SINGAPORE — The increased CPF housing grants announced in Budget 2023 could further increase HDB resale prices in Singapore, according to a property expert.
During the Budget 2023, Deputy Prime Minister and Finance Minister Lawrence Wong said eligible families could receive up to almost S$190,000 in grants when buying a resale flat.
Lynlee Foo of MoneyFM 89.3 spoke with Ku Swee Yong, director of International Property Advisor Private Limited, who explained that the additional grants of an extra $30,000 paid through CPF to subsidize home purchases, amounts to a 3 per cent to 5 per cent savings.
While the increased grants may benefit eligible first-time homebuyers, Ku questioned whether all eligible buyers would be able to afford buying in the resale market.
“Eligible first-timers make up a fraction of that, but eligible first timer with the 14,000 household income cap. Does it mean that all of them would actually be able to afford buying in the resale market?” Ku asked.
“I may be an eligible first timer. Me and my spouse, our income could be just S$6000 combined. We wouldn’t jump into the resale market.”
Ku also cautioned young families to consider long-term financial planning and retirement adequacy when making home purchase decisions.
“Young families should consider slightly longer and longer term. 30 years from today, would their retirement adequacy be affected? Because today you have decided to pay a little bit higher for resale flats instead of continuing in the BTO queue. You might realize then, looking back that you have actually used up quite a lot of your funds and not having saved enough for your retirement years,” he said.
Despite these potential challenges, Ku also noted that new Singaporean citizen families who have converted from permanent residents to citizens could be more willing to jump in and buy resale flats, as they are likely high-skilled, high-value workers.
Ku also noted that in the short term, sellers of HDB resale flats may hold tight to their asking prices, with some potentially tempted to push up prices by a small amount of S$10,000 or S$20,000. However, he also pointed out that all HDB prices are pegged to the Resale Price Index (RPI).
The RPI, which reflects the general price movements in the resale market, for the 4th Quarter of 2022 is 171.9, an increase of 2.3% over that in the 3rd Quarter of 2022.
It has just been reported that a 1,206 sq ft HDB 5-room Built-To-Order (BTO) flat in Seng Kang, which has recently completed its five-year Minimum Occupation Period (MOP) was sold for S$928,000, equivalent to around S$770 psf.
“Perhaps in a year’s time, we might see the issue of the affordability of BTOs and resale flats being widely discussed. Next year, this time, because BTO prices could be notched up, pushed up a little bit by this resale price index moving up,” he said.
In addition to the increased CPF housing grants, the higher marginal buyer stamp duty could also impact homebuyers and developers. Ku noted that developers would need to factor in the additional cost when buying land or redeveloping properties, and consider whether buyers would be willing to pay the higher stamp duty.
Ku said, “Developers have to factor in this unexpected increase in buyer stamp duty. And on top of that, they also have to consider that when they buy a piece of land or bought an enbloc, when they redevelop it, would the buyers of these strata title apartments have the budget to stretch to include that 2 per cent extra stamp duty?”
The result could be that developers may reduce the size of the apartments to attract buyers in lower price ranges.
Overall, the increased CPF housing grants and higher marginal buyer stamp duty may complicate the decision-making process for young families in Singapore looking to purchase a home, and it remains to be seen how these measures will impact the property market in the coming months.