Housing Supply Singapore

How Does Housing Supply Affect Property Prices

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The real estate landscape in Singapore is on the cusp of exciting changes, presenting great opportunities for potential homebuyers and savvy investors. 

To meet the strong demand for private housing,  the Government will be increasing the supply on the Confirmed List. In total, about 100,000 public and private housing units are set to be completed between 2023 and 2025, providing significant support to address housing needs in the coming years.

  • The number of units on the Confirmed List for the 2H2023 GLS Programme will be raised to 5,160, up from the initial 4,090 units planned for the first half of the year, bringing the total supply on the Confirmed List in 2023 to 9,250 units, the highest level seen since 2013.
  • Compared to the previous year, the supply for 2023 is almost 50% higher, and it is approximately 2.5 times higher than that of 2021. Furthermore, the Government has made sites available on the Reserve List that could yield another 3,430 units if developers assess there is demand for them.

In this article, we will dive into the details of the housing supply situation in Singapore and specifically on upcoming Build-To-Order (BTO) projects and new condominium launches. We will examine factors like location, pricing and the impact of increased housing supply, offering a comprehensive analysis of market dynamics that will empower you in your decision-making processes.

Build-To-Order (BTO)

Build-To-Order (BTO) projects are a vital part to many young Singaporeans. Only in Singapore, it is often used as an informal way to tie down the other partner in a foreseeable marriage.

HDB BTO

Apart from the draw of securing your partner together with a prospective house, BTOs are also known as subsidized housing which aim is to provide affordable and quality homes for aspiring homeowners. 

In 2023, there will be a total release of 23,000 BTO flats, 9,923 in the first half and 13,000 in the second half of 2023. Let’s take a further look at the BTOs landscape for this year.

i. Past BTO Launches

In the May 2023 BTO launch, the flats in Bedok are competitively priced, with 4-room flats starting from $448,000 and 5-room flats from $588,000. This pricing strategy aims to attract potential buyers and cater to a diverse range of budgets.

Table 1: Flat Prices in May 2023 BTO Exercise
May BTO launch

Image credit: HDB

Based on the last 2 launches (Feb & May 23) below table shows the starting price estimation based on flat type and town. Do note that these prices are based on historical data.

Table 2: HDB BTO Launch Prices

HDB BTO Launch Price

ii. Upcoming BTO Launches

To address the growing demand for housing, HDB has significantly increased the supply of BTO flats. The number of flats has been raised by 35% from 17,100 units in 2021 to 23,200 units in 2022, and is expected to reach 23,000 units in 2023, closely monitoring housing demand, ensuring a consistent and sufficient supply of flats. 

In Aug 2023, the Housing and Development Board (HDB) plans to release approximately 6,700 Build-To-Order (BTO) flats in various towns and estates such as Choa Chu Kang and Tengah in August 2023, followed by another offering of around 6,300 flats in towns/estates including Bedok and Bishan in November 2023. 

Table 3: August 2023 BTO Launch Projects (source from HDB portal)

BTO Aug 23 Launch

 

New Launch Condos 

Apart from BTOs, the private property market is also set to witness new launches that cater to discerning homebuyers and seasoned investors. These projects often come up in highly desirable locations across Singapore. The pricing of these new launches is influenced by factors like location, unique features, and market conditions. 

For instance, The Reserve Residences is a luxurious condominium development coming up in Bukit Timah, offering opulent living, top-notch amenities, and unparalleled convenience, featuring direct access to Beauty World MRT Station and Bus Interchange.

i. Current Launches

Lake Garden Residences

Launched at slightly below $2,000 per square foot (psf), Wing Tai has expectations of rapid price escalation as units are sold progressively. For instance, one-bedroom-plus-study units spanning 527 sq ft are priced from $1.03 million ($1,954 per square foot), while three-bedroom units starting from 926 sq ft begin at $1.8 million ($1,944 per square foot).

Pinetree Hill

During the launch weekend, UOL-SingLand successfully sold 29% of Pinetree Hill, with an average selling price of $2,460 per square foot (psf). The developer initially released 400 units for sale at the same average price, resulting in a sales rate of 37.5% based on the number of units released.

Grand Dunman

During the launch weekend (July 15-16), Grand Dunman witnessed a strong demand with 550 out of 1,008 units sold, indicating a take-up rate of 54.6%. The average selling price achieved for the 99-year leasehold condo located on Dunman Road in prime District 15 was approximately $2,500 per square foot (psf).

 

ii. Upcoming launches

New Launch 2023

 

Impact of Increased Housing Supply on Buyers and Sellers: 

The rise in housing supply has a significant impact on how buying and selling play out in the market. More housing options give buyers greater flexibility and bargaining power, while sellers may face stiffer competition as they try to attract potential buyers. The increased housing supply will help to moderate price increases and stabilize the market in the long run.

In this scenario, sellers must position their properties strategically, emphasize unique selling points, and offer competitive pricing to stand out from the crowd. On the other hand, buyers need to carefully evaluate available options, considering factors like location, amenities, and potential for future appreciation, to make smart purchasing decisions. 

We also handpicked 2 articles for you:

Conclusion

Given the abundance of newly completed units and an increasing supply of both public and private housing, we are anticipating a further stabilization of property prices.

 

Guide to Housing Interest Rates

Understanding Home Loan Interest Rates in Singapore

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In the realm of Singapore’s real estate market, the interplay between interest rates and property dynamics is a crucial factor for both prospective homebuyers and savvy property investors.

A comprehensive understanding of the interest rate climate, including the determinants of these rates, the distinctions between fixed and floating interest rates, the influence on housing prices, historical trends, current rates from multiple banks, and the future outlook, is paramount for making informed decisions in this ever-evolving landscape.

What are the main factors influencing the interest rates?

On a macro level, interest rates are intricately tied to factors such as global economic conditions, central bank policies, inflation expectations, and market liquidity.

Fret not if you are not an economist! By keeping track of the interest rate determinations made by the U.S. Federal Reserve, you can effectively monitor the rates since its decisions have an impact on the broader global interest rate patterns, including Singapore’s. From the graph below it is evident that the interest rates in Singapore (SORA in this case) is highly correlated to the US FED rates.

Interest Rates Cycle
Table 1: Data from FED rates and SORA for period 2021-23. You can follow the US Fed Rates and get historical data from sites like Trading Economics.

Having gained an understanding of the macro factors influencing interest rates, continue reading to discover the implications it has on your home purchase price, mortgage loan and other important considerations to keep in mind.

 

Are there any impact of interest rates on housing prices?

Economics 101: When interest rates are low, borrowing costs decrease, thereby increasing affordability and stimulating demand for properties. This heightened demand often leads to upward pressure on housing prices. Conversely, rising interest can dampen affordability, reducing demand and potentially causing a downward shift in property prices.

Interestingly, in Singapore’s real estate market, rising interest rates often have a bullish effect on home prices, contrary to other real estate markets. This suggests that as a potential homebuyer, there may be an opportunity to benefit from this exceptional trend. The resilience of the Singapore economy and property market is evident in the fact that even when interest increase, it fails to dampen the interest in real estate, with home prices typically rising alongside higher rates.

The graph below clearly illustrates the upward trend of the Residential Property Price Index from 2021 to 2023, coinciding with the previously mentioned rise in interest rates (table 1).

Property Price Index Table 2: Residential Property Price Index by Region, credits to Globalpropertyguide

One of the consequences of high interest rates is that it can discourage first-time buyers and individuals looking to downsize, leading them to opt for the rental market instead. When interest rates are elevated, mortgage loans become more expensive, prompting landlords to make adjustments to accommodate the changes in rates.

Rental Price Index Table 3: Residential Rent Index Annual Change %, credits to Globalpropertyguide

 

What are the differences between Fixed and Floating interest rates?

For many individuals, choosing between fixed and floating interest rates can be a tough decision to make. In my view, neither option inherently outweighs the other, as the decision ultimately relies on your personal risk tolerance and financial stability.

i. Fixed Interest Rate:
With a fixed interest rate, the rate remains unchanged throughout a specific period, typically ranging from two to five years. This offers stability and predictability in monthly mortgage payments, shielding you from market fluctuations.

ii. Floating Interest Rate:
A floating interest rate, also known as a variable interest rate, can fluctuate based on market conditions. Floating rate housing loan is usually pegged to the Singapore Overnight Rate Average (SORA) or a Fixed Deposit Based Rate (FDR). Floating rates offer the potential for lower rates during periods of market decline but come with the risk of increased rates when the market rises.

Consider the following when choosing between these 2 options

  • Is it crucial for you to have the assurance of consistent monthly payments? If so, a fixed-rate loan could be a more appropriate choice as it eliminates any unexpected surprises.
  • What is your risk tolerance & financial stability to maintain the monthly housing loan payment?
  • What is the market outlook? Consider the possibility of interest decreasing within the next 1 to 2 years, borrowers may prefer opting for a shorter lock-in period for their housing loan.

Also read up on the latest round of property cooling measure where there is an increase of 0.5% to the interest rate floor across HDB and Bank loans.

What are the current interest rates from multiple banks?

Let us provide you with a glimpse of the prevailing interest rates from various banks in Singapore:

Cheapest Fixed Interest Rates (as of 13th July 2023)

  • CIMB                  – 2 Years Fixed – 3.5%
  • Bank of China   – 3 Years Fixed – 3.4%
  • Bank of China   – 3 Years Fixed – 3.5%

Cheapest Floating Interest Rates (as of 13th July 2023):

  • Hong Leong Finance – PPR- 2.15% (Lock-in 2 years), net 4.0%
  • Bank of China             – 3M SORA + 0.50% (Lock-in 2 years), net 4.19%
  • Bank of China             – 3M SORA + 0.55% (Lock-in 2 years), net 4.24%

You can find out the latest mortgage rates from portals like Propertyguru.

 

What can I anticipate regarding the future outlook of interest rates?

Looking forward, the trajectory of interest rates hinges upon various factors, including global economic conditions, inflation trends, and central bank policies. Interest rates in Singapore have seen significant hikes in recent times and buyers need to be mentally prepared for any potential rise.

Earlier we spoke about The U.S. Federal Reserve’s interest rate decisions having an impact on Singapore’s. In recent times, the U.S. Federal Reserve has been gradually increasing interest to manage economic growth and maintain stability. However, the pace of rate hikes has been slowing down since Feb 2023.

From the Fed Reserve table below we can observe that during Sep-Nov 2022, the interest rate hike peaked at +0.75% compared to recent period Feb-Jun 2023 where the interest rate hike averaged to only +0.25%. 


Image credit: tradingeconomics

The outlook for interest rates suggests that we may be approaching a potential plateau or inflection point, indicating a potential stabilization or slower pace of increase in the near future.

Buyers need to be cognizant of this shift in interest rates and understand that the current level may become the new norm for a while. It is crucial to evaluate the affordability of mortgage rates based on this expectation. Consulting with financial advisors and mortgage specialists will provide buyers with insights into the potential impact of interest rate increases on their financial planning.

Staying well-informed, closely monitoring market trends, and seeking guidance from industry professionals are crucial when navigating Singapore’s dynamic real estate market.

Read more about the property market outlook for H2 2023 – Is now the right time to buy or sell

Conclusion

To navigate Singapore’s real estate market like an expert, you need to stay well-informed about all macro and micro factors such as market trends, property cooling measures, interest rates, new housing supply, etc. It is definitely not an easy task to be able to monitor all these and it is always advisable to seek guidance from industry professionals.

When deciding between fixed and floating rates, consider your personal risk tolerance and financial stability. Being prepared and having a thorough understanding of the situation will enable you to make informed decisions aligned with your own preferences.

Home Loan Guide Mortgage Singapore

A Comprehensive Guide to Housing Loans in Singapore

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For many individuals and families in Singapore, owning a home is a significant milestone. As property prices continue to rise, securing a housing loan becomes essential for many prospective homeowners. In this article, we will provide you with a comprehensive guide to housing loans in Singapore, covering key aspects such as eligibility criteria, loan types, interest rates and other important considerations.

(For HDB buyers) HDB Housing Loan or Bank Loan? 

Whether you choose an HDB housing loan or a bank loan depends on your financial capabilities and risk profile:

i. HDB Housing Loan: HDB offers a fixed-rate loan, currently at 2.6% which is pegged at 0.10% above the prevailing CPF Ordinary Account (OA) interest rate. It is suitable for individuals seeking lower risk and stable monthly payments. However, it comes with certain limitations and eligibility criteria.

ii. Bank Loan: Bank loans offer more options and flexibility, including fixed and floating rates. If you are comfortable with some financial risks, have the discipline to review and refinance periodically, and meet the eligibility criteria, a bank loan may be a viable option.

Evaluate your financial capacity, risk tolerance, and the pros and cons of each option to make an informed decision. Now, lets begin with the steps to getting your housing loan!

Step 1. Calculating Your Maximum Loan Amount:

Before you begin the loan application process, it’s essential to determine your maximum loan amount. Banks in Singapore use two main ratios to assess your borrowing capacity:

i. Total Debt Servicing Ratio (TDSR): 

The TDSR is a calculation that determines the percentage of your gross monthly income that can be allocated towards servicing all your debts, including the housing loan. The TDSR threshold for property loans is set at a maximum of 55% of the borrower’s monthly income– meaning your total monthly debt obligations, including the new housing loan, should not exceed 55% of your income.

ii. Mortgage Servicing Ratio (MSR):

The MSR calculates the percentage of your gross monthly income that can be used to service your housing loan installments. The MSR threshold is set at 30% of your income. In other words, a maximum of 30% of your gross monthly income can be used for your monthly housing loan repayment. 

*Do note that the MSR applies only to housing loans for a HDB flat, or an executive condominium (EC) where the minimum occupation period (MOP) of the EC has not expired.

To ensure that you’re not taking up too much debt, a good rule of thumb is to keep this ratio within 25% to 30% of your gross monthly income instead

By understanding these ratios and evaluating your financial situation, you can estimate the maximum loan amount you can borrow from the bank.

Step 2. Obtain Your In-Principle Approval (IPA) or HDB Flat Eligibility (HFE) Letter:

After assessing your financial capacity, the next step is to obtain an In-Principle Approval (IPA) from the bank or the HDB Flat Eligibility (HFE) letter from HDB.

  • The IPA is a written documentation issued by the bank that states and documents the maximum amount of housing loan you can take to purchase your property.
  • An HFE letter is an in-principle indication that you qualify for a concessionary housing loan from HDB, based on the information submitted at the point of application. Your HFE will also indicate the maximum loan amount you can take, monthly instalments, and repayment period.

You will need to provide relevant documents such as your income statements, identification documents, employment details, and property information.

  • To obtain the IPA: Approach your mortgage banker and submit the relevant documents. The bank will evaluate your financial profile and provide you with the IPA, which outlines the loan amount you are eligible for.
  • To obtain the HFE letter: Applications are made online using HDB’s e-service and logging in using your SingPass. Required supporting documents are also to be uploaded using the online service. Your submission will be processed within 14 days of receiving the full set of documents, and you can check your HFE letter application status by logging into the HDB website and clicking My Flat -> Application Status -> HFE.

Bluenest partners with financial institutions and we can assist if you require an IPA. Just call us at 3138-2554 or contact us here.

Step 3. House Hunting!

Based on the in-principle approval from your bank or HFE Letter from HDB, you will know how much you are eligible to borrow. Nevertheless, you may wish to think carefully about your financial situation before making an offer.

Landed House Viewing: 8 Things To Look Out For | Sevens Group

Step 4. Applying for the Housing Loan/ Submit Resale Application:

Once you have obtained the IPA/ HFE Letter, you can proceed with paying the Option to Purchase (OTP):

  • Upon receiving the IPA, homebuyers have up to 30 days to pay the Option to Purchase (OTP) before the IPA expires. The OTP is a legal document that grants you the right to purchase the property within a specified period. Thereafter, the OTP is valid for 21 days for home buyers to make the relevant down payment and obtain approval for the preferred bank loan to take effect.
  • The HFE letter is valid for 6 months from the date of issue. If your HFE letter is expiring within 30 calendar days, you may apply for a fresh one if you are planning to buy a flat. If you are getting a bank loan, do request for Letter of Offer to confirm the housing loan. You can proceed to exercise the OTP, submit resale flat application online and lastly, attend the completion appointment.

Another key consideration when choosing your housing loan options is the interest Rates

Selecting the best housing loan interest rates is a critical decision when financing your dream home. With numerous banks and loan packages available, it’s important to consider various factors to make an informed choice. Below are key considerations when choosing the best housing loan interest rates for your needs.

1. Should I get a Fixed Interest Rate or Floating Interest Rate?
One of the primary decisions to make is whether to opt for a fixed interest rate or a floating interest rate:

i. Fixed Interest Rate: With a fixed interest rate, the rate remains unchanged throughout a specific period, typically ranging from two to five years. This offers stability and predictability in monthly mortgage payments, shielding you from market fluctuations.

ii. Floating Interest Rate: A floating interest rate, also known as a variable interest rate, can fluctuate based on market conditions. Floating rate housing loan is usually pegged to the Singapore Overnight Rate Average (SORA) or a Fixed Deposit Based Rate (FDR). Floating rates offer the potential for lower interest rates during periods of market decline but come with the risk of increased rates when the market rises.

Consider the following when choosing between these 2 options

  • Is it crucial for you to have the assurance of consistent monthly payments? If so, a fixed-rate loan could be a more appropriate choice as it eliminates any unexpected surprises.
  • What is your risk tolerance & financial stability to maintain the monthly housing loan payment?
  • What is the market outlook? Consider the possibility of interest rates decreasing within the next 1 to 2 years, borrowers may prefer opting for a shorter lock-in period for their housing loan.

You can find out the latest mortgage rates from portals like Propertyguru

2. Lock-In Period:

The lock-in period refers to a specific timeframe during which you are obligated to maintain the loan with the same bank or face penalties for refinancing or early repayment. When assessing loan packages, pay attention to the lock-in period:

i. Longer Lock-In Period: Loans with longer lock-in periods, typically three to five years, may offer more favorable interest rates or other benefits. However, they limit your flexibility to switch lenders or refinance during that period.

ii. Shorter Lock-In Period: Loans with shorter lock-in periods, such as one to two years, provide greater flexibility but may come with slightly higher interest rates or fewer benefits.

Evaluate your long-term plans, such as potential property sales or refinancing, and choose a lock-in period that aligns with your goals.

3. Redemption Waiver and Conversion Options:

Certain loan packages offer additional features that can be advantageous:

i. Redemption Waiver: Some banks may waive or reduce the redemption penalty if you sell your property during the lock-in period. This flexibility can be valuable if you foresee the possibility of selling your property within the lock-in period.

ii. Conversion Options: Look for loan packages that provide free conversion options within or at the end of the lock-in period. This allows you to switch between fixed and floating rates or adjust the loan tenure without incurring additional costs.

Consider these features if you value flexibility and foresee the need to sell or adjust your loan terms during the lock-in period.

Choosing the best home loan interest rates requires careful consideration of fixed versus floating rates, the lock-in period, redemption waiver, and conversion options. Additionally, deciding between an HDB housing loan and a bank loan depends on your financial capabilities and risk appetite. Take the time to assess your needs, seek professional advice, and compare loan packages from various banks to secure the best home loan interest rates that align with your long-term financial goals!

 

**New cooling measure with effect from 30th Sep 2022:

  • There will be an increase of 0.5% point in the interest rate floor used to calculate the Total Debt Servicing Ratio (TDSR) and the mortgage servicing ratio (MSR).
  • An interest rate floor of 3% has been implemented for determining the eligible loan amount for loans granted by HDB.

Click here to read more about this cooling measure and how it will affect your next purchase.

Property Cooling Measure Sep 2022

New Property Cooling Measures (Sep 2022)- Lowered HDB LTV, +0.5% Interest Rate Floor & 15-months Wait-out Period

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30 Sept 2022–
Measures to Promote Sustainable Conditions in the Property Market by Ensuring Prudent Borrowing and Moderating Demand

1. Increase in TDSR and MSR calculation by 0.5 percentage point

  • There will be an increase of 0.5% point in the interest rate floor used to calculate the Total Debt Servicing Ratio (TDSR) and the mortgage servicing ratio (MSR).
  • An interest rate floor of 3% has been implemented for determining the eligible loan amount for loans granted by HDB.
    +0.5% for TDSR, MSR

 

2. HDB LTV Limit Reduced to 80%

  • Loan-to-Value (LTV) limit for HDB housing loans will reduce from 85% to 80%.
  • The lower LTV limit will apply to new flat applications for sales exercises launched and complete resale applications which are received by HDB on or after 30 September 2022
  • The revised LTV limit does not apply to loans granted by private financial institutions, for which the LTV limit remains at 75%

Why these cooling measures?

Due to a substantial increase in market interest rates, there is a growing likelihood of further increases in the future. And as such these measures aim to regulate the amount of money that can be borrowed for property purchases, ensuring that borrowers do not overextend themselves financially. By setting stricter limits on loan quantum, the government intends to protect home buyers from potential difficulties that may arise as a result of uncertain economic conditions and the anticipated rise in interest rates.

It is essential for property buyers and owners to carefully evaluate their financial circumstances and take into account the potential impact of rising interest rates on their borrowing costs. Engaging with financial institutions and seeking professional advice will be crucial to navigating these changes effectively.

If you are unsure of the entire resale process, do read: HDB resale payment timeline: How to plan your cashflow 

3. 15-Month Wait-out Period for Private Home Owners Buying HDB Flats

  • Private residential property owners (PPOs) and former PPOs will need to wait for a duration of 15 months before they can purchase a non-subsidized HDB resale flat.
  • The wait-out period will not apply to seniors aged 55 and above who are moving from their private property to a 4-room or smaller resale flat.
  • HDB may grant exceptions on a case-by-case basis for those facing genuine housing needs or extenuating circumstances, regardless of their age.
  • This new measure will take effect from 30 September 2022. It is a temporary measure which will be reviewed in future depending on overall market conditions and housing demand.

Why this cooling measure?

Very simple- the government wants to maintain affordable housing options, particularly for first-time home buyers. This measure aims to moderate demand and prevent private property owners, who generally have greater financial means, from outbidding other potential buyers.

Before 30 Sept 2022– PPOs and ex-PPOs are currently allowed to buy a non-subsidised HDB resale flat on the open market, with the requirement that they dispose of their private properties within six months of the HDB flat purchase.

 

Conclusion:

The recent round of cooling measures, aims to address signs of overheating in both the HDB resale and private home markets. By reviewing and adapting measures in response to market dynamics, the government aims to maintain a stable and sustainable property market that aligns with economic fundamentals.

Possible overflow of demand into the rental market

The measures are likely to make it challenging for potential home buyers to obtain loans or afford properties. As a result, individuals who are unable to meet the stricter criteria or afford the higher costs of purchasing a property may shift their focus towards the rental market. This increase in demand for rental properties can lead to a surge in rental prices and a decrease in rental vacancy rates. Landlords and property investors may benefit from this shift in demand, capitalizing on the growing number of tenants seeking rental accommodations.

Expecting the market to cool down as a result of these measures

The increase in interest rate floors for Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) calculations, along with the reduction in the Housing Development Board (HDB) loan-to-value (LTV) limit, will limit the amount of money borrowers can access for property purchases.

These measures aim to prevent over-borrowing and speculative activities, ensuring a more sustainable and stable property market. As a result, potential buyers may be deterred from entering the market or may need more time to accumulate sufficient funds for a purchase. This decrease in demand for properties can lead to a stabilization or even a decrease in property prices. Overall, the cooling measures aim to create a balanced and sustainable property market in the long run.

Singapore Property Market Outlook

Navigating the Singapore Property Market: Is Now the Right Time to Buy or Sell?

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The Singapore property market is in a state of flux, influenced by factors such as interest rates, increased housing supply, and property cooling measures. In this article, we will delve deeper into these factors to help buyers and sellers understand the market dynamics and make informed decisions.

 

1. Interest Rates: A New Normal

Interest rates in Singapore have seen significant hikes in recent times and buyers need to be mentally prepared for any potential rise in interest rates. It is important to know that The U.S. Federal Reserve’s interest rate decisions have a significant impact on global interest rate trends, including Singapore’s.

In recent times, the U.S. Federal Reserve has been gradually increasing interest rates to manage economic growth and maintain stability. However, the pace of rate hikes has been slowing down since Feb 2023. From the Fed Reserve table below we can observe that during Sep-Nov 2022, the interest rate hike peaked at +0.75% compared to recent period Feb-Jun 2023 where the interest rate hike averaged to only +0.25%. 


Image credit: tradingeconomics

The outlook for interest rates suggests that we may be approaching a potential plateau or inflection point, indicating a potential stabilization or slower pace of increase in the near future.

Buyers need to be cognizant of this shift in interest rates and understand that the current level may become the new norm for a while. It is crucial to evaluate the affordability of mortgage rates based on this expectation. Consulting with financial advisors and mortgage specialists will provide buyers with insights into the potential impact of interest rate increases on their financial planning.

 

2. Increased Housing Supply: More Choices, Heightened Competition

To meet the strong demand for private housing, the government of Singapore has decided to increase the supply of new private housing units. In the second half of 2023, there will be 5,160 units available, which is a significant increase compared to the previous year. In total, there will be about 9,250 units available in 2023, the highest level since 2013. Additionally, developers have the option to initiate the development of an extra 3,430 units if they see market demand.

New Launch 2023

This increase in supply is part of a larger plan to address housing needs. In total, around 63,500 private housing units (including Executive Condominiums) are expected to be available. Between 2023 and 2025, approximately 40,400 units will be completed, more than double the number completed in the previous years. This is part of a larger plan to complete about 100,000 public and private housing units between 2023 and 2025, ensuring there are enough homes for the population.

The abundance of housing options provides buyers with a broader range of choices. This increased supply empowers buyers to take their time, conduct thorough research, and make informed decisions. Buyers can explore various property types, locations, and price ranges, enabling them to find properties that align with their preferences and budget.

For sellers, the higher supply means heightened competition. To attract buyers in this dynamic market, sellers should set realistic prices that align with current market conditions and property valuations. Collaborating with experienced real estate agents who possess in-depth market knowledge and pricing strategies is crucial for sellers to achieve successful transactions.

 

3. Property Cooling Measures: Maintaining Market Stability

On April 27th, 2023, the Singaporean government announced of the raise in the Additional Buyer’s Stamp Duty (ABSD) rates for certain types of property transactions. That was the third round of cooling measures since December 2021. The aim of this move is to promote a sustainable property market and prioritize housing for owner-occupation, while managing investment demand. 

Revised ABSD Apr 2023Image credit: MND Singapore. Read more about the increase in ABSD here

Coupled with the 15-month wait-out period for individuals downgrading from private properties, industry experts have expressed agreement that these cooling measures have been somewhat effective in curbing the rapid rise in property prices and values. 

These cooling measures have been calibrated to moderate housing demand while prioritizing owner-occupation. Property seekers who are looking to buy for their own stay or HDB buyers will not be affected by these measures and will be provided with options for new flats. The government will continue to adjust its policies as necessary to ensure they remain relevant and promote a sustainable property market.

 

Conclusion

Navigating the Singapore property market requires a comprehensive understanding of the prevailing conditions and factors at play. Buyers should be mentally prepared for potential interest rate increases, factoring them into long-term affordability calculations. The increased housing supply offers buyers more choices but also intensifies competition among sellers, necessitating realistic pricing strategies.

Property cooling measures remain an integral part of the Singapore property market. Buyers and sellers should stay informed about the latest measures, such as ABSD, LTV limits, SSD, and TDSR, and consider their impact on transactions and market dynamics.

By staying informed, conducting thorough research, and seeking professional advice, buyers and sellers can make confident decisions in the ever-evolving Singapore property market. Remember that real estate transactions are long-term investments, and careful consideration!

ABSD Apr 2023

Increased ABSD Rates to Cool Property Market [Apr 2023]

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On April 27th, 2023, the Singaporean government announced that it would be raising the Additional Buyer’s Stamp Duty (ABSD) rates for certain types of property transactions. This is the third round of cooling measures since December 2021. The aim of this move is to promote a sustainable property market and prioritize housing for owner-occupation, while managing investment demand.

The revised rates will take effect from 27 April 2023.

What is ABSD?

The ABSD rates are a tax levied on certain property transactions in addition to the existing Buyer’s Stamp Duty (BSD). These rates apply to Singaporean citizens, Singapore Permanent Residents, foreigners, and entities or trusts that are purchasing residential property.

Here are the specific ABSD rate increases:

Revised ABSD Apr 2023

Image credit: MND Singapore

  • The ABSD rate for Singaporean citizens (SCs) purchasing their 2nd residential property will be raised from 17% to 20%.
  • The ABSD rate for SCs purchasing their 3rd and subsequent residential property, and for Singapore Permanent Residents (SPRs) purchasing their 2nd residential property will be raised from 25% to 30%.
  • The ABSD rate for SPRs purchasing their 3rd and subsequent residential property will be raised from 30% to 35%.
  • The ABSD rate for foreigners purchasing any residential property will be raised from 30% to 60%.
  • The ABSD rate for entities or trusts purchasing any residential property (except for housing developers) will be raised from 35% to 65%.

Based on 2022 data, the above ABSD rate increases will affect about 10% of residential property transactions. If you are looking to avoid ABSD and maximise your loan for the 2nd property- look no further and read our article on Deferred Payment Schemes.

No changes to first residential property

Good thing is the ABSD rates for SCs and SPRs purchasing their first residential property will remain at 0% and 5%, respectively. These measures will not affect those buying an HDB flat or Executive Condominium unit from housing developers with an upfront remission, as long as any of the joint acquirers/purchasers is a Singaporean citizen.

ABSD refund for married couples With 1 SC spouse

Married couples with at least one SC spouse who jointly purchase a second residential property can continue to apply for a refund of ABSD, subject to certain conditions. These conditions include selling their first residential property within six months after the date of purchase of the second residential property if it’s completed, or the issue date of the Temporary Occupation Permit (TOP) or Certificate of Statutory Completion (CSC) of the second residential property, whichever is earlier, if the second property is not completed at the time of purchase.

On the flip side- Government will increase supply with up to 100,000 new flats 

It’s important to note that these measures will also help to stabilize private property prices and curb potential foreign investments. The government’s plan to increase housing supply on the Confirmed List to 4,100 units for the 1H2023 Government Land Sales (GLS) program from 3,500 units for 2H2022, and the launch of up to 23,000 flats in 2023, are part of this strategy. The government is also prepared to launch up to 100,000 new flats in total between 2021 to 2025, to cater to growing housing demand.

In conclusion

These measures have been calibrated to moderate housing demand while prioritizing owner-occupation and providing sufficient housing supply. Property seekers who are looking to buy for their own stay or HDB buyers will not be affected by these measures and will be provided with options for new flats. The government will continue to adjust its policies as necessary to ensure they remain relevant and promote a sustainable property market.

Buy new launch condo before selling HDB

Buying New Launch Without Selling HDB? Here’s An Option to Consider.

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For HDB upgraders, new launch condos seem to have the best balance of affordability and potential capital appreciation.

But if you’re hoping to buy the new launch before selling your flat, you may run into cashflow issues given the higher cash outlay and Additional Buyer Stamp Duty (ABSD).

Is there a way to avoid ABSD entirely? And how do you maximise your loan for the 2nd property?

Enter Deferred Payment Schemes.

 

What is the Deferred Payment Scheme (DPS)?

Normal Payment Scheme vs Deferred Payment Scheme

The Deferred Payment Scheme allows you to make a downpayment, and then pay the balance much later on (sometimes up to two years). It’s available only with new launches that have already TOP’ed.

In other words: book now, pay later.

This is attractive to HDB upgraders who want to secure a new launch before they sell their existing property. It gives them much more time to sell, with the assurance that they already have their next home prepared.

Read also: From HDB to Condo – Can You Get a Dual Key Condo At a Discount?

On the developer’s end, the scheme benefits them because it allows them to sell balance units more easily. 

Pros and Cons of the Deferred Payment Scheme

 

The Benefits of an Enhanced Deferred Payment Scheme

  1. Don’t have to pay 17% ABSD upfront, as long as the buyer of your HDB (or existing property) exercises the option before you exercise the option for the new launch condo.
  2. If you’re financially savvy, you can invest and earn returns on the funds you would have otherwise needed to pay in a standard Progressive Payment Scheme.
  3. You have more time to sell your existing home, receive the sale proceeds, and move into your new place.
  4. Once you’ve sold your flat, you can take a larger loan since you’ll no longer need to service the mortgage for your HDB. Otherwise, your LTV ratio for the second property will be capped at 45%.
  5. Depending on the terms of the purchase agreement, you may get a fixed monthly return for the new launch. That means you can collect income to offset the downpayment for the condo.

The Cons of This Approach

  1. Since you’re essentially buying time, you’ll pay higher prices. There’s usually a 10% markup from the original pricing.
  2. The MAS considers the Deferred Payment Scheme a benefit, so banks will deduct this “benefit” from the purchase price when calculating the loan they offer you. That means your home loan may be slightly smaller than the 75% LTV ratio you would’ve gotten without the deferred payments.
  3. If 2021 and 2022 were any indication, central banks are raising their interest rates – and home loan interest rates are following suit. Two years later when you apply for the loan, you may find very different rates.
  4. And along the same lines as #4, your financial circumstances could also change in that time. You’ll need an iron rice bowl for the Deferred Payment Scheme.
  5. Very few developers offer a Deferred Payment Scheme – and even fewer will defer the balance payment for two years. It also tends to be for the “leftover” units that haven’t been snapped up (and there may be good reason for this). This limits the available condos you can buy.

 

What to Look Out For with the Deferred Payment Scheme

Enhanced Deferred Payment Scheme - Peak @ Cairnhill II

If you still have your heart set on the DPS, look at newly-TOP’ed condos (including in the last few years) with unsold units as a starting point. Many of these developers won’t publish the DPS online, so you’ll have to talk to the agents to find out if they offer it.

You’ll then have to check out the terms of the agreement. Here are a few things to ask about:

1. How Extended Is the Option Period?

Most Deferred Payment Schemes only push the option period to 8 or 9 weeks.

But there’s a rare version of the DPS (sometimes known as the Enhanced Deferred Payment Scheme) that allows you to exercise the option up to two years later.

This is ideal for those looking to escape ABSD and maximise their home loans. 8 weeks doesn’t give you much of a runway to sell your existing property and move to the new place.

2. Who Pays the Property Taxes and Maintenance Fees?

Developers have been known to offer very favourable terms in this area. Look out for an Enhanced DPS that requires 0% property tax and no maintenance fees until you exercise the OTP.

Of course, you’ll need to balance this with the other terms and conditions. For example, some developers may require a larger down payment in return.

3. Is Subletting Allowed – Or Are There Fixed Monthly Returns?

And in the same train of thought, are you allowed to rent out the unit in the interim? Alternatively, does the developer provide fixed monthly returns on your downpayment? You may have to negotiate with the representative agent on this.

 

Condos with an Enhanced Deferred Payment Scheme in 2022

As of the time of writing, these were a few of the possible condos that offered an Enhanced Deferred Payment Scheme:

1. Lloyd SixtyFive

  • TOP: 2017
  • 30% down payment for OTP
  • Exercise and complete 24 months later
  • Pay no stamp duty, maintenance, or property taxes during this time.

2. The Line @ Tanjong Rhu

  • TOP: 2016
  • 20% down payment for OTP
  • Exercise and complete 24 months later
  • Master tenancy agreement issued under the buyer’s name so you can rent out the unit.
Can You Buy a Condo Before You Sell Your HDB? Here's How to Decide.

Can I Buy Condo Before Selling HDB? Here’s How to Decide.

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For many HDB upgraders, buying a resale condo before (or without) selling their HDB seems like the ideal scenario.

For one, the timeline is a lot easier to plan. You also won’t have to worry about possibly being homeless in between selling your flat and getting the new place.

Best case scenario, the rental income from your flat can help to service the mortgage for your condo.

But that’s assuming you can afford it.

If that’s still a question, we can help. Today, we’ll go through a checklist of three criteria you need to pass to even think about buying a condo before selling your HDB:

Sell HDB Buy Condo: 3 Criteria to Help You Decide What to Do

 

Criteria 1: You Have the Cash for the Upfront Payments.

There are three large cash payments you’ll need to note:

  1. 25% Down Payment
  2. Buyer Stamp Duty
  3. Additional Buyer Stamp Duty

A. Down Payment

Unlike the $5,000 deposit you paid for your HDB, you’ll need 25% of the purchase price in cash for a resale condo. (Source: MAS) You can’t even use CPF for any of it if you’re still paying off the home loan for your flat.

For a $1.3 million dollar condo, that’s a $325,000 down payment when you exercise the option.

(It’s a different story entirely if you no longer have a mortgage to service. You’ll only pay 5% in cash as a down payment then.)

B. Buyer’s Stamp Duty (BSD)

What many people forget when buying a condo is that the BSD payable is much larger. And for a resale condo, you’ll need to pay stamp duties in cash first before applying for reimbursement from CPF later on. Your lawyer will collect the stamp duty when you exercise the option.

Here’s the latest table of rates from IRAS:

Purchase Price or Market Value, whichever is greater BSD Rate (Residential)
First $180,000 1%
Next $180,000 2%
Next $640,000 3%
Remaining Amount 4%

That means on a resale condo that costs $1,300,000, you’ll pay:

(1% x $180,000) + (2% x $180,000) + (3% x $640,000) + (4% x $300,000) = $36,600 in Buyer Stamp Duty.

Read also: 7 Spacious 3-Bedroom Condos Near MRT Under $1.5K PSF

C. Additional Buyer’s Stamp Duty (ABSD)

ABSD is due at the same time as BSD. You can apply for an ABSD remission later on if you fulfil certain criteria, but you’ll pay it in cash first. (More on the remission in a bit.)

Assuming you and your spouse (or whomever you’re buying the resale condo with) are both Singaporean, you’ll pay 17% ABSD on either the purchase price or market value of the resale condo, whichever is higher. If one of you is a PR, you’ll pay 25% instead.

With the average resale condo, the downpayment + BSD + ABSD can easily be upwards of half a million dollars.

 

Criteria 2: You Can Afford to Forfeit the ABSD Remission.

Some HDB upgraders assume that the ABSD remission is easy enough to secure. All they need to do is sell their flats soon after buying the resale condo, right?

The truth is, you need to prepare yourself financially in case you don’t get the ABSD refund. There are a number of risks that may cause you to lose it.

If you don’t have a healthy buffer without it, buying the resale condo before selling the HDB might not work for you.

Example #1: Buyer Disqualifies Themselves

In hopes of buying another condo later on, some buyers choose to decouple for the purchase of the first resale condo. Unfortunately, this disqualifies them for the refund.

One of IRAS’s conditions is that the married couple must purchase the second property under both their names only. Sadly, there are agents who forget this clause and continue to promote decoupling.

(IRAS is very strict about not giving extensions, even if you got misleading information from your agents or lawyers.)

Example #2: You Can’t Sell Your Flat In Time.

Since you only have 6 months to sell your HDB after buying the resale condo, it makes your timeline rather tight. This is especially so if you intend to do extensive renovations and move into the condo before you sell the flat.

What if there are renovation delays?

And what if you’re holding out for the best possible offer for your flat?

In some cases, you might be forced to sell below market rate just to secure your ABSD refund. But there’s no guarantee you’ll find a buyer even if you lower your price.

Other Requirements

For married couples, other conditions for the ABSD refund include:

  1. The married couple must include at least one Singapore Citizen. 
  2. You apply for the refund within 6 months after selling the flat (starting from when the buyer exercises the OTP). No putting off the paperwork, folks.
  3. You haven’t purchased or acquired any other residential property since buying the resale condo. This is relevant particularly to those likely to inherit properties.
  4. The couple remains married and there is no change of ownership for the resale condo at the time of HDB flat sale. 

As with any investment, know the risks and budget accordingly.

 

Criteria 3: You Can Afford a Smaller Loan.

This only applies if you’re still paying off the home loan for your HDB. If you’re taking out a second loan, your loan-to-value (LTV) ratio is capped at 45% for a 30-year tenure.

If the loan tenure is over 30 years or the loan period extends past your 65th birthday, it’s capped at 25%.

Following our earlier example, you can borrow a maximum of $325,000 if you’re purchasing a $1,300,000 condo. That leaves you having to come up with almost a million dollars in cash or CPF.

Don’t forget the Total Debt Servicing Ratio (TDSR). If you have a car loan or any other form of debt, the new home loan + existing loans are all capped at 55% of your income.

(To recap: TDSR is calculated based on Total Monthly Debt Obligations as a percentage of Gross Monthly Income. If your Gross Monthly Income is $10,000, you’ll be capped at $5,500 for your total monthly debt payments.)

 

For Most, Selling HDB First and Buying Condo After is the Way to Go

For most HDB upgraders, the less risky and stressful route is to sell their HDB flat before they buy a condo unit. You can take advantage of HDB’s Extension of Stay facility (Read more: Extension of Stay HDB: Traps to Avoid to Protect Both Sides) to create a buffer in your timeline.

Even if you do have to arrange for some short-term accommodation, it will probably end up costing you less than trying to buy a condo unit before selling your HDB flat.

 

Still need property advice? Get in touch with us.

Calculating Cash Proceeds from the Sale of Your HDB Flat

Calculating Proceeds from HDB Sale (6 Oft-Missed Details)

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If you’re like most Singaporeans, you probably hold most of your net worth in the flat you live in. You’re counting on it to be a good store of value for when you upgrade to your dream home – or when you finally retire.

So it can come as a shock when you get to the HDB Resale Completion Appointment only to find out you won’t get any cash – and in fact have to top up out of your own pocket.

Just how do you calculate the proceeds from the sale of your HDB flat? How much cash will you get, and in which cases will you have to top up out of your own pocket?

That’s what we’ll cover today.

 

How You Usually Calculate Proceeds from the Sale of Your HDB

Before we get into the nitty-gritty details, we’ll go over a straightforward scenario for calculating your sale proceeds.

HDB’s calculator is a great guide for this. You begin with your Intended Selling Price, from which you’ll make deductions to end up with your final Balance Cash Proceeds.

The main deductions are as follows:

  1. Outstanding Housing Loan
  2. CPF Monies Used + Accrued Interest
  3. Outstanding HDB Payments (upgrading costs + upgrading levy + resale levy)

After making the requisite deductions, you’ll be left with your cash proceeds.

Here’s a sample from HDB’s Sale Proceeds Calculator:

Snapshot of HDB's Sale Proceeds Calculator

 

Overlooked Deductions when Calculating Your Sale & Cash Proceeds

So what eats into your sale proceeds? Here’s what people often miss in their calculations:

 

Overlooked Detail #1: CPF Refund Amounts Include Accrued Interest.

If you used CPF savings to pay for your flat, you’ll need to return this to the account along with the 2.6% annual interest that would have accumulated if you’d left the funds there. And if you’ve been using CPF to pay off your home loan every month, that amount gets much larger.

Let’s take a typical 25-year HDB mortgage of $250,000. After 18 years of paying off your loan, you’d have made a total repayment of ~$234,000 (including about $80,000 in interest payments on the loan). If you used your CPF to make these payments every month, you need to refund the CPF along with accrued interest.

Basically, you’re paying interest on your interest payments – a double whammy.

In this example, the total amount that you’d need to refund to CPF for mortgage payments is:

~S$234,000 (CPF you withdrew for payments)

+ ~S$69,000 (Accrued Interest at 2.6%)

Total: ~$303,000.

 

Overlooked Detail #2: You Need to Refund Housing Grants to Your CPF Account.

If you took any housing grants, you also need to return these funds along with accrued interest to your CPF account. You don’t have to return it to the government, but you won’t get the proceeds in cash either.

Say you bought your flat 18 years ago, taking $30,000 from CPF housing grants on top of the $250,000 home loan. The grant amount you’d refund to CPF would then include about $16,789 in accrued interest. That means another $46,789 out of your sale proceeds to refund to CPF.

 

Overlooked Detail #3: Fees, fees and more fees.

Next you’ll have to deduct all the costs associated with selling a home, including

  • legal fees
  • agent commissions
  • moving costs
  • renovation costs for your next place
  • maintenance fees
  • HDB admin fees
  • property tax

(We cover all the payments in our guide on HDB Resale Payment Timeline: How to Plan Your Cashflow.)

 

Overlooked Detail #4: There’s a Hidden Cost to Selling Your Flat Below Market Value. 

If you sell your flat below market value and the sale proceeds aren’t enough to fully refund your CPF, you may need to top up the difference in cash.

But as long as you sell your flat at or above market value, you won’t have to pay out of your own pocket even if the proceeds aren’t sufficient. That’s why even if you’re in a rush, it’s worth doing the prepwork and engaging a good agent for the sale.

Read also: How to Sell HDB – 5 Lessons We Learned From Record-Breaking Flat Sales

You can find out the amount you need to refund to your CPF account here.

 

Overlooked Detail #5: HDB May Require You to Pay a Levy When You Sell Your Flat.

HDB Resale Levy

The HDB resale levy is an additional amount you need to pay if you’re selling a subsidised flat and subsequently buying another subsidised flat. You won’t need to pay it if you buy the next flat without any housing grants.

HDB defines a subsidised house as:

  1. A flat bought from HDB
  2. A resale flat bought with CPF housing grant
  3. A DBSS or an EC bought from a developer
  4. Other forms of housing subsidies (e.g. you bought a flat through SERS)

When and how you’ll pay the resale levy depends on when you book your second subsidised flat. HDB will either deduct it directly from your sale proceeds or ask you to pay it in cash when you collect the key to your second flat. For more details, check out HDB’s website.

HDB Upgrading Levy

This is rare, but it’s applicable if you’re selling a flat that has gone through at least two rounds of subsidised MUP upgrading programs. To check if you need to pay the upgrading levy, you can submit a query with HDB here.

 

Overlooked Detail #6: 50% of Cash Proceeds Go to Your New HDB Loan. 

If you’re planning on buying a new flat with an HDB loan, you’ll have to use the greater amount of either $25,000 or 50% of the cash proceeds (including the $5,000 cash deposit) to reduce the loan amount.

E.g. If your cash proceeds come to $48,000, you’ll need to use $25,000 to offset the HDB loan amount.

 

Bottom Line? Cash Proceeds From Selling Your HDB Could Be Much Lower Than You Think

Putting all the numbers together, let’s use an example.

Say you and your spouse bought a $285,000 4-room BTO 18 years ago. You were both first-timer applicants and you got $30,000 from HDB housing grants. You paid $5,000 in cash, $30,000 in CPF, and took a $250,000 HDB loan. You also chose to make your monthly mortgage repayments using CPF.

You’ve decided to sell your flat and found a buyer who offered $575,000.

* P (Principal), I (Accrued Interest)

    • Sale Price: $575,000
    • Deductions: $496,511
      • Outstanding Housing Loan: $92,881
      • CPF Down Payment Refund: $47,618 = $30,000 (P) + $17,618 (I)
      • CPF Mortgage Payments Refund: $303,394 = $234,394 (P) + $69,000 (I)   
      • CPF Grant Refund: $47,618 = $30,000 (P) + $17,618 (I)
      • Cash Deposit Received from Buyer: $5,000
    • Cash Proceeds: ~$78,489

 

  • Fees: ~$14,180

 

      • Seller’s Agent Commission: 2% market standard, so $11,500 (or half that if you go with Bluenest)
      • Legal Fees: Around $1,800 for a private lawyer
      • HDB Admin Fees: $80
      • Moving Costs: Around $800

 

  • Cash after Sale: ~$64,309

 

And unless you’ve already got your next home in move-in ready condition, you’ll probably need to save some of this for costs like a downpayment, renovations, buyer stamp duty, and any applicable levies. If you’re buying your next place while selling your current flat at the same time, you’ll need to manage your finances accordingly.

 

Still need help figuring out your cashflow for the purchase of your next home? Get in touch with one of our agents.