Desmond Lee flags psychological factor in rising HDB resale flat prices

If not reined in, such market dynamics can cause bubble in resale market, he cautions

- Wong Yang

Perceptions that Housing Board resale prices will continue getting higher are making home buyers anxious to secure a flat regardless of the price, while raising sellers' expectations about how much their flats can fetch, said National Development Minister Desmond Lee.

He flagged this "psychological dynamic" as a factor contributing to rising flat prices, as he explained why the Government has tightened the HDB loan limit to cool the resale market.

From Aug 20, HDB has lowered the loan-to-value (LTV) limit, or the maximum loan that home buyers can take from HDB to fund a new or resale flat purchase, from 80 per cent to 75 per cent.

At a media briefing on Aug 20, Mr Lee said: "If we are not careful, such market dynamics can cause the resale market to run out of line with economic fundamentals and cause a bubble. History tells us that the property market moves in cycles, and those who buy at higher prices with larger loans are also hardest hit when the market cools.