice but to pay a million dollars and more," Huttons said.

Huttons estimates HDB resale volume to be between 26,000 and 28,000 and prices to grow by up to 8% in 2024.

Huttons also expects the number of million-dollar flats to exceed 1,000, or 3% to 4% of the total market volume.