The Housing Development Board (HDB) announced new property measures that will curb speculation in the HDB resale market.

The most notable measure was the extension of the second HDB concessionary loan to downgraders. “This is certainly welcome news,” said PropNex CEO Mohamed Ismail, “especially for existing HDB owners without a strong credit standing.”

He explained that such people who may be in a difficult financial situation usually find it hard to secure a bank loan after selling their initial property as their credit background is weak. The second HDB concessionary loan is extended to downgraders on condition that they are only allowed to keep 50% of the cash proceeds from the sale of their initial property or $25,000, whichever is higher. The rest must be used to finance the second flat.

“Allowing these people to unlock 50% of their cash proceeds while still qualifying for the HDB bank loan will certainly be helpful to downgraders,” said Ismail, “and we may see an increase in market activity due to an increase in downgraders.” However, he declined from predicting if there will be an increase in resale flat prices as it is too soon to assess the impact on prices.

Another measure announced include a quota cap of 8% PRs in each block and 5% within each neighbourhood, as well as a reduction of $10,000 in the CPF Housing Grant for couples which consist of one Singaporean Citizen and one Permanent Resident (PR).

Modelled after the Ethnic Integration Policy (EIP), the Singaporean Permanent Resident (SPR) Quota applies to all PRs except Malaysians who, like all PRs, have to follow the EIP.

“This policy is restrictive in nature only to PRs,” said Ismail, “and we can anticipate its effects to be similar to those of the EIP.”

He explained that besides a more even distribution of PRs across the 162 neighbourhoods here, PRs selling their flats in neighbourhoods or blocks that have reached their quota will be able to command a higher price when selling to other PRs. Conversely, PRs selling flats in estates not popular with PRs may only be able to sell at a comparatively lower price.

With regards to the $10,000 reduction in CPF Housing Grant, a $10,000 premium is also payable for similar couples who buy a new flat from HDB. However, the $10,000 will be granted or returned once the PR spouse becomes a Singapore Citizen, or when the couple bears a child who is a Singaporean Citizen.

“These moves should allay the fears of those Singaporeans who feel that PRs are partly to blame for driving up HDB resale flat prices,” opined Ismail, who maintained that as the PR population only accounts for 8% of HDB dwellers, their impact on prices so far has been minimal at most.

Finally, the Minimum Occupation Period (MOP) for buyers of HDB flats without CPF Grants was raised from 1 year and 2.5 years for bank loans and HDB loans to three years. Ismail felt this policy will, at most, just encourage buyers to adopt a mid-to-long term view when buying their flat.

“Most HDB buyers are not buying their flats with the aim to flip,” he explained, “primarily because while private property prices may rise 30% or more within a year, HDB prices rarely go up by more than 10%. Looking at the HDB Resale Price Index (RPI), the last ten years only saw double-digit growth in 2007 and 2008.”