Fewer HDB flat upgraders chasing the condo ownership dream

SINGAPORE – There are fewer Housing Board flat upgraders chasing the condominium dream after several rounds of property cooling measures.

Adding to that are higher mortgage rates and private home prices, as well as growing economic headwinds.

A total of 2,322 new and resale non-landed private homes were bought by those with HDB addresses in the first half of 2023, down nearly 36 per cent from 3,628 during the same period in 2022, said real estate firm OrangeTee & Tie, citing transactions recorded in the Urban Redevelopment Authority’s Realis database.

In 2022, 6,287 new and resale private homes were bought by those with HDB addresses, down 36.2 per cent from 9,854 units in 2021, according to OrangeTee & Tie.

Among the reasons for the drop were three rounds of property curbs introduced in December 2021, September 2022 and April 2023, which tightened borrowing limits and raised the additional buyer’s stamp duty (ABSD) from 12 per cent to 20 per cent for those buying their second residential property.

The total debt servicing ratio (TDSR) threshold was also tightened from 60 per cent to 55 per cent, further restricting liquidity and financing for non-first-time buyers, said property firm ERA Singapore’s key executive officer Eugene Lim. TDSR is the portion of a borrower’s gross monthly income that goes towards repaying all monthly debt obligations.

In addition, the medium-term interest rate floor used to compute TDSR and the mortgage servicing ratio was raised by 0.5 percentage point to 4 per cent for residential property loans from Sept 30, 2022.

The mortgage servicing ratio is the portion of a borrower’s gross monthly income that goes towards repaying all property loans.

“As banks are now required to use a higher mandatory interest rate of at least 4 per cent to compute the loan, some home buyers who were borderline cases were not able to secure their loan,” Mr Lim said.

Further dampening demand, the average three-month compounded Singapore Overnight Rate Average – the benchmark interest rate used to price floating-rate home loans – jumped to 3.21 per cent in the first quarter of 2023, from 0.22 per cent in the first quarter of 2022, he added.

“This big surge in interest rates in a year means monthly mortgage payments would have correspondingly increased,” he said.

Even more pronounced is the drop in sales of new non-landed private homes to those with HDB addresses.

This came as the number of newly launched units shrank 57 per cent to 4,528 in 2022 from 10,496 in 2021, noted Mr Lam Chern Woon, head of research and consulting at Edmund Tie.

According to OrangeTee & Tie, buyers with HDB addresses accounted for just 682 new condo sales in the first half of 2023, down 40.9 per cent from 1,154 units in the first half of 2022.

Condo resale transactions for this group, meanwhile, fell 33.7 per cent to 1,640 units from 2,474 units over the same period.

Mr Lam attributed the drop in resale transactions to the elevated interest-rate climate, sombre economic outlook and dampening effects of the cooling measures.

Nonetheless, resale transactions have been exceeding new sales since the second half of 2020, in part because the rise in resale condo prices has not been as sharp as that for new condos in the past two years, said OrangeTee & Tie senior vice-president for research and analytics Christine Sun.

Median resale prices rose just 9 per cent from 2021 to 2022, compared with median new-home prices, which jumped nearly 22 per cent in the same period, she said.