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Big drop in HDB resale deals as new rules bite

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The number of Housing Board resale flats changing hands dropped drastically last month - a sign that the new cooling measures announced at the start of the year are beginning to kick in.

There were around 750 resale deals last month, the lowest activity in any month since the Singapore Real Estate Exchange (SRX) started tracking prices in 2007. This is less than half the 1,740 transactions in February last year.

The data also showed that overall median resale prices of Housing Board flats have dipped slightly, reversing the rising trend in the final quarter of last year.

While the Chinese New Year period usually sees a slowdown, property analysts also attributed last month's dip to the market adjusting to January's measures - especially the new rules governing loans for Housing Board flats.

That has made it harder to purchase larger units, limiting choice.

To prevent buyers from overstretching their finances, the Government capped mortgage payments to banks at 30 per cent of a borrower's monthly income, and 35 per cent if they took a Housing Board loan.

Previously, there were no caps for bank loans, which saw some borrowers spend as much as 60 per cent of their monthly pay on mortgages.

The new cap affected those looking for larger
properties more.

For example, a couple with a combined income of $8,000 who opt for a 30-year-loan would only be able to borrow around $570,000, given an interest rate of 3 per cent. This is half of what they could borrow in the past.

This couple may then have difficulty getting a centrally located five-room unit, which costs around $800,000, not including the cash premium paid above the flat's valuation.

ERA Realty key executive officer Eugene Lim highlighted another factor - the 5 per cent additional buyer's stamp duty for permanent residents (PRs) purchasing their first home.

PRs did not have to pay this surcharge before January's announcements, which also disallowed them from subletting their whole flat after five years.

"This has resulted in many PRs, who make up 20 per cent of the market, sitting on the sidelines," Mr Lim said.

According to SRX, overall median resale prices of Housing Board flats fell from $460,000 in December last year, to $450,000 now.

The Government has pledged to offer at least 23,000 new flats this year. Prices in the last BTO offering ranged from $140,000 for a three-room unit in Choa Chu Kang to $575,000 for a five-room unit in Ang Mo Kio.

Credit from The Straits Times - 8 March 2013
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