'I'm in hot water right now': Cooling measures leave some home owners in difficult spot

'I'm in hot water right now': Cooling measures leave some home owners in difficult spot
PHOTO: Straits Times file

SINGAPORE - Three weeks ago, estate officer Patrick Yew sold his one-bedroom condominium unit with the intention of buying a five-room Housing Board resale flat to live in with his ageing parents.

But overnight, his plans have come crashing down.

A fresh round of cooling measures, announced slightly after 11.40pm on Thursday and kicking in on Friday, includes a 15-month wait-out period for current and former owners of private residential property who wish to buy a non-subsidised HDB resale flat.

Previously, they were allowed to buy an HDB resale flat on the open market if they sold their private properties within six months of the HDB flat purchase.

Mr Yew, 48, who is going through a divorce, said: "I have already sold my condo, which was an investment property, and I'll leave my four-room HDB flat to my wife and two kids because they need a home. After the divorce, I'll have to move out, but where do I live for 15 months?"

He said friends have offered him a place to stay but he does not want to trouble them. "I'm in hot water right now," said Mr Yew, who experienced a drop in earnings and now makes around $2,700 a month, which he said makes renting difficult.

He said he will appeal to HDB to waive the 15-month wait-out period on account of his divorce and personal circumstance.

At least three other downgraders in similar situations told The Straits Times that they will appeal or abandon their plans to buy an HDB resale flat entirely.

The authorities said current and former private property owners, regardless of age, who have extenuating circumstances such as financial difficulties may approach HDB to assess their situation.

The 15-month period - albeit a "temporary measure that will be reviewed based on overall demand and market changes", said the National Development Ministry - is likely aimed at slowing the flow of hot money from private property owners who want to cash out and downgrade to an HDB property so that more money can be put aside for their retirement funds, said analysts.

But some buyers said the blanket policy is unfair to those who have genuine needs to downgrade.

Alumni relations manager Nurhadi Khan, 41, sold a four-bedroom plus study executive condominium unit in July when mortgage payments became too expensive with rising interest rates, and had planned to buy a four-room HDB resale flat with a lower monthly mortgage.

"I acknowledge that the perception is that anyone who sells a private property will have a fair bit of cash proceeds and therefore pick better HDB resale flats by offering more money, but it is not true for everyone; certainly not for us," said Mr Khan, who said he would appeal to HDB.

"Here we are, trying to do the right thing and be prudent with our finances, but yet we're getting penalised for it and have to wait 15 months, which seems illogical."

On Friday, the Government also raised the medium-term interest rate floor used to compute the total debt servicing ratio to 4 per cent and further lowered the loan-to-value limit for HDB housing loans to 80 per cent from 85 per cent, itself a cut from 90 per cent in December 2021.

This means the Monetary Authority of Singapore is using stricter criteria to assess borrowers' ability to repay, and therefore quality for a loan. Buyers will be able to borrow less than before.

The moves come after the HDB resale price index increased by more than 5 per cent as at the end of the second quarter of the year, a growing sign of overheating in the property markets amid rising interest rates and a gloomy economic outlook.

PropNex associate group director Alex Deven said some of his clients have exercised their Option to Purchase (OTP) but have not yet submitted their resale application to the HDB.

With the new measures, they are subject to the 15 month wait-out period and may be unable to buy the flat.

It is also unclear if they will get back their fees as the OTP is an agreement between the seller and buyer.

In response to ST's queries, HDB said it will assess such situations on a case-by-case basis.

Others have abandoned their plans of downgrading, said Mr Deven.

"It's causing some concerns and we have been working through the night sorting out timelines and new budgets for our clients since the announcement," he added.

This article was first published in The Straits Times. Permission required for reproduction.

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