Cash-tight elderly looking to downsize to get help

SINGAPORE — 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.