Middle-income get more help to buy HDB flat with enhanced Special CPF Housing Grant from July 2013 BTO exercise

Over 50% of households could get housing grant

$6,500 income cap means more can get help to buy bigger new HDB flats

By Charissa Yong And Daryl Chin, The Straits Times, 28 Aug 2013

OVER half of Singapore's households may now be able to get a Special Housing Grant of up to $20,000 when they buy a new four-room or smaller Housing Board flat.

With the grant being extended, a family taking home up to $5,000 a month can get the full $20,000, while those earning between $5,001 and $6,500 can get between $5,000 and $15,000.

The grant was previously only for families earning up to $2,250 who bought three-room or smaller flats in non-mature estates.

HDB said over five in 10 resident households now come under the expanded income ceiling.

The median income of a family applying for a four-room flat in a non-mature estate is also $4,100 - well within the new limit.

Making the announcement yesterday, National Development Minister Khaw Boon Wan said: "We have always been very targeted at the lower-income... but today, I think, it's a major move. We are shifting beyond the lower-income to the middle-income."

Home buyers keen on four- room flats said the grant would make them more affordable.

Security officer Muhammed Helmi, 25, who with his fiancee makes about $2,000 a month in total, is eyeing a new four-room flat in Yishun costing about $290,000.

He said: "Based on my income, the loan I can get isn't that much, so this additional money will be a big help for me."

The broad policy changes were first announced by Prime Minister Lee Hsien Loong at the National Day Rally.

The new criteria apply from the most recent Build-To-Order (BTO) exercise last month.

Said accounts executive Felicia Lim, 25, who is waiting on her May BTO application: "I'm not entitled to the grant, but if I were, it would help me a bit. I could take a smaller loan, maybe 5 per cent less of the selling price."

The grants will likely lead some buyers to switch from a resale flat to a BTO flat, said SLP International head of research Nicholas Mak. "But the number of these families depends on the number and attractiveness of BTO flats that the Government can supply in the near future," he added.

More singles will also qualify for the Special Housing Grant: Those who earn up to $3,250 a month can now get up to $10,000 when they apply for a two-room flat on their own. This is more than twice the previous monthly income cap of $1,125.

Some 3,000 families living in two-room units can also benefit from a new $15,000 Central Provident Fund subsidy called the "Step-Up Grant" when they upgrade to a bigger flat. Both old and new homes must be in non- mature estates.

Said Mr Khaw: "If you are low-income, don't rush into a three-room flat. Go into a two- room flat (first). After five years, probably that's when your family begins to enlarge... we will help you upgrade to three rooms."

HDB policy changes at a glance

- Special Housing Grant of up to $20,000 for four-room or smaller flats extended to households earning up to $6,500.

- Income ceiling for this grant for singles raised to $3,250.

- Step-Up grant of $15,000 for two-room flat owners moving to three-room flats in non-mature estates.

- Older set of parents under the Multi-Generation Priority Scheme can now opt for three-room flats.

- A new, larger three generation flat will be piloted in Yishun starting from the next sales exercise.

- HDB loans reduced from 30 to 25 years, with repayments capped at 30 per cent of monthly income.

- Bank loans for HDB flats will be brought down from 35 to 30 years.

- Permanent residents now have to wait three years before being eligible for a resale flat.

Three-year waiting period for PRs to buy resale flats
Rules on HDB loans also tightened to stabilise market
By Daryl Chin And Charissa Yong, The Straits Times, 28 Aug 2013

NEWLY MINTED permanent residents will no longer be able to buy a resale public flat immediately.

Instead, they will now have to wait three years, as part of the Housing Board's new swathe of policy measures which was announced yesterday by National Development Minister Khaw Boon Wan.

Describing the waiting period as "fair", he said it would further distinguish between citizens and non-citizens.

Another big change: tighter rules on HDB loans, aimed at promoting financial prudence among buyers and to further stabilise the resale market.

From today, resale flat buyers who take HDB loans can use only up to 30 per cent of their gross monthly pay to repay their loans, down from 35 per cent. This brings it in line with the current mortgage servicing ratio limit for private loans, which was similarly adjusted by the Monetary Authority of Singapore in January.

The maximum repayment period for HDB housing loans will also be lowered from 30 to 25 years, and from 35 to 30 years for bank loans taken to buy HDB flats.

This is to protect buyers who want to stretch their finances and opt for bigger flats.

"If you make flats cheaper, people buy bigger flats. Then we are always chasing the tail, and flats will always be unaffordable," said Mr Khaw.

Property analysts said the resale market - already at its lowest transaction volume since 1997 - will take the biggest hit. Cash premiums paid above a flat's valuation could also be lowered.

"Demand will be drawn away by buyers who can't secure a larger loan for their ideal resale flat, and PRs who account for a fifth of the resale market," said ERA Realty key executive officer Eugene Lim.

On the new PR rule, Mr Khaw said: "There will be some impact on the market, but eventually things will catch up again in about three years' time."

R'ST research director Ong Kah Seng noted many PRs go for resale flats instead of pricier condominium units, as they needed to pay a 5 per cent additional buyer's stamp duty on their first purchase starting January this year.

"This will help to ensure that PRs are not crowding the HDB resale market, and that enhanced affordability is indeed targeted at Singaporeans," he said.

PRs fully owned 51,000 HDB flats - 6 per cent of all HDB flats - as of end June. Permanent residency was given to about 60,000 people in the past two years.

Permanent resident Xi Zhuang, 35, said the new rule was harsh, but understandable. "Many locals believe that PRs are the ones who drive up resale prices (by paying high cash premiums for flats). That is not true for all of us," said the graphic designer.

Besides stabilising the market, HDB also unveiled more details on the schemes targeted at different buyer groups that Prime Minister Lee Hsien Loong touched on recently.

For instance, more buyers - with household income not more than $6,500 - will be eligible for the Special Housing Grant.

A new type of flat will also be launched to encourage multiple generations to live under one roof.

New three-generation flats to be launched next month
By Rachel Au-Yong. The Straits Times, 28 Aug 2013

THE Housing Board is taking another stab at encouraging multiple generations to live under one roof, with new three-generation (3Gen) flats to be launched at next month's sales exercise in Yishun.

The new flat type contains four bedrooms and three bathrooms, and at 115 sq m, is about 5 sq m larger than current five-room units.

Applicants need to comprise at least a married or courting couple and their parents.

To prevent abuse, rooms cannot be sublet during the five-year minimum occupation period. After that, such flats can be resold in the open market, but only to other eligible multi-generational families.

The 3Gen announcement marks a return of multi-generational flats to the HDB stable, after "granny flats" saw a low take-up rate in 1987. These flats - 289 units spread across Yishun, Bishan and Tampines - ranged from 133 sq m to 165 sq m in size.

In the latest incarnation, 80 3Gen units will be launched.

National Development Minister Khaw Boon Wan is unsure if there will be a huge demand, but said he supports its "social objective".

"We really want extended families to live together, for real, and not to game it to get a bigger flat," he added. "If it works, we will build more."

HDB has also tweaked the Multi-Generation Priority Scheme to allow parents of married children to apply for a three-room flat in the same Build-To-Order project.

Previously they were eligible to apply for only studio apartments or two-roomers under this scheme, which sets aside 15 per cent of the corresponding flat supply for them.

Student Denis Tan, 25, applauded the schemes, saying: "We all know Singaporeans are a busy lot. Having family in close proximity really increases interaction, or else it will be only during weekends, if at all."

Enhanced housing grants to cost at least S$150 million a year
Channel NewsAsia, 28 Aug 2013

National Development Minister Khaw Boon Wan said the ministry estimates that the enhanced Special CPF Housing Grant would cost the government an additional housing subsidy of at least S$150 million a year.

In his Facebook post, Mr Khaw said this will raise the current housing grants (Additional Housing Grant and Special CPF Housing Grant) for new flats from about S$290 million to cover S$440 million a year.

Mr Khaw said the enhancement is not a trivial policy shift but a significant one made after careful consideration.

On August 27, the National Development Ministry announced the enhanced Special CPF Housing Grant, extending the benefit to four-room flats, and middle-income families earning up to S$6,500.

The Special CPF Housing Grant was previously meant only for two-room, three-room flats and families earning up to S$2,250.

Due to the grants, those who planned to buy flats in the resale market may opt for Build-to-Order (BTO) flats instead but analysts feel the impact will be small. 

Chris Koh, director of property firm Chris International, said: "In the resale market, I can't wait for a flat, I need a flat fast, so this group is always there. In the resale market, you also have options of other grants like the family grant, so that can offset this S$20,000 that is being offered to them. Having said that, having S$20,000 is still better than not having it so one will be very tempted especially now we have it open to (the) middle income."

Separately, Singapore Permanent Resident (PR) households with no citizen owner will have to wait three years from the date of obtaining PR status before they can buy a resale HDB flat.

This will apply to resale applications received on or after 27 August 2013, 5.30pm.

Previously, they could buy a resale flat once they had their PR status.

"These PRs have options. If I don't buy a resale flat today, I still have the option of renting a place to wait out that three years before I'm eligible to buy. I have lower-end condos that I can consider," explained Koh.

These measures, in addition to others rolled out previously, aim to stabilise the HDB resale market.

The number of resale applications registered with HDB has been falling for the past four years.

In the first and second quarter of this year, the number was 9,570. This is a 42 per cent drop from the 16,630 applications in the same period in 2009.

Analysts expect transaction volumes for the next two quarters to continue falling by five to 10 per cent.

Demand from PRs to shift with new measures
By Sumita D/O Sreedharan and Xue Jianyue, TODAY, 29 Aug 2013

Sales engineer Sean Tan and his wife — who are both Malaysians — were hunting for a resale flat after they got Permanent Resident (PR) status in June. However, their plans will have to be shelved for now.

On Tuesday, the Ministry of National Development and the Housing Development Board announced with immediate effect that PR households have to wait three years after receiving PR status before they can buy a resale flat.

Mr Tan, 26, said he was “shocked” by the announcement. Currently living in a rented room with his wife, he aspires to own a three-room flat and use the next three years to save up more money.

Another PR, marketing executive Chiu P K, 29, while not being affected by the new rules because he is married to a Singaporean, said he was concerned about the spillover effect on the other segments of the property market. “I think the Government is solving one problem but pushing the pressure to the condominium and rental markets,” said Mr Chiu, who came from Hong Kong 16 years ago to study here and received his PR status in 2007.

While property agents and analysts are still assessing the impact of the mandatory waiting period for PRs, those TODAY spoke to noted that previously, not all PRs would rush into the resale market as soon as they received PR status.

Property agent Andros Phay said some PRs have to wait at least five years before they buy a resale flat. “(They) do not have enough CPF to finance their purchase so they will still rent a place till they are financially able,” he said.

Nevertheless, another property agent, Mr Maung Thet Naing Oo, said that most of the PRs he has encountered are those who are established in their careers. “Once they get the PR, they tend to buy a house as they want to make sure their accommodation is more permanent,” he said.

The property agents expect the demand from PRs for resale HDB flats to be shifted to the rental or private property markets.

However, Mr Nicholas Mak, Executive Director of Research and Consultancy at SLP International Property Consultants, said that it was unlikely that there will be a spillover effect on the private residential market. He said: “Those who can afford to buy private properties will buy these properties regardless of the measure.”

Noting that one in five resale flat buyers is a PR, he added that the number of resale HDB units sold may drop by as much as 20 per cent.

PropNex CEO Mohamed Ismail said the impact on the rental market would be “marginal” as newly-minted PRs form a small percentage of PR buyers in the resale market. “That does not mean the PRs will be without a roof, they have other options,” he said. “They can rent, they can buy private resale, or even executive condos in the resale market without fulfilling the three-year rule.”

NEW HDB RULES FOR PRS

Sudden change affects at least 150 property deals
Buyers in mid-deal stranded; HDB plans to review deals on case-by-case basis
By Daryl Chin, The Straits Times, 30 Aug 2013

AT LEAST 150 property deals have hit the skids due to a sudden Housing Board policy change which requires new permanent residents (PRs) to wait three years before they can buy a resale flat.

The figure is an early estimate by property agents, who say that similar cases are streaming in, with PRs having been caught out by Tuesday night's surprise announcement, which took effect immediately.

Before then, PRs could buy a resale flat as soon as their residency had been confirmed.

National Development Minister Khaw Boon Wan said the move was part of efforts to stabilise and "restore balance" in the HDB market.

But it has stranded buyers like IT customer service officer Gong Wei.

The 26-year-old Hebei resident, who received his PR status last year, had already paid the $1,000 option fee and was waiting for the bank's letter of offer to signify his finances were healthy before submitting his application.

The bank's letter arrived on his doorstep on Wednesday.

"The new rule is a decision made by the country leaders and it's a policy I can accept," he said in Mandarin.

"But I feel that a grace period for those who are already in the middle of a deal is a fair concession to make."

While it is not known how many PRs have been caught out by Tuesday's move, official figures show that Singapore granted residency to about 30,000 people a year in the last three years.

Mr Tony Du, president of the Tian Fu Club for new Chinese immigrants - mainly from Sichuan province - said new members typically buy a home within the first three years of being granted residency.

"About 90 per cent go for HDB flats because they're cheaper," he noted.

The development has already led to a drop in demand, which has trickled down to affect sellers and agents.

Some agents report that PRs are cancelling viewings altogether, choosing instead to continue their current rental arrangements or opting for comparatively smaller two-bedroom suburban condo units at the prices they would have paid for a large resale flat in a better location.

Purchasing supervisor William Sin had planned to sell his five-room Woodlands flat to Mr Gong Wei for $502,000. He will now have to look for a new buyer.

Mr Sin, 44, had put down $1,000 on a three-room flat and now risks losing both.

Even before Tuesday, he noted that genuine buyers have been few and far between.

The mortgage servicing ratio limit, capped at between 30 per cent and 35 per cent at the start of the year to cool the market, has already led to the lowest number of HDB resale transactions in the first two quarters since 1997.

"I've heeded the Government's call to reduce my debt," said Mr Sin. "But, ironically, holding on to a bigger unit now is not as good an asset as it was a couple of years back."

Bosses at several of Singapore's largest property firms, including PropNex and ERA Realty, plan to appeal on behalf of buyers affected.

Said PropNex key executive officer Lim Yong Hock: "These are not buyers who are gaming the system, but people with genuine needs. They should not be penalised."

A spokesman for HDB told The Straits Times yesterday that it plans to review the transactions on a case-by-case basis.

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