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Lower LTV Limit And Tighter HDB Loans: How The 2022 Property Cooling Measures Will Affect You

Yen Joon

Yen Joon

Last updated 30 September, 2022

The government has introduced new property cooling measures to cool the resale flat market. Here's how the latest measures will affect you if you're a resale flat buyer.

Despite making revisions to the existing cooling measures last year and rising home loan rates, Singapore's property market has shown its resilience; prices of HDB flats and private properties have continued to increase.

In particular, resale flat prices have gone up by 10.8% year-on-year, while 166 million-dollar resale flats have also exchanged hands in the first half of 2022. 

With the hot property market, the government has stepped in to introduce a new set of property cooling measures to moderate the market, which will come into effect on Friday (30 Sep 2022).

Here's how the new property cooling measures will affect you.

Singapore property cooling measures 2022 overview

1. Loan-to-value (LTV) limit for HDB home loans lowered from 85% to 80%

The LTV limit of HDB loans will also be lowered from 85% previously to 80%. This will apply to both new and resale HDB flats, including upcoming BTO launches and resale flat applications on or after 30 September 2022. 

How will this affect you? Since LTV is the amount you can borrow up to the property's purchase price or value, this effectively means that you'll need to pay a higher downpayment with the reduced maximum loan amount. 

For example, if you’re buying a resale flat for S$500,000, the maximum you’re allowed to borrow is now S$400,000 with an LTV of 80%. This means you’ll need to fork out S$100,000 in downpayment, or S$25,000 (5%) more than before.

The LTV limit for private financial institutions, such as banks, will still remain at 75%. 

2. Higher medium-term interest rate floor for banks and HDB housing loan eligibility

The Monetary of Singapore (MAS) will also raise the medium-term interest rate floor used to compute the Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) by 0.5% point for property loans from private financial institutions (e.g. banks). This means that the medium-term interest rate used to calculate TDSR will be increased to 4% from the current 3.5%. 

Type of loan Medium-term interest rate
Residential property purchase loans and mortgage equity withdrawal loans The higher of 4% per annum floor (up from 3.5% per annum) or the thereafter interest rate
Non-residential property purchase loans and mortgage equity withdrawal loans The higher of a 5% per annum floor (up from 4.5% per annum) of the thereafter interest rate

While the TDSR and MSR remain at 55% and 30% respectively, the increase in interest rate means the amount that property buyers can borrow will be reduced if they can't meet the stress test.  

This new limit will apply to loans for properties where the Option to Purchase (OTP) is granted on or after 30 Sep 2022. If there's no OTP, then it will apply to Sale and Purchase Agreements on or after 30 Sep 2022.

It will also apply to mortgage equity withdrawal loans made on or after 30 September 2022. 

According to the MAS, the 3-Month Compounded Singapore Overnight Rate Exchange (SORA) has been rising in recent months in tandem with US interest rates.

The revised medium-term interest rate floors would help ensure that “households borrow prudently for their property purchases in a higher interest rate environment”.

That said, private financial institutions will still have the final say when it comes to determining the actual interest rate for home loans. This will also not affect borrowers who are refinancing their owner-occupied properties. 

For HDB loans, HDB will introduce an interest rate floor of 3% per year to compute a borrower's eligible housing loan amount.

This will only apply to HDB Loan Eligibility (HLE) letter received on or after 30 Sep 2022. Also, the current HDB concessionary interest rate will continue to be 2.6% p.a.

Transaction type Effective date
Purchase of flats from HDB such as BTO and HDB SBFs - Application for an HLE letter received; and 
- Sales launch date on or after 30 Sep 2022
Purchase of resale flats on the open market and open booking flats from HDB HLE letter application received on or after 30 Sep 2022
Taking over an ownership of an existing flat HLE letter application received on or after 30 Sep 2022

3. Private property owners must now wait 15 months to buy a non-subsidised HDB resale flat (for those below 55 years old)

Despite introducing a set of cooling measures as recently as December 2021, demand for resale flats has continued to increase, pushing up flat prices. In fact, the HDB Resale Price Index has gone up by more than 5% since the end of Q2 2022. 

To cool the hot resale flat market, private property owners (PPOs) and ex-private property owners (ex-PPOs) will now have to wait 15 months before they can buy a non-subsidised HDB resale flat.  

(Previously, PPOs were allowed to buy a resale flat in the open market if they had sold their private properties within 6 months of their resale flat purchase.)

This move will help to curb property speculators, ensuring that resale flats remain affordable for those who are looking for residential purposes. 

Note that the new measures will only apply to those who are 55 years old and below; so if you're 55 years and above (including your spouse) and moving out from your private property to a 4-room or smaller resale flat, the measures won't apply to you. 

Additionally, PPOs or ex-PPOs who are 55 years and above can also buy a 2-room Flexi flat on a short lease and a Community Care Apartment from HDB. You can also approach HDB for financial assistance if you're having financial difficulties. 

With a longer waiting period, condo owners who plan to sell their properties and ‘downgrade’ to an HDB flat may need to consider renting a home for more than a year.

Otherwise, they would need to downsize to a smaller private property, or move to another private property. However, remember that buying another private property will likely incur hefty Additional Buyer’s Stamp Duty (ABSD) fees.

In case you forgot, here's the amount you need to pay:

Buyer profile ABSD rate
Singapore citizens buying their first residential property 0%
Singapore citizens buying their second residential property 17%
Singapore citizens buying their third and subsequent properties 25%
Singapore PRs buying their first residential property 5%
Singapore PRs buying their second property 25%
Singapore PRs buying their third and subsequent properties 30%
Foreigners buying any property 30%
Entities (company or association) buying any property 35% (additional 5% if it's a housing developer)
Trustee buying any residential property 35%

Meanwhile, HDB owners who plan on selling their HDB flats may lose more prospective buyers. But experts have said that demand for 3- and 4-room flats may go up among retirees looking to downgrade.

If you're in panic mode because you've obtained the OTP before 30 Sep, don't worry because HDB will offer some flexibility to have your 15-month wait-out period waived, if you can show proof that you had obtained the OTP before the policy changes. 

Looking for a bank loan?
Find and compare the best home loans on SingSaver now.


Read these next:
Home Loans In Singapore (2022): Best Mortgage Rates To Consider
Loan-to-Value Ratio & Limits In Singapore (30 September 2022 Update)
New Singapore Housing Loan Rules In 2022 – How Much Can You Borrow?
Getting A Bank Loan For HDB vs A HDB Housing Loan – What’s The Difference?
How Much Do You Need To Buy Your First Home In Singapore?







In my past life, I was always broke because of a lack of financial literacy. Now, I publish a few posts every week* on personal finance to help you manage your money better. *I mean, I’ll try


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