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HDB loans soon to be available to downgraders


SINGAPORE – When he said he was feeling the heat, National Development Minister Mah Bow Tan was not referring to the weather, but the “exceptionally” high number of questions in Parliament on housing, he said in jest.

The 15 Members of Parliament who put questions and issues to his ministry included those who have been pushing for changes to certain housing policies for years – and on Friday, they got a significant concession.

Mr Mah announced that Singaporeans can now take a second concessionary loan from the Housing and Development Board (HDB) to downgrade or buy a similar-sized flat.

This will benefit some 1,000 households per year.

Previously, they could only qualify for a concessionary loan, which incurs 2.6 per cent in interest, if they upgraded to a bigger flat. Earlier in the day, MPs Cedric Foo, Cynthia Phua and Ahmad Magad had pointed out again – for the final time – that they had constituents who, after selling off their existing flats, struggled to even downgrade and did not qualify for a bank or concessionary loan.

Noting how MPs have been raising this issue for a long time, Mr Mah said: “Some MPs also gave me feedback that by providing the second concessionary loan to households only for upgrading, this may inadvertently drive some to upgrade even though it may be more prudent for them not to do so.

“With greater economic volatility, the flexibility to right-size will become more important.”

The big policy change comes with conditions, though.

“To further encourage financial prudence”, HDB will reduce the size of the second concessionary loan by an amount equal to the full Central Provident Fund refund and half the cash proceeds from the sale of the first flat.

For instance, if a couple sell their flat and get a $60,000 CPF refund and $80,000 in cash proceeds, the CPF refund and $40,000 will have to go toward paying for their next flat.

“In other words, HDB would then grant them a loan which is $100,000 less,” he said.

But HDB will allow buyers to keep at least $25,000 of the cash proceeds if they get back less than $50,000.

Property firm Propnex chief executive Mohamed Ismail believes the policy change may lead to “an increase in market activity due to an increase in downgraders”. However, he said it was too soon to say if resale flat prices would rise.

On whether it will be cheaper for downgraders to take the second concessionary loan, Ngee Ann Polytechnic real estate lecturer Nicholas Mak told MediaCorp it was difficult to tell with variables such as loan tenure and fluctuating bank interest rates.

In Parliament, Mdm Phua (Aljunied GRC) asked if the 50-per-cent criteria for cash proceeds could be lowered. Mr Mah said this applied to nett proceeds and that he would review “whether it’s too high or too low” after the scheme has been implemented.

The minister also announced that HDB will raise the minimum occupation period (MOP) for all resale flats bought to three years. Currently, flats bought with a concessionary loan have an MOP of 2.5 years, while those bought without have an MOP of one year.

The extension of the MOP is to “foster owner-occupation, and (is) not about affordability per se”, said Mr Mah.

Property experts felt this measure would have little impact on prices. “Most HDB buyers are not buying their flats with the aim to flip,” said Mr Ismail.

Last year, 9 per cent, or 3,000 households, sold their resale flats within three years of purchase.

(via TodayOnline)

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