Friday 26 September 2014

Pay less cash upfront when you “right size” your HDB flat: Staggered Downpayment Scheme

Cash-tight elderly looking to downsize to get help
Down payment halved for buyers of two- or three-room flats in new scheme
By Xue Jian Yue, TODAY, 25 Sep 2014

To help existing flat owners looking to move into smaller flats but facing cash flow difficulties, the Housing and Development Board (HDB) has announced that those buying a two- or three-room flat in a non-mature estate can opt to pay half the required down payment for their new flat.

They need pay the other half together with the balance purchase price of the new flat only when they collect the keys.

The Staggered Downpayment Scheme kicks in from the latest Build-to-Order exercise launched yesterday, under which a total of 4,630 flats were offered for sale in Bukit Batok, Hougang, Jurong West and Kallang Whampoa.

Of these, close to 1,800 units are two- and three-room flats in the non-mature estates of Bukit Batok, Hougang and Jurong West.

The HDB said flat buyers do not need to apply for the scheme, as it would be extended to those who are eligible.

To qualify automatically, flat buyers will need to have applied to buy a two- or three-room flat in BTO or Sale of Balance Flat exercises from this month. The new unit has to be in a non-mature estate and buyers must not have sold their existing home.

In general, the purchase of a new flat under the scheme also has to help buyers unlock net sales proceeds for their retirement — in other words, the purchase price has to be lower than the sale price of a buyer’s existing flat.

In response to media queries, the HDB said if buyers do not meet this criterion, but face difficulty in making the full down payment, it would consider such cases on its merits.

It reiterated that the scheme is “intended to help flat buyers who wish to right-size to a new flat in preparation for retirement, but have their funds tied up in the existing flat”.

Currently, buyers who do not take loans or sign up for HDB loans are required to pay a down payment of 10 per cent of the purchase price, while those who are borrowing from financial institutions need to pay a down payment of 20 per cent.

These will be halved to 5 per cent and 10 per cent, respectively, under the new scheme.

Writing on his blog, National Development Minister Khaw Boon Wan said the initiative would help elderly residents who want to move into a smaller flat, but need to sell their existing unit first to raise funds for the new purchase.

“At Meet-the-People sessions, I sometimes meet elderly residents who intend to right-size to a smaller flat, but face some cash-flow difficulties in the process,” he said. “The sale proceeds for their existing (larger) flat will be enough to pay for the new (smaller) flat, but they need to sell the flat first.”

He revealed that the HDB had told him that, last year, 47 elderly residents cancelled their new flat bookings because they were unable to raise the down payment.

“They must have felt disappointed, having to abort their plans because of a cash-flow problem,” Mr Khaw said.

Property analysts whom TODAY spoke to noted that without an age criterion, the new scheme would benefit a large group of prospective buyers — including those in financial hardship looking to downsize their homes.

Losing one’s job and family issues such as divorce are some possible reasons a buyer could struggle to fork out the down payment, said Mr Mohamed Ismail, chief executive officer of PropNex Realty.

Chris International director Chris Koh noted that the scheme could also ease the financial outlay of those who are helping their aged parents pay the down payment for a smaller home.

Mr Colin Tan, Director of Research and Consultancy at Suntec Real Estate, said the root of the problem is high property prices.

Noting that a typical family does not enjoy the luxury of space in an HDB flat, he said: “If property prices were lower, we won’t have this problem ... If property prices were lower, (buying or living in) bigger flats is not a problem.”

Meanwhile, the HDB said that, in November, it would put up for sale about 4,290 BTO flats in Sembawang, Sengkang, Tampines and Yishun.

An additional 3,000 flats will be offered in a concurrent Sale of Balance Flats exercise.

Pay less cash upfront for small BTO flats
By Janice Heng, The Straits Times, 25 Sep 2014

EXISTING Housing Board flat owners who move to small new flats can choose to pay half of the required down payment upfront, and the rest later.

This staggered down payment option is only for those looking to buy new two- or three-room flats in non-mature estates. They must be able to "unlock net sales proceeds" by doing this, meaning that their new flats must be cheaper than their existing ones.

For buyers of such flats who do not meet this criterion but have trouble making the full down payment, their cases will be assessed on a case-by-case basis by the HDB.

The change takes effect from this month's Build-To-Order (BTO) exercise, which began yesterday. The move aims to help flat owners who wish to "right size" to a new unit but have their funds tied up in their existing flats, said the HDB.

Those who are not taking a bank loan, or who are taking an HDB loan, need to pay only 5 per cent in down payment when they sign the Agreement for Lease, instead of the current 10 per cent.

Those taking loans from financial institutions need to pay only 10 per cent upfront, instead of the current 20 per cent.

The other half of the down payment needs to be paid only when the buyer collects the keys to the new flat.

In a blog post, National Development Minister Khaw Boon Wan noted that at his Meet-The-People sessions, he sometimes meets elderly people who want a smaller flat but have cash-flow problems.

Last year, 47 elderly people cancelled their new flat bookings because they were unable to raise the down payment, he noted.

To be eligible for the scheme, buyers should not have completed the sale of their existing flats when applying for the new ones.

Applying for the scheme is not required, as the HDB will extend it to those who are eligible.

The move was announced at yesterday's BTO launch of 4,630 new flats, across five projects in the non-mature towns of Bukit Batok, Hougang and Jurong West and one project in the mature estate of Kallang Whampoa.

Flats range from 36 sq m and 45 sq m two-room units to five-room units of up to 112 sq m and 115 sq m Three Generation flats.

Analysts expect a good response for the Kallang Whampoa project. It is in a mature estate and also close to Boon Keng MRT station, noted ERA Realty key executive officer Eugene Lim.

But pastor Chua Hock Lim, 71, is trying for a three- or four-room unit in Bukit Batok instead, as it is "cheaper than Whampoa" and closer to town than Jurong West.

As of 5pm yesterday, two-room flats in Hougang and four-room units in Kallang Whampoa were the most popular. Both had 1.3 applicants per unit, with singles accounting for most of the demand for the two-room flats.


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