Remarks by Minister Desmond Lee at Media Briefing on Property Market Measures

Dec 16, 2021

Good morning. Thank you for attending this media briefing.

Last night, the Government announced a set of measures to cool both the private residential and HDB resale markets. The demand-side measures have already taken effect. At the same time, we will be introducing some supply-side measures in the housing market.

State of the Housing Market

We have been watching the housing market closely for several quarters. Despite the economic impact of COVID-19, the private residential and HDB resale markets have remained buoyant. Private housing prices have risen by about 9% since the first quarter of 2020. HDB resale flat prices have also increased sharply after a six-year decline, rising by about 15% since the first quarter of 2020. As a result, the House Price to Income (HPI) ratio in both the private housing and the HDB resale markets have been increasing. The HPIs are still below their historical averages for now. In particular, HPI for HDB resale flats reached 4.4 times in the first three quarters of 2021, which is well below its level a decade ago. However, it is now on a clear upward trend. Transaction volumes in both markets have also been high. HDB BTO demand too has been high, and buyers who turn to the HDB resale market are understandably concerned about the increasing prices.

The recovery in the housing market reflects strong, broad-based demand for housing in the past two years. There is higher housing demand as the larger cohorts of those born in the late 1980s and 1990s reach marriageable age. Household sizes have also become smaller. People are also worried that the recent disruptions to construction works means they have to wait longer for their flats. Some have turned to the resale or private market, whilst others may have brought forward their BTO flat purchases. Demand has also been supported by the very low interest rate environment. These factors have contributed to an increase in transaction volumes and the increase in prices.

There is clear upward market momentum in prices and transaction volumes, despite the near-term uncertainty about the COVID-19 situation, including the prospect of the Omicron variant spreading here. If left unchecked, prices are likely to run ahead of economic fundamentals. This will increase the risk of a destabilising correction later on, that will hurt many households.

Borrowers will also be vulnerable to the likely rise in interest rates in the next year and beyond, as major central banks look to tighten monetary policy to respond to inflation as well as the recovery in their economies. A combination of rising prices and higher interest rates will risk a significant increase in debt servicing costs for future buyers.

Cooling Measures

The Government has decided to implement a set of measures now to cool the private and public housing markets.

We carefully considered the timing and scope of the measures. While there is continuing uncertainty created by COVID-19, we have decided to move now, to reduce the risk of a self-reinforcing cycle of price increases in the private and HDB resale markets, that will impact housing affordability.

The measures will address both demand and supply of housing. They will help to support a stable and sustainable property market in the medium-term, and also ensure that housing remains affordable for Singaporeans, the majority of whom live in HDB flats. Crucially, our measures seek to prioritise housing purchases for genuine owner-occupation, especially among first-time homebuyers. They aim in particular to ensure that affordability in the HDB resale market – as measured by HPI – remains well below its historical levels.

Let me now run through the measures.

First, the Government has raised Additional Buyer’s Stamp Duty (ABSD) rates across the board. However, ABSD rates for Singapore Citizens and Singapore Permanent Residents purchasing their first residential property will remain unchanged. This will moderate demand from those purchasing residential property for investment, and will not affect housing purchases for genuine owner-occupation.

Second, the Government has tightened the Total Debt Servicing Ratio (TDSR) threshold from 60% to 55%. This has been carefully adjusted to moderate demand, while not overly hindering Singaporeans’ home-ownership aspirations. It is also intended to encourage greater financial prudence among homebuyers, providing an additional buffer against potential income reductions or interest rate increases. The TDSR threshold adjustment is not expected to affect most borrowers buying HDB flats, as the vast majority of these borrowers (around 97%) have TDSRs of less than 55%. While some prospective private housing borrowers will need to consider right-sizing their intended purchases as well as the loans they take on, the tighter TDSR threshold will put households in a better position to service their ongoing mortgage obligations in the medium term.

Third, the Government has also reduced the Loan-To-Value (LTV) limit for HDB housing loans from 90% to 85%. This measure will also encourage greater financial prudence among homebuyers in the public housing market. The reduction in LTV limit is not expected to affect first-timer buyers significantly, especially for lower to middle income households. This is because first-timer families buying a resale flat today can benefit from generous grants of up to $160,000 and can use their CPF savings upfront to pay for their flat. This reduces the overall loan quantum that first-timer buyers will have to take to complete the flat purchase. Hence, first-timer buyers of HDB flats are not expected to be affected significantly by the reduced LTV limit.

Fourth, even as we moderate demand for property, we recognise that there is genuine demand from homebuyers. We will therefore increase supply in both the private and public housing markets to meet housing demand.

We have observed high BTO subscription rates, which have further increased during the pandemic. BTO application rates have increased from 3.7 applications per BTO flat in 2019 to 5.5 in 2021. This is despite the increase in BTO supply from around 14,600 units in 2019, to around 17,000 units per year in 2020 and 2021. The strong demand was driven by households formed due to marriage, and by a social trend of smaller households. To support these aspirations, we will ramp up BTO supply to launch up to 23,000 flats per year in 2022 and 2023, to meet demand from Singaporean households. This will be a 35% increase from the 17,000 flats launched in this year, in 2021.

In 2022, we will launch a good mix of flats across mature and non-mature towns such as Bukit Merah, Jurong West, Kallang Whampoa, Queenstown, Tengah, Toa Payoh and Yishun. This will provide buyers with more options, especially for those looking to live near their families for mutual care and support.

Looking ahead, we are also prepared to launch up to 100,000 flats in total from 2021 to 2025, if needed. But we will calibrate this based on prevailing demand. We will also watch the progress of current BTO projects closely to ensure that they stay on track. HDB will continue to monitor the housing demand and make adjustments where necessary to meet Singaporeans’ housing needs.

At the same time, we will increase the supply of private housing through the Government Land Sales (GLS) Programme. For the GLS Programme for the first half of 2022, there will be around 2,800 units on the Confirmed List, with another 3,700 units on the Reserve List. This is a 40% increase for the Confirmed List from the previous GLS Programme, in the second half of 2021. We will step up supply even further if demand remains strong.


Let me conclude by highlighting a few key points.

First, the Government is committed to promoting a stable and sustainable housing market. Despite the uncertainties posed by COVID-19, we have decided to act now, given the increasing risk of property prices running ahead of market fundamentals and impacting housing affordability. We have introduced a comprehensive suite of both demand and supply side measures to stabilise the property market and ensure housing affordability. We will continue to monitor the property market and remain vigilant to the risk of a sustained increase in prices relative to income trends.

Second, we recognise the anxieties of Singaporeans, especially first-time homebuyers, who may be concerned about strong competition for BTO flats as well as increasing HDB resale prices. We will ramp up BTO supply significantly to meet their aspirations, as described earlier. Demand-side measures, where Singapore Citizens buying their first property remain exempt from ABSD while rates for property investors have been increased, will also help moderate demand in favour of homebuyers.

Third, we should all exercise prudence in property purchases. This is to ensure households can continue to service their mortgages sustainably over the long-term, against the backdrop of a likely rise in interest rates in the next year and beyond.

Thank you.