90% of buyers with LTV ratios above 75% purchased 4-room or larger HDB flats, reveals Desmond Lee
National Development Minister Desmond Lee revealed that nearly 90% of buyers with LTV ratios above 75% purchased 4-room or larger HDB flats, paying S$20,000 to S$60,000 more. He assured that lower-income families would not be impacted by the LTV cut, as the Enhanced CPF Housing Grant would offset the reduction.
The recent increase in total housing grants for first-timer families purchasing resale Housing and Development Board (HDB) flats has sparked questions regarding its potential impact on resale prices.
People's Action Party (PAP) MP for West Coast GRC, Ms Foo Mee Har, filed a parliamentary question asking whether the enhanced grants, now amounting to up to S$230,000, could lead to sellers demanding higher prices, knowing buyers have increased financial support.
Additionally, Workers' Party MP for Sengkang, Mr Chua Kheng Wee Louis, filed parliamentary questions seeking information on loan-to-value (LTV) ratios for first-time homebuyers who have taken HDB loans since 30 September 2022.
He requested details on the number and percentage of loans with LTV ratios at 80%, between 75% and 80%, and below 75%, broken down by flat type. Mr Chua also inquired about the breakdown of the HDB Resale Price Index (RPI) by flat type over the past five years, including the reasons for differences in price growth across flat types.
In his written reply, Minister for National Development Mr Desmond Lee addressed some of these concerns.
He explained that while the Resale Price Index had increased by over 4% in the first half of 2024, MND could not provide detailed RPI figures by flat type due to small transaction volumes and fluctuations in certain categories. Instead, he referred to publicly available data on median resale prices by town and flat type, updated quarterly on the HDB InfoWEB.
Regarding loan-to-value ratios, Mr Lee noted that most homebuyers borrow conservatively, with nearly 90% having LTV ratios below 75%. He added that buyers with LTV ratios above 75% tended to purchase larger flats, such as 4-room and 5-room flats, and paid between S$20,000 and S$60,000 more than those with lower LTV ratios for the same flat types.
Mr Lee highlighted that the recent reduction of the LTV limit from 80% to 75%, effective from August 2024, is intended to promote more prudent borrowing and stabilise the resale market, particularly at the higher end.
Mr Yip Hon Weng, another PAP MP, raised concerns about the potential negative impact of the lower LTV limit on low-income households transitioning from rental housing to home ownership.
In response, Mr Lee assured that lower-income first-timer families would not be disadvantaged, as the increase in the Enhanced CPF Housing Grant (EHG) will more than offset the reduction in loan quantum.
He also acknowledged that a small number of low-income families, including second-timers, may be affected by the lower LTV limit but are not eligible for EHG.
He encouraged them to approach HDB for assistance through support schemes such as the Step-Up CPF Housing Grant and the Fresh Start Housing Scheme.
Mr Lee assured that the EHG is not likely to significantly affect seller pricing, as sellers are unaware of the grant amounts buyers are entitled to.
The EHG and the reduced LTV limit are designed to ensure affordable homeownership while moderating price increases, said Mr Lee, who noted that the government will continue monitoring the housing market and taking necessary action to maintain affordability and stability.
