Changes in HDB grants: No price spikes for resale flats but EC crunch could worsen

Changes in HDB grants: No price spikes for resale flats but EC crunch could worsen

While the resale market for ageing flats is set to see a boost from changes to housing grant schemes that kicked in yesterday, the prices of such flats may not necessarily rise in tandem with increased demand, property observers said.

This is because the Government is likely to increase the supply of new flats to match the higher overall demand and keep housing prices under control, they added.

The analysts were responding to changes announced on Tuesday, which included the Enhanced CPF Housing Grant (EHG).

The EHG - given to first-timer families earning $9,000 or less - replaces two previous grants.

It allows more people to benefit, as it has a higher income cap and does not impose any restrictions on flat size or location.

PropNex chief executive Ismail Gafoor said the EHG will increase buyer interest in resale flats and could help owners who have found it difficult to sell their older flats.

He noted that while resale flats are about 20 per cent pricier than comparable new flats, the additional grant money (up to $40,000), coupled with other advantages such as saving on renovation and a shorter waiting time, could narrow the price gap for first-time buyers.

But he does not expect prices to rise significantly just because there are more buyers.

To keep public housing affordable, the Government will most likely monitor the market and ramp up the supply of new flats if needed, he said. Prices may increase slightly with inflation but should remain stable overall, he added.

ERA Realty's head of research and consultancy Nicholas Mak said the changes may not mean that buyers will now rush for resale flats in mature estates, as many consider multiple factors in buying homes.

Some who have specific wants, such as living near their parents, may be prepared to pay a higher price or receive less in grants to get their desired flat through the resale market, he noted. Buyers who get a resale flat with a lease that does not cover them till age 95 will see their grants pro-rated.

But for most, the specific flat's proximity to amenities like MRT stations and schools, or to undesirable elements like columbariums and expressways, is more significant than the type of estate, Mr Mak said.

And younger buyers generally tend to prefer newer flats that are easier to sell off a few years down the road, he added.

The housing policy changes include raising the income ceiling for executive condominiums (ECs) from $14,000 to $16,000.

In the short term, this will likely widen the gap between the high demand and low supply of ECs as the land supply for such projects is scarce, Mr Mak said. "The supply in the short term is quite inflexible," he added, noting that the rules require developers to wait at least 15 months before they can launch EC projects after acquiring land parcels.

So even if the Government were to sell more land parcels next year, new ECs would be launched in 2021 to 2022 at the earliest, he said.

Mr Mak noted that there are currently three EC projects set to be launched next year.

There were no would-be buyers yesterday afternoon when The Straits Times visited the showroom for Piermont Grand in Punggol - the only EC launched this year.

"It's still early days. I'm hopeful for the weekend when more people have heard about the news and are not working," said OrangeTee & Tie property agent Andrew Yew.

"The EHG has been a long time coming and really helps young couples who might have been considering ECs previously but whose income exceeded the ceiling."

Source from The Straits Times 12 Sept 2019