Saturday, March 6, 2010

HDB launches anti-speculation measures



After all that chatter about flats not being affordable, HDB has hit back with a roundhouse combo of anti-speculation measures. Sure they call it 'Reinforcing Owner-Occupation Among HDB Flat Owners', but we know what this means - no more making a quick buck off your resale flat.

There are changes to the HDB concessionary loan and the Minimum Occupation Period. Here's a rundown of what these new measures are and how they will affect you.

1. Lifting of Upgrading Condition
Current Situation
If you're upgrading to a larger flat, HDB will give you their super-low second concessionary loan; but only if you are upgrading (ie. 4rm to 5rm). Downsizers have to trawl the banks for a market-rate loan.

New Situation
HDB will give you a second concessionary loan regardless. So whether you're upgrading, downgrading or 'rightsizing' as they call it, HDB will be there with their loan.

Private property owners, you're on your own. You won't get a second HDB loan when you sell your condo/landed/apartment.


2. Right-sizing the Quantum for the Second Concessionary HDB Loan aka 'No more cash, baby'
Current Situation
Say you've just sold your old flat and bought a new one for $500k. From the sale of your old flat, you pay back the CPF refund of $100k, take a loan of $450k from HDB for the new flat and walk off with $100k in cash.

New Situation
After using your $100k CPF refund to offset the loan for the new flat, half of your $100k cash ($50k) proceeds have to be channeled to your loan. This means that you will get a reduced loan of $300k ($450k - $100k - $50k), but you will only have $50k in cash.

So sorry guys, the cash you will get from your COV has been effectively reduced by 50%. There's an exception though, you will get to keep at least $25k from your cash proceeds. This means that if your cash proceeds is $40k, you'll get to keep $25k and the remaining $15k will be channeled to your loan.

Also, in the event that you've bought your new flat before you sold your old one, HDB will lend you a larger loan first (since you've haven't got the money to offset your new house yet), but at average bank market rates. When you've sold your old flat, they will take the proceeds to offset your loan as per above and give you a new loan based on their concessionary rates.

Oh yeah, this measure is WITH EFFECT FROM TODAY.

Confused? Look at this example by HDB.

3. Raising the Minimum Occupation Period (MOP) for the resale of non-subsidised HDB flats
Current Situation
a. Resale HDB/DBSS Buyers who take a housing grant and New HDB flat buyers have a Minimum Occupancy Period (MOP) of 5 years before they can sell their flat.

b. Those who did not take a housing grant, but took a HDB concessionary loan will have an MOP of 2.5 years.

c. Those who did not take a housing grant, and took a bank loan will have an MOP of 1 year.

New Situation
a. NO CHANGE

b. MOP changed to 3 years

c. MOP changed to 3 years

This will take effect from today onwards, BUT existing flat owners need not be worried, this does not affect you, only those resale transactions filed after today.

In summary
Looks like the measures are coming hard and fast - halving your cash from your COV will be sure to make some sellers baulk. Will these measures help to cool the resale market? Or will people just keep cranking the COV higher to get more cash?

Honestly, it all seems quite confusing. We're pretty sure the HDB hotline will be inundated with calls tomorrow morning.

Readers, we'll get our best brains around this and analyze these measures in closer detail. Stay tuned.

In the meantime, tell us what you think.

Via HDB - "Revisions to HDB Loan Policy to Support Right-sizing and Financial Prudence" and "Reinforcing Owner-Occupation Among HDB Flat Owners"

As posted in h88.com.sg by ZH Yeo

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