What happens when income ceilings for public HDB flats are lifted

How bad will the effect be?

According to Nomura, another key reason why they continue to be cautious towards the Singapore equity market is the government’s hawkish stance towards the property market, especially with the January 12th property measures. 

While volumes declined in February, they recovered sharply in March as buyers, presumably mostly first-time buyers, were attracted by discounts given by developers and perhaps motivated by fear that if they do not buy now the window may disappear again. 

Here's more from Nomura:

As the cumulative effects of the seven rounds of property measures take effect and with an economy that is likely to remain subdued over the next couple of years, we believe it will be a matter of time before prices start to pull back, especially given the significant supply of properties due for completion over the next three years and the availability of additional new launches in both the private and public sectors.

Also the government has signalled its intention to delink the primary HDB market from the resale market in its effort to “tame the resale market”. Indeed the government has announced that it intends to lower BTO prices of new HDB flats in non-mature assets by pegging prices to about 4.4 times annual income or a reduction in BTO prices by around 30%.

This will likely have a knock-on effect on the resale market and eventually the private mass residential segment of the market. Another potential policy tweak which could  have repercussions on the property market is the possible lifting of the income ceiling for public HDB flats.

If this happens, some demand could be diverted away from the resale market. The Minister of National Development also recently hinted at the subsidies for EC should be lower than for primary HDB flats. This tweaking could have an impact on the property market as well.