Property Cooling Measures 30 Sep : Who are the winners and losers? | The Wacky Duo

Planning to downgrade from Private to resale HDB?

Like clockwork, the
govt introduced a new set of cooling measures at the stroke of midnight to give absolutely no chance for anyone to react.
The most significant measure on the list would impact private downgraders the
most.

Here is a quick summary of the cooling measures and the impact

1) Higher medium-term interest rate floor for bank and HDB housing loan
eligibility

For property loans granted by private financial institutions, MAS will
raise by 0.5%-point the medium-term interest rate floor used to compute
the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio
(MSR).

This applies to loans for the purchase of properties where the Option to
Purchase (OTP) is granted on or after 30 Sep 2022. If there is no OTP,
then for Sale and Purchase Agreements dated on or after 30 September

Example

Loan : SGD 1,000,000, 30 years

Previous: 3.5% 

Monthly payment: $4490

Now:4%

Monthly payment: $ 4774

Winners and Losers

Winners:  No winners here, this increase in interest calculation will mean you
qualify for a lower loan amount.

Losers: Home buyers who do not have
sufficient cash and require maximum loan based on their income. They would
have to reduce their budget for the next property

2) Lower Loan to Value Limit for HDB Housing Loans (85%-80%)

This will only impact those taking HDB loans. You would have to increase cash
by 5% if considering HDB loans. There is no change for Bank Loans (75%). With
bank interest rates rising, more people are leaning towards HDB loans as
interest for HDB is pegged 1% higher than CPF OA (2.6%) vs bank rate that is
now moving closer to 3%

Winners and Losers

Winners:  No winners here

Losers: First-time buyers would feel
the pinch, which means an additional cash outlay. The lower-income family will
also be affected. 

3) 15 Month Wait for Private Property Owners (below 55 years old) buying no
subsidies HDB resale Flat. For above 55, they are allowed to purchase 4
rooms or smaller resale without the wait-out period.

Before this measure, it is not surprising to see private property owners
downgrading or rightsizing to HDB resale properties. There are no restrictions
to this. This introduction will impact future downgrading decisions as it
would mean that they would have to rent before making the next purchase.

Winners and Losers

Winners: Landlords may benefit as
rentals may increase 

Losers: Downgraders will face
additional rental costs should they wish to purchase a resale HDB. Enbloc
downgraders above 55, looking for bigger places, would also need to fulfil the
wait-out period. Owners of 5 Rooms, 3 Gen and Executive may find their buyer
pool reduced.

This will also impact future enbloc decisions. Additionally, it may help to
boost the resale private market instead.