Housing Market Shifts as Government Measures Provide More Support to First-Time Buyers
Singapore’s Budget 2023 introduces new housing measures that could significantly impact the property market, especially for first-time buyers. The government’s decision to increase the Central Provident Fund (CPF) Housing Grant for resale flat buyers is expected to reduce some financial burdens and spur demand in the HDB resale market.
Grant Increases and Impact on Homebuyers
Finance Minister Lawrence Wong announced on February 14 that the CPF Housing Grant for first-time families purchasing resale flats would increase by S$30,000, now reaching a total of S$80,000 for families buying four-room or smaller resale flats. For families purchasing five-room or larger resale flats, the grant will rise by S$10,000, bringing the total to S$50,000. First-time singles will receive half of the amounts available to families, with grants of up to S$40,000 for smaller flats and S$25,000 for larger ones.
This initiative aims to support those with a household income of less than S$1,500, potentially offering up to S$190,000 in grants for eligible families. The Budget also introduces prioritisation measures for younger buyers and those with children, including additional chances in the Build-to-Order (BTO) flat ballot system.
Supporting Urgent Housing Needs Amid Rising Prices
Professor Qian Wenlan from the National University of Singapore highlighted that the increased grants, alongside more ballot chances for BTO flats, will assist young families struggling with the rising costs of homeownership. “With the pandemic causing delays in housing supply, this move helps alleviate the pressure on first-time buyers, especially those in urgent need of a home,” she explained.
Mr Lee Sze Teck from Huttons echoed this sentiment, pointing out that some first-time buyers may not be able to wait for BTO flats to be completed in several years. The increased grants will help offset the recent rise in resale flat prices, especially benefiting lower-income buyers.
Shift Towards Resale Flats and Increased Market Activity
The HDB resale price index saw a nearly 31% rise between Q1 2020 and Q4 2022. PropNex’s CEO, Mr Ismail Gafoor, sees the grant increase as a timely intervention that could help mitigate the cost of resale flats by reducing down payments or loan amounts.
This change could encourage families to downsize to smaller flats, thereby easing the demand for larger five-room flats. Analysts predict that these moves could shift demand from the BTO market and smaller private properties towards resale flats, potentially increasing transaction volumes in the resale market.
Mr Lee forecasts the resale market’s transaction volume could rise to between 26,000 and 28,000 units, up from an earlier projection of 24,000 to 26,000. He also expects resale prices to increase by 8% to 10%, up from an earlier prediction of about 5%.
Potential Effects on BTO Demand and Resale Market Prices
As demand shifts towards resale flats, the BTO market may experience a relative easing of demand, which could improve the chances of first-time buyers securing a BTO flat. This could be compounded by the increased supply of BTO flats and additional ballot chances.
However, experts like Ms Chia Siew Chuin from JLL Singapore warn that the increased housing grants may cause some first-timer singles to opt for larger HDB flats rather than smaller private non-landed units, further boosting demand for resale flats.
Concerns Over Rising Resale Prices
While many analysts welcome the measures, Associate Professor Yu Shi Ming from NUS cautioned that the increased government grants could inadvertently drive up resale flat prices. With more capital available to buyers, sellers may increase their asking prices, contributing to continued price growth. “We’ve already seen resale prices reaching new peaks, and this announcement may perpetuate this trend,” he said.
In conclusion, while the government’s move to increase CPF Housing Grants for resale flats is expected to support first-time buyers, it may also have the unintended consequence of further inflating the prices of resale flats, despite previous cooling measures.
