Tighter loan limits could feed demand for smaller flats, raise rentals further, curb overall buying

TIGHTER limits on property loans announced late last night will shrink homebuyers’ purchasing power and pinch on affordability, market analysts observed. And this could feed into greater demand for smaller flats – specifically resale 4-room Housing Development Board (HDB) flats – while also leading to higher rental rates and a slowdown in demand for private property.

As Wong Xian Yang, head of research, Singapore at Cushman and Wakefield summed up: “In all, the new measures increase market frictions and should slow resale HDB price growth. However, given resilient underlying housing demand, low unemployment rates and an anticipated shift in demand from the private market, HDB price growth could still remain positive in the fourth quarter of 2022, albeit at a much slower pace as compared to previous quarters.”

Catherine He, director and head of research, Singapore at Colliers, said: “Apart from cooling the HDB resale market directly, these measures will indirectly cool the private residential market, as it will shrink the pool of HDB upgraders profiting from higher HDB prices. As such, mass market projects could be most impacted, as this segment is most dependent on upgraders. Cash-rich buyers such as high-net-worth individuals will be less affected as they require less leverage.”