How Government Cooling Measures Affect Your Home Buying Budget

Wiki Article

Over the past decade, Singapore’s government has introduced a range of cooling measures to stabilise property prices and discourage speculation. While these policies protect long-term affordability, they can significantly affect how much home you can afford — especially in 2025’s high-interest-rate, high-valuation market.

Whether you’re a first-time homebuyer, upgrader, or investor, this guide explains how cooling measures impact your loan eligibility, cash requirements, and overall budget.

1. What Are Cooling Measures?

Cooling measures are policies introduced by the government to:

Curb excessive price growth
Reduce speculative buying
Ensure sustainable household debt
Maintain housing affordability over the long term

These measures apply across both HDB and private property markets and affect both citizens and foreigners.

2. Loan-to-Value (LTV) Limits: Smaller Loans for Most Buyers

The Loan-to-Value (LTV) ratio determines how much you can borrow relative to the property price.

As of 2025:

First housing loan (bank): Up to 75% LTV
HDB loan (for eligible buyers): Up to 80% LTV
Second housing loan: Maximum LTV drops to 45% (or 25% depending on loan term and age)

What this means for you:
If you're buying a $1 million condo and eligible for 75% LTV, you’ll need at least $250,000 in downpayment — of which 5% ($50,000) must be in cash, the rest via CPF or cash.

3. Total Debt Servicing Ratio (TDSR): Capping Your Monthly Loan

TDSR limits how much of your monthly income can go toward repaying all debts, including:

Home loans
Car loans
Credit cards
Student loans

The current TDSR cap is 55% of gross monthly income.

Example:
If you earn $8,000/month, your total debt repayments (including a new mortgage) cannot exceed $4,400/month. This limits the maximum loan you can qualify for — and directly affects your property budget.

Tip: Reduce existing debts or increase income to expand your home loan eligibility.

4. Additional Buyer’s Stamp Duty (ABSD): A Significant Upfront Cost

ABSD is one of the biggest factors that can shrink your buying power.

As of 2025:

Buyer Type	ABSD on 1st Property	ABSD on 2nd Property
Singapore Citizen	0%	20%
Singapore PR	5%	30%
Foreigner	60%	60%
Entities/Trusts	65%	65%

Example:
A Singaporean buying a second property priced at $1.5 million must pay $300,000 in ABSD upfront. That amount does not go toward your equity — it’s a sunk cost.

How it affects your budget:
You may need to downsize or delay your purchase if your funds go toward stamp duty instead of the property itself.

5. Stress Test Interest Rates: You’ll Be Tested at Higher Rates

Even if bank mortgage rates are currently around 3.5%, your loan will be evaluated using a higher interest rate — typically around 4%–4.5%, depending on the bank’s internal stress test.

Why this matters:
Your loan eligibility shrinks when tested at higher rates, even if you can afford repayments at today’s lower market rates.

6. CPF Usage Limits on Older Leasehold Properties

If you're eyeing a resale condo or HDB unit with less than 60 years lease remaining, you may face CPF usage restrictions.

CPF can only be used if:

The remaining lease covers the youngest buyer to age 95
Otherwise, CPF usage is pro-rated or not allowed at all

Impact on budget:
You may need more cash if CPF is not allowed, or reconsider the property altogether.

7. Minimum Occupation Periods (MOP) and Resale Restrictions

New HDB flats and Executive Condos (ECs) have a 5-year MOP before you can sell or buy another property
You also cannot buy private property while still within the MOP

Budget impact:
This locks in your decision for 5 years — no upgrades or flipping. You must plan your finances and lifestyle accordingly.

8. Cooling Measures Reduce Leverage — Not Just Speculation

Ultimately, all these cooling measures limit your leverage (how much you can borrow or invest) to ensure financial prudence.

This means:

You’ll need higher savings or CPF to enter the market
You may have to lower your expectations in terms of size, location, or facilities
You’ll be encouraged to hold properties long-term, not for quick resale profits

Conclusion: Cooling Measures Force Buyers to Be More Disciplined

Government cooling measures in Singapore are not meant to discourage home ownership — they’re designed to keep the market stable, especially in uncertain economic conditions.

But they do mean that:

Your home buying budget will be smaller than you think
You need to factor in cash, CPF, loan limits, and stamp duties early in your planning
The importance of buying within your means has never been greater