S$322m given out under HDB’s AHG scheme

The government handed out S$322 million to eligible households under the Additional Housing Grant (AHG) Scheme since it was enhanced two years ago.

The grant can be used to buy either a new flat from the Housing & Development Board (HDB) or a resale flat from the open market.

In fresh figures released to Channel NewsAsia, HDB said 16,100 households have benefited since the changes.

But with growing mortgages placing a greater burden on households, some are hoping for more help at the upcoming Budget.

High on their list is more housing grants.

Twenty-six-year-old Singaporean Muhd Sharizan shares a three-room flat with his wife and two children.

He received the maximum additional housing grant of S$40,000, which went towards offsetting the S$15,000 down-payment and reduced their outstanding loan.

“My CPF was really not enough so this grant helped me to pay for my house. Without this grant, I don’t think I could have afforded to buy the house,” Mr Sharizan said.

However, Mr Sharizan said he worries that the 30-year repayment period will be a drain on his retirement savings.

Mr Sharizan and his wife contribute about S$500 to their CPF accounts each month – S$350 goes towards their mortgage.

“The faster I pay, the faster my loan will (cleared). And so I can keep the rest of my money inside my CPF account for my retirement,” he said.

With housing prices on the upswing, first-time buyers have expressed concerns that mortgage loans are becoming unmanageable.

Observers say bringing down housing prices is not the solution, as flat owners wouldn’t want to see their assets devalued.

Hence, it’s unlikely new cooling measures will be introduced. The focus, instead, will be on helping young couples and the low-income buy their first flat.

In this aspect, more housing grants may be on the cards.

The AHG Scheme has been tweaked twice since it was started in 2006.

Each time, the income ceiling was raised by S$1,000 to allow more households to apply for it, and the maximum grant available was upped by $10,000.

Close to 28,500 households have benefited from the S$500 million disbursed so far.

While a higher grant will help to lower the mortgage, observers say a longer term strategy must also be in place.

MP for Holland-Bukit Timah GRC Liang Eng Hwa said: “It is more than just pricing the housing or giving grant, but how do they service it in the long term.

“So we must help them stay employable, to be able to earn a higher salary over time”.

Mr Liang said the government must monitor the debt service ratio, which calculates the amount that goes towards paying for housing.

He said the ratio should be below 25 per cent – meaning flat owners can pay mortgages with their CPF, without having to use cash.

Source : Channel NewsAsia – 16 Feb 2011

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