Bigger resale grant a shot in the arm for weak market: Analysts

SINGAPORE — The increase in housing grants for couples buying their first resale flat may inject life into a lacklustre resale market, property analysts said, adding that there is enough of a buffer in housing supply now to deter sellers from jacking up prices.

Apart from giving couples more choices, the move may also encourage more of them to settle down more quickly, given the shorter waiting time.

If buyers bite though, resale prices may rise in the coming months, albeit at a gradual pace, the experts said, while others pointed out that this may bridge the price gap between resale and Built-to-Order (BTO) units, and help the Government to cut the supply of BTO flats gradually.

Unveiling the Budget on Monday, Finance Minister Heng Swee Keat said that the Central Provident Fund (CPF) Housing Grant would be increased immediately to better support couples wanting to buy their first resale flat from the Housing and Development Board, with those opting for a four-room or smaller unit to receive a S$50,000 grant, up from the previous S$30,000.

Couples buying five-room or bigger flats will receive a grant of S$40,000, previously capped at S$30,000.

Adding in the Additional CPF Housing Grant (up to S$40,000) and Proximity Housing Grant (S$20,000), it may be possible for a couple to receive a total of up to S$110,000 in grants when they get a resale flat.

The cost of resale units has gone down by 10 per cent since the second quarter of 2013 — the year the Mortgage Servicing Ratio was introduced as a cooling measure, property analyst Ku Swee Yong said.

The chief executive officer of International Property Advisor also said that prices could pick up in the next two quarters, since the increased housing grant would incentivise couples to switch from buying BTO units or even executive condominiums to buying resale flats.

Mr Eugene Lim, key executive officer at ERA Realty, agreed, saying that BTO flats typically have a waiting time of around three years before owners can move in, and couples may choose resale homes now that they are within easier reach.

He added that by diverting demand to the resale market, the Government then has the flexibility to cut the supply of BTO units gradually when needed, without upsetting market equilibrium.

On the possible surge in demand for resale units, Associate Professor Sing Tien Foo from the National University of Singapore said that there should be a sufficient buffer to meet new demand, because there would be families selling their flats to move to private housing units.

Prof Sing, who is from the department of real estate at the university’s School of Design and Environment, added that the increased housing grant may also help moderate the gap in prices in the resale and BTO markets.

A potential first-time buyer, Mr Tommy Lee, 30, told TODAY that he has been unsuccessful in securing a BTO unit in the last four years, not to mention that he may have to wait another four years to move in if he gets one. While some housing projects were oversubscribed, he and his fiance have also been selective in their choices, preferring a home near Macpherson or Toa Payoh, where their parents live.

They have decided now to turn to the resale market. “The increased housing grant is a good sweetener, especially for those looking to settle down quickly,” Mr Lee said, though he anticipated that resale home prices may go up and “this would be as good as offsetting the incentives the Government is providing”.