Experts predict the increased CPF Housing Grant and additional BTO ballot chances will drive more first-time buyers to the resale market.
SINGAPORE: With rising costs and a pressing demand for affordable housing, the Singapore government’s Budget 2023 measures, announced on February 14, are expected to offer critical support for first-time homebuyers—though they may also have unintended effects on the housing market.
One of the key highlights of the Budget was an increase in the Central Provident Fund (CPF) Housing Grant for resale flat buyers. The grant for first-time families purchasing a four-room or smaller resale flat has been raised by S$30,000, bringing the total to S$80,000. For those purchasing a five-room or larger flat, the grant increases by S$10,000, reaching S$50,000. First-time singles will receive half of these amounts: S$40,000 for a four-room or smaller resale flat, and S$25,000 for larger flats.
Together with other housing grants, a first-time family with a monthly household income of less than S$1,500 could receive up to S$190,000 for a resale flat. In addition, Budget 2023 introduces more ballot chances for younger first-time buyers with children to improve their chances of securing a Build-to-Order (BTO) flat.
Resale Flats to See Increased Demand
While the increased housing grants are designed to alleviate some of the financial strain on young families, analysts predict that these measures could fuel greater demand in the resale flat market.
Professor Qian Wenlan from the National University of Singapore (NUS) Institute of Real Estate and Urban Studies said that the combination of increased grants and prioritization in the BTO system should help address the rising cost of homeownership. However, the rising demand for flats could further increase competition, particularly as resale prices continue to climb.
According to Mr. Lee Sze Teck, Senior Director of Research at Huttons, some first-time buyers will find themselves with a greater need for a flat but are unable to wait for the extended BTO timelines. With resale prices rising over the past two years, the increased grants will help offset the higher costs, especially for lower-income families.
Shifting Demand and Price Adjustments
The HDB resale price index saw a nearly 31% rise from Q1 2020 to Q4 2022, and analysts expect that the increase in housing grants could spur further demand in the resale market. As a result, resale flat prices may continue to climb, potentially leading to an uptick in transactions. Mr. Lee predicts that the resale market could see between 26,000 to 28,000 transactions, up from an earlier estimate of 24,000 to 26,000. Resale prices could increase by 8% to 10% instead of the previously forecasted 5%.
The effect on the BTO market may also be significant, with some buyers opting for resale flats due to the shorter wait time. This could balance the supply-demand disparity in the BTO market and offer more opportunities for first-time buyers to secure a flat.
Easing Pressure on the Private Market
Analysts believe that the additional CPF housing grant could even influence demand in the private residential market. For first-time singles with the option of choosing between a larger HDB resale flat or a smaller private property, the additional support might push them to the resale market, helping to ease demand for private properties.
However, some experts, like Associate Professor Yu Shi Ming from NUS Business School, warn that the increase in grants might have a counterproductive effect on the goal of helping young families. He pointed out that with more financial support, buyers may be inclined to purchase larger or better-located flats, leading sellers to raise their asking prices. This could result in continued price hikes in the already competitive resale market, despite various cooling measures introduced in the past.
In conclusion, while Budget 2023’s housing measures are likely to help first-time buyers, they may also contribute to higher resale flat prices, further intensifying competition in the market. The impact on both the BTO and resale markets will be closely watched in the coming months.
