Archive for April, 2009

Housing Subsidies

Friday, April 24th, 2009

(Part of “The Almost Complete Goondu’s Guide to Buying a HDB Flat in Singapore” series.)

In order to make home ownership more affordable for Singaporeans, HDB flats are subsidised through various schemes.

CPF Housing Grant Scheme

Through the CPF Housing Grant Scheme, the government provides eligible buyers of resale flats with a range of subsidies that cater to families and people who are single.

Under the Family Grant, a subsidy of $30,000 in the form of CPF money is given to first-time applicants who have not enjoyed housing subsidies before, and whose household income is not more than $8,000.

Married couples who meet the first-timer prerequisite, and are purchasing a unit near their parents’ or married children’s residential property, are entitled to a higher-tier grant of $40,000. To qualify for this subsidy, the applicants’ flat must either be in the same town as their parents’ or married children’s property, or within a two-kilometre radius if they are in different towns. The income limit of $8,000 applies in this case as well.

The Singles Grant, as its nomenclature suggests, is meant to assist those who are unmarried. To qualify for this grant, the applicant has to be a Singaporean citizen above 35 years old, and must not have previously enjoyed any housing subsidy from the HDB. If the applicant is living on his or her own, he or she can get a grant of $11,000, whereas joint applicants (ranging between two to four people) can obtain a subsidy of $22,000.

Singles who will be living with their parents are eligible for a higher-tier grant of $20,000. As with the Family Grant, the Singles Grant is for people buying resale flats in the open market.

Top-up Grant

The Top-up Grant is essentially for people who have previously applied and qualified for the Singles Grant. Such a grant recipient can subsequently apply for more subsidies if he or she meets either of the following conditions:

    – The recipient marries someone who is a Singapore citizen and satisfies the first-time criterion, or someone who is likewise a Singles Grant recipient.

    – The recipient’s non-citizen spouse or child has become a Singapore citizen or permanent resident (applicable to those who have bought resale flats under the Non-citizen Spouse Scheme).

Applicants can apply for the Top-up Grant either for their existing flat or when they purchase another resale flat. The top-up amount is the difference between the prevailing Family Grant and the collective Singles Grant amount which the applicants previously received.

For example, based on a basic-tier Family Grant rate of $30,000, if both spouses each received $11,000 under the Singles Grant (thereby making a total of $22,000), the top-up amount will be the difference between $30,000 and $22,000, which is $8,000.

Buyers who are eligible for the Top-Up Grant can also apply for the Additional Housing Grant.

The applicant will have to meet a number of eligibility conditions before he or she can qualify for the Top-up Grant.

Additional CPF Housing Grant

The Additional CPF Housing Grant (AHG) made its debut in March 2006. It is meant to give extra financial assistance to people in lower-income brackets. It was enhanced in 2007 to make it easier for first-time applicants to purchase a flat, especially in these difficult times. The latest revisions to the AHG are as follows:

    – Increase in income ceiling from $4,000 to $5,000.
    – Increase in maximum grant amount from $30,000 to $40,000
    – Reduction of the two-years continuous employment prerequisite to one year.

The changes are intended to let more first-timers qualify for the AHG. Applicants have to meet a number of eligibility conditions before they can apply for the grant, including these:

    – Applicants must meet all the prevailing conditions for the CPF Housing Grant for Family or CPF Housing Top-up Grant (whichever is applicable).
    – At least one applicant must have worked continuously for at least one year before the time of application.
    – The average monthly household income over this one year period must not exceed $5,000.

Grant money can be used to offset the purchase price of the flat, thereby reducing the mortgage amount a buyer needs to secure. It can also be used as capital payment for the purchase. The money can only be used for the initial payment: the balance, if any will have to be used to reduce the mortgage loan. Upon subsequent sale of the flat, the AHG (and the CPF Housing Grant) will be refunded to the recipient’s CPF account, according to prevailing CPF rules.

For more details, check out the HDB Infoweb.

(via The Straits Times, 24th April 2009)

Recovery Expected Only After Mid-2010

Friday, April 24th, 2009

Experts say housing market will rebound after stock market does.

BUYERS snapping up homes in recent weeks may be jumping into the market way before it has reached the bottom, according to new research.

Real estate consultancy DTZ is tipping a gradual property market recovery only from the middle of next year. The firm bases its view on a new report from its Asia forecasting unit.


This shows how a slump, or recovery, in the stock market is always mirrored in the property market, but only after one or more quarters.

Or to put it more bluntly: The housing market will not recover until at least one quarter, or even a year, after the stock market recovers.

And as any stock market investor knows, the Straits Times Index (STI) is well down from its 2007 peak, even though it has risen slightly recently.

‘The STI reflects people’s view of the economy so its recovery will really depend on clear signs of an economic recovery,’ said DTZ’s senior director of consulting and research Chua Chor Hoon.

Experts have long noted that a recovery in the stock market typically precedes an economic recovery, with a recovery in the property market after that.

‘It’s all co-related in one way or another. The stock market is usually the earliest indicator but it’s not hard and fast… its timing might be off,’ said Daiwa Institute of Research analyst David Lum.

Last week, the Government said it expects gross domestic product to contract by 6 per cent to 9 per cent this year, well up on an earlier forecast of a 2 per cent to 5 per cent contraction. DTZ’s study also underlined the high levels of unsold stock held by developers – another drag on prices and an eventual recovery.

The report indicated that the residential market thus has a higher chance of bottoming out only by mid-2010 and then staging a gradual recovery.

Mr Lum said the property market has already started to correct so anyone who bought recently would not have purchased at the peak.

If prices fall further, these people will not be happy, but they would have been comfortable with the price levels they bought into and will not be overstretched as they would have thought about their purchase, he added.

DMG & Partners Securities investment analyst Brandon Lee believes the mass market segment would have bottomed out at around $550 psf to $600 psf so recent buyers may not have much to worry.

Those who bought prime homes, however, may have gone in too early. Mr Lee sees the property market bottoming out only in the first half of next year.

‘Crises in the past have lasted for six to eight consecutive quarters and we are only half way through,’ he said.

‘Further, equity markets are still volatile and prices have not reached the bottom for prime properties. Interest in prime property remains very subdued.’

The property market remains largely weak, even though recent sales of new private homes brought a glimmer of hope to the market. First-quarter new private home sales hit 2,660 units, representing 62 per cent of all new private homes sold during the whole of last year.

Whether it was pent-up demand, discounted levels or other factors, sales did reach very high levels given the recession.

But most sales were in the mass market segment, which consultants tip to be the best-performing sector this year.

Demand for prime and high-end homes remains sluggish.

‘Since when does a ‘rebound’ in one segment signal a recovery for the entire market?’ asked Chesterton Suntec International head of research and consultancy Colin Tan.

‘The greatest danger we face now is complacency…If it were an ordinary recession, I can understand why we are starting to call this period of optimism the first signs of a recovery, but it is not,’ said Mr Tan.

‘The recovery cycle will be like no other. There will be further twists and turns.’