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a distant view of singapore's urban landscape. (photo from xinhua news agency)

recently, the ministry of national development and the housing and development board of singapore announced that the loan-to-value ratio (ltv) limit for hdb housing loans will be lowered from 80% to 75%, and the extra housing grant (ehg) will be increased. this move is aimed at further helping first-time hdb buyers, especially low- and middle-income families, to purchase new and resale hdb flats, and to encourage non-urgent homebuyers to be more cautious in taking out loans to buy houses, so as to curb the rising prices of resale hdb flats and prevent the triggering of a real estate bubble.

the cooling measures previously introduced by the singapore government and the increase in the supply of pre-sale hdb flats have slowed the rise in resale hdb prices. singapore's resale hdb prices rose by 4.9% in 2023, a significant narrowing from the 10.4% increase in 2022. however, strong and widespread market demand, coupled with the small number of units that meet the minimum residence requirement this year, led to a resale hdb price increase of more than 4% in the first half of this year.

as of the end of july this year, singapore has sold about 543 resale hdb flats worth more than one million singapore dollars, exceeding the 470 units sold in the whole of last year. in july, 120 resale hdb flats were sold for more than one million singapore dollars, breaking the historical record. the continuous emergence of resale hdb flats worth more than one million singapore dollars has boosted the enthusiasm of residents to buy and sell hdb flats.

more than 80% of singapore's population lives in government-provided housing. in recent years, with the influx of foreign capital and the rapid increase in immigration, singapore's real estate transaction volume and prices have increased significantly. the rapid growth in transaction prices of government housing, apartments, private homes and other real estate has attracted the attention of the government, which has repeatedly introduced regulatory policies to prevent the real estate industry from overheating.

looking at the sales price of resale hdb flats, it rose 7.6% year-on-year in july this year. prices of all housing types are rising, including 6.6% for three-bedroom flats, 8.7% for four-bedroom flats, 7.6% for five-bedroom flats, and 6.3% for apartment flats. prices in mature communities and non-mature communities rose 7.8% and 7.5% respectively. the increase in housing prices has been significantly faster than the increase in residents' income.

in terms of resale hdb flats, 3,049 units were sold in july, up 39.6% from the previous month and 48.3% from the previous year. in terms of housing type, three-bedroom hdb flats accounted for 24.9%, four-bedroom hdb flats accounted for 46.0%, five-bedroom hdb flats accounted for 23.5%, and apartment-style hdb flats accounted for 5.6%. in terms of regional distribution, non-mature communities accounted for 59.5% of resale hdb flats in july, while mature communities accounted for 40.5%.

this reduction in the loan-to-value ratio is the third adjustment by the singapore government in four years. each previous reduction was 5 percentage points. in december 2021, it was reduced from 90% to 85% for the first time. in september 2022, it was reduced from 85% to 80%. from august 20 this year, it was further reduced to 75%. this means that from august 20, the amount of housing loans provided by the housing and development board will not exceed 75% of the value of the house. after the adjustment, the housing and development board will keep the upper limit of the loan ratio with financial institutions consistent. buyers must use more cash or cpf savings to pay a 25% down payment for hdb flats.

the new rules will have less impact on first-time hdb buyers, especially low-income families, as they can get higher housing subsidies. to help low- and middle-income families buy hdb flats, the upper limit of additional housing subsidies that eligible first-time hdb buyers can receive will be raised from the current s$80,000 to s$120,000. the upper limit of additional housing subsidies for singles who buy hdb flats for the first time will be raised from s$40,000 to s$60,000.

the lower the income of the hdb buyer, the more additional housing allowance he or she will receive, regardless of the type and location of the house. families with an average monthly income of less than s$1,500 and singles with an average monthly income of less than s$750 will receive the full additional housing allowance. within two months after the resale hdb transaction is completed, the additional housing allowance will be automatically deposited into the buyer's cpf account by the government.

after the increase in the additional housing allowance, it is estimated that 13,000 first-time hdb flat buyers will benefit each year. the additional housing allowance policy was launched in september 2019, and so far about 72,300 first-time hdb flat buyers have benefited, receiving a total of more than s$2 billion in government subsidies. among the beneficiaries, 40% purchased resale hdb flats, and 60% applied to the government housing and development board for pre-sale hdb flats, surplus hdb flats or open reservation hdb flats.

in addition, in order to reduce the pressure of residents taking care of their families in addition to their busy work, the singapore government will fine-tune the hdb policy from the middle of next year to allow singles or married people to enjoy priority when applying for pre-purchased hdb flats near their parents' homes so that they can take care of their parents. in addition, elderly or single people will be able to buy new homes. however, singles must be over 35 years old to apply for a pre-ordered hdb flat from the housing and development board, and can only buy a two-bedroom unit. after the government adjusted the policy, although singles were given priority, they were not allowed to buy larger units.

the government estimates that the reduction in loan ratios will affect about 10% of resale hdb buyers, but such buyers may still be willing to pay more for properties close to the city center or in better locations. if the government does not take preventive measures in advance, the resale market may become disconnected from economic fundamentals and trigger a bubble. real estate industry analysts generally believe that the government's resale hdb cooling policy will undoubtedly play a positive role in curbing housing prices. (economic daily reporter in singapore, cai bentian)