ST Forum : Genuine buyer's problems

18 JAN 2011,

NEW PROPERTY MEASURES

Genuine buyer's problems

WHILE I appreciate the rationale for implementing additional curbs to speculative investments, thereby freeing more supply for genuine home buyers, the reduced loan-to-value limit of 60 per cent will further impede genuine upgraders who need a larger HDB flat or move into private property (' New measures to curb property speculation'; last Friday).

If the Government's aim is to increase public housing supply for first-time owners, that would come from more build-to-order (BTO) flats as well as facilitating more vacant three-room and four-room resale flats, which would be more affordable for younger couples.

More BTO flats are being built. But for HDB dwellers who need a larger flat or aspire to make the leap to owning private property, the new 70 per cent loan-to-value limit imposed last August was already an insurmountable financial obstacle.

The new limit will only force more families to stay put in their smaller flats, withholding supply. The reason: Families cannot get a second bank loan at 80 per cent unless they have HDB's approval letter (which comes within two weeks from the first appointment of their flat's sale) and a document from the bank holding their existing mortgage, which can be discharged only upon a sale.

If upgraders take this route, they must find temporary shelter for about two months, and move house twice, which will add to their costs.

The alternative, to ensure a new home upon vacating their old one, is to take that second mortgage at a 60 per cent loan-to-value, which will mean forking out more cash upfront.

Many lower-to-middle income HDB dwellers simply do not have that kind of spare cash, even after factoring in their Central Provident Fund money after the sale of their flat.

The Government should impose a staggered loan-to-value ratio for differing household incomes.

For instance, maintain the 80 per cent ratio for households earning a monthly total of $4,000 or less, 70 per cent for households earning $4,001 to $6,000, and 60 per cent from $6,000 up. Staggering the ratio will not penalise the lower-income groups together with the cash-rich investor.

Adam Reutens-Tan