Higher CPF Housing Grant: No big increase in resale market prices, say analysts

Final-year university student Belle Low has been looking to settle down with her boyfriend of four years.

So far, her search for a first home has been concentrated largely on Build-to-Order (BTO) flats. But she said the increase in the CPF Housing Grant has opened up an additional option for them: the resale market.

In his Budget statement delivered on Monday (Feb 20), Finance Minister Heng Swee Keat announced an increase in the CPF Housing Grant for first-timer couples looking to buy in the resale market. They used to get S$30,000 when buying a resale flat. But this amount has been increased to S$50,000 for couples who buy four-room or smaller resale flats, and S$40,000 for couples who buy five-room or larger resale flats.

“The additional amount is not very large, but it’s still money,” said Ms Low. “We would definitely consider looking at resale flats now.”


Property analysts agree that the increased grant has made resale flats more affordable and attractive for young couples like Ms Low and her boyfriend.

PropNex’s Key Executive Officer Lim Yong Hock described the move as “an encouragement to young couples to settle down as soon as possible.”

“In most cases, resale flat purchases can be completed within a three- to four-month period,” he said. “Whereas with a new flat, you will have to wait a couple of years before it is ready.”

Analysts added that the number of flats changing hands in the resale market will likely enjoy a good boost.

“With more attractive grant amounts, this means resale flats are now cheaper,” said ERA’s Key Executive Officer Eugene Lim. “Buyers who are sitting on the fence may very well tilt towards a resale flat with this announcement.”

He added that together with the Proximity Housing Grant, there is more incentive for more young families to stay near their parents. “There will likely be an increase in demand for resale flats in mature estates, as this would be where the majority of the young couples’ parents would be staying.”

PropNex’s Mr Lim added that he believes transaction volume will increase more for four-room flats. “The increase is S$20,000 if you get a smaller flat, so it would encourage more people to go for a four-room rather than a five-room,” he said. “And for those who are currently looking at three-room flats, they could probably stretch their dollar a bit if the price isn’t too far away.”

The move is also a timely one, as Cushman & Wakefield Singapore’s head of Research Christine Li noted. “A large volume of BTO HDB units reached the end of their Minimum Occupation Period (MOP) at the end of 2016,” she said. “This is 80 per cent higher than the number of units that reached the MOP in 2015.”

“The grant can therefore help to soak up additional HDB resale supply, particularly for those who need to dispose of resale flats after they have taken possession of new BTOs, executive condominiums and private properties.”


It is for this reason that the analysts do not think prices will increase much in the resale market, with PropNex’s Mr Lim noting that the supply of resale flats is “still very good.”

He said there may be a marginal increase in prices within the next few months, but there is unlikely to be any drastic increase.

“Affordability is still a question, and those who are eligible for the maximum grant amount will likely have a budget to work on,” he added. “Newcomers are generally low-budget buyers. They’re not cash rich and cannot offer a sum much higher than the market rate.”

ERA’s Mr Lim said there is likely to be a “gradual uptick” in prices over this year, adding that price increase will benefit sellers of flats with “excellent attributes and in locations where sellers are few.”

Nonetheless, he cautioned against sellers raising their asking prices immediately and expecting matching offers.

“Many HDB flats are largely similar in design, space and attributes,” he said. “If a seller increases his price rashly, prospective buyers can easily turn to other sellers who are offering a similar flat at a lower price.”

“It is still very much a buyer’s market, and buyers don’t want to perceive themselves as getting a ‘bad’ deal.”

Furthermore, it is unlikely that the new grants will cause a plunge in demand for BTO flats, according to director of R’ST Research Ong Kah Seng.

“Young couples will still appreciate BTO flats which are heavily subsidised, and only those who have urgent requirements to immediately move into a completed property will purchase a resale flat with the grant,” he said.

“Young couples also tend to have higher lifestyle requirements and many of them will find a resale flat is less likely to offer them the opportunity to have a flat which is in a comprehensively planned new housing estate or precinct,” he added. “Some new housing estates or new growth suburban corridors like Punggol also offer an exciting waterway living concept.”

Hence, while Ms Low and her boyfriend welcome the new grants, she said they are likely to stick with their original plan of a BTO flat.

“The three years’ lead time I need to wait to get a flat will give us time to save up for costs like renovations and the wedding,” she said. “The property market has been depressed recently, so it makes more sense for us to go in now rather than to wait for it to bounce up again, and we end up getting a resale flat at a higher price.”

“Most of my friends are still considering BTO over resale,” she added. “The new grants just open a door, but I don’t think it will sway our decision significantly.”

Source : Channel NewsAsia – 21 Feb 2017

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