HDB's tweaks to income assessment, grants disbursement could plug loopholes; minimal impact on housing market expected: Experts

SINGAPORE — New changes made by the Housing and Development Board (HDB) to income assessment and housing grants distribution methods of home buyers could plug potential loopholes and also make it fairer for those with fluctuating incomes, property analysts and agents said.

TODAY spoke to them after HDB announced on Monday (May 8) that those looking to buy HDB flats or executive condominiums (ECs) will have their incomes assessed over a period of 12 months, instead of the most recent three or six months, depending on whether one is a salaried employee or self-employed.

Income assessment is significant because it determines not only one's eligibility to buy ECs and HDB flats, both new and resale, but also the amount of certain grants one is entitled to as these grants are tied to income levels.  

On Monday, HDB also announced that eligible housing grants will be shared among applicants and occupiers in the household if they are engaged, instead of being given only to the applicant.

Also, if the applicants are a couple made up of a Singaporean and a permanent resident, both will get the grants, instead of just the Singaporean previously.

The changes, which also include a new HDB Flat Eligibility (HFE) letter that is aimed at streamlining the purchase process for buyers, take effect on Tuesday.

Property analysts and agents whom TODAY spoke to also said that the various changes would not have a large impact on housing demand and prices, as the moves are mainly procedural in nature.

CHANGES IN INCOME ASSESSMENT PERIOD

Besides lengthening the income assessment period to 12 months, HDB introduced two other changes: 

• The income to be assessed will cover "all income from employment or trade, except bonuses"
• The assessment period ends two months before the month of HFE letter application, meaning if one applies for the letter in May 2023, the assessment period will be from April 2022 to March 2023

HDB said the change will allow for a "clearer assessment of an applicant’s income level, especially for those whose income fluctuates from month to month".

Property analysts and agents who spoke to TODAY welcomed this change and agreed that it will be fairer for those with fluctuating incomes.

Mr Nicholas Mak, chief research officer at property technology company Mogul.sg, said: “The change in income assessment period is better for those who have been unemployed for several months or were changing jobs somewhere within that 12-month period.”

Agreeing, both Mr Chris Koh, director of property firm Chris International, and ERA real estate agent Jack Tan said that stretching the review period to over 12 months will be good for those with unstable incomes, such gig workers.

Apart from providing a more consistent and clearer assessment of a buyer’s income, the extension to 12 months can also plug loopholes in the homebuying process, experts said.

Provost's chair professor at the National University of Singapore’s Department of Real Estate, Professor Sing Tien Foo, said that high income earners intending to buy a home could exploit the previously short income assessment period to not only qualify for the purchase but also to higher grants.

“This could have been done by having one spouse quit their jobs for a few months, so that the combined household income reflected is lower than what the couple can actually earn together,” said Prof Sing.

In short, extending the assessment period to 12 months will make getting round the rule harder since it would require one to be without income for a much longer period of time, though it does not make it entirely impossible. 

"Overall, the 12 months income assessment will shave off high income earners trying to game the system," said Prof Sing.

HOUSING GRANTS 

Under the new measures, housing subsidies will be shared among all core applicants and core occupiers, for first-time applicants, instead of just the core applicant.

The core applicant and core occupiers are the necessary owners and occupants that form the core family nucleus respectively. The changes mean that they will share housing grants which could go up to S$190,000.

But these measures also impose restrictions on how these grants are used.

Only the core applicants can use their share of the housing grants to pay for the flat purchase, while the share of the grants that go to the core occupiers can only be used by the occupiers later on when they apply for another flat in future.

LIMITED IMPACT ON HOUSING DEMAND, PRICES

When asked if the latest moves would affect the public housing market, experts generally said that the measures mostly address procedural issues with buying a public flat.

Prof Sing said those with fluctuating incomes and would thus benefit from the longer assessment periods do not make up a huge proportion of buyers.

It is also unlikely that there is a significant proportion of buyers who use such loopholes that could move the needle on market conditions.

Mr Mak said: “Most of the HDB flat owners and buyers I meet and know are ordinary Singaporeans who have decent jobs, and they need to work to earn an income. They cannot afford to be unemployed for a year just to game the housing system.” 

As such, experts do not foresee a significant cooling effect on housing demand and, thus, resale prices, they said.

NEW HFE LETTER

Another change announced by HDB is the introduction of the HFE letter, which will inform prospective buyers upfront of their eligibility for a new or resale flat, housing grants and HDB loans.

This includes the grant and loan amounts that homebuyers will be getting.

Previously, their eligibility for these three would be assessed at different stages of their home buying journey. 

For example, their eligibility for a housing grant would be assessed when they are applying for a resale flat. 

This could lead to uncertainty about their housing budget as they do not know how much of the grants they will receive even as they are about to secure the purchase of a flat.

One prospective home buyer, Mr Jeff Ng, said that the new administrative change is helpful.

“Previously, under the old process, it was quite confusing for me to calculate how much I will get in grants and loans.

"The new changes reduced this complexity and have not affected my homebuying plans. I can still receive the same amount in grants I qualified for before the change to HFE and the review of the income assessment period,” said the 32-year-old engineer, who is a first-time buyer applying for a five-room resale flat with his partner.

CLARIFICATION: An earlier version of the article quoted a property agent stating that couples could "game" the system and get full access to grants by putting only one spouse as the applicant. HDB has clarified that the combined household income of both applicants and occupiers are assessed.