Singapore will introduce new curbs on public housing as new Prime Minister Lawrence Wong seeks to tame years of price increases that threaten to become a political flashpoint in upcoming elections.

The measures, which include a lower loan-to-value limit on financing from the public housing authority, are aimed at promoting a “stable and sustainable” market, according to a joint statement late Monday from the Ministry of National Development and the Housing & Development Board (HDB).

The affordability of public housing is a potential hot potato for the ruling People’s Action Party, which has governed Singapore since independence in 1965 and is seeing its popularity decline. Almost 80% of households live in public housing units, which are built and sold at subsidised prices by the state.

Prices have surged in recent years - in some cases topping S$1 million - driven by pandemic-induced construction delays and changing demand among the young for faster-built flats.

Under the new measures, loan-to-value limits, which determine the maximum amount an individual can borrow from the HDB, will be lowered to 75% of a property’s value from 80%. The limit on loans from commercial banks will remain at 75%. The changes kick in from Aug 20 and will apply to transactions in the secondary market as well as new units known as Build-To-Order flats starting in October.

“Given the sustained, strong, broad-based demand for HDB resale flats, these measures will help cool the market and encourage prudent borrowing,” according to the statement.

The government will also increase housing grants by as much as S$40,000 to improve affordability for lower-to-middle income first-time homebuyers.

The new property curbs come as Wong readies to lead his party into the next election, which must be held by November 2025 but could come much sooner. The vote will be the first since the PAP had its worst-ever parliamentary showing in 2020 - despite winning 89% of the seats - owing in part to concerns about the economy and a youth cohort that’s more open to a bigger role for the opposition in government.

In April 2023, the government sought to ease the boom in private homes. It slapped on additional cooling measures including doubling stamp duties for foreign buyers to 60% and raised levies for second-homebuyers.