Property

Budget 2017’s CPF Housing Grant for Resale Flats Increase: What it Means for Singaporeans

Lynnette Goh 0 Comments

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So our Finance Minister Heng Swee Keat announced in his Budget statement on Monday that the CPF Housing Grant for first-timer couples purchasing flats from the resale market has been raised from $30,000 to $50,000. Whoo-hoo! We now have $20,000 more to get less birdhouse-y homes! Let’s all rejoice and take a moment of silent gratitude. What does this change really mean for us though? Let’s take a closer look.

 

The low-down

The CPF Housing Grant we’re talking about here, is applicable only for:

1) First-timer SC/ SC (Singapore Citizen) or SPR (Singapore Permanent Resident) households and SC singles, that are looking to buy

2) Resale flats with a minimum 30 years of leasehold left

**If your flat purchase does not meet the above criteria, sorry you’ll have to pop that happy balloon of joy out.

The cap for this grant has been increased from $30,000 to $50,000 for four-room flats or smaller, and to $40,000 for flats five-room or bigger, for SC/SC households. SC/SPR households basically get the same grants but at $10,000 lesser for each flat type denomination. And singles $20,000 and $25,000 each respectively.

Besides the aforementioned, there is no other change. So why is this such a big thing? Because on top of the CPF Housing Grant, there is also the Proximity Housing Grant and the Additional Housing Grants! The PHG gets you another $10,000/$20,000 if you live with/within 2km of your parents, while the AHG gets you an additional $5,000-$40,000 depending on your monthly household income. The breakdown would look something like this:

For Families

CPF Housing Grant: $30,000 to $50,000
(depending on flat size and whether both are Singapore Citizens)
AHG: $5,000 – $40,000
(Depending on household income; not applicable for households with avg monthly income of above $5,000)
PHG: $20,000

Total Grants for Families: $65,000 – $110,000

 

For Singles

CPF Housing Grant: $20,000 to $25,000
(depending on flat size)
AHG: $2,500 – $20,000
(Depending on household income; not applicable for singles with avg monthly income of above $2500)
PHG: $10,000

Total Grants for Singles: $32,500 – $55,000

 

Does this change how we see resale flats?

In the past, we’ve always seen BTO’s as the cheaper option due to the grants and subsidies. Now with this change, the resale grants are comparatively higher to that of BTO grants for first-timers- since it only comprises of the AHG (which is at the same rate as the above) and the Special Housing Grant, which is also dependent on monthly household income. And we all know that when a grant is dependent on income, it’s not going to amount to much if your spouse and you earn an average of even only $2,550 each.

Take for example if you’re considering a flat in Clementi. You’re looking around with your honey for a suitable home near your parents and your combined income just nicely hits that $5,000 mark (to qualify for the AHG).

According to HDB’s latest sales launch, the price range for the latest BTO exercise in Clementi is, $432,000 to $550,000 for a 4-room of 90 square meters. We’ll pick the lowest of the range as an example. Your grant would amount to something like this:

AHG: $5,000 ($5000 monthly income)
SHG (Special Housing Grant): NA (Matured town)
Price of house: $432,000- $5,000= $427,000

You would effectively be paying $427,000 for your house after grants.

The reported price range for resale comparables of 90sqm to 100sqm in the vicinity is $520,000 to $785,000. The lowest price for the comparable is $520,000. A purchase would mean you get $75,000 worth of grants:

CPF housing grant: $50,000
AHG: $5,000 monthly household income- $5,000 (grant)
PHG: $20,000 (family)

Total Grants: $50,000+ $5,000+ $20,000= $75,000

After subsidizing the grants, you’ll still have to pay $445,000 ($520,000-$75,000) for the flat. Although this amount is larger, you can get your house straight away. The question would be though, is this $18,000 difference in price worth your investment? Would you mind waiting 3 to 4 years for a home at a slightly cheaper price? It’s really just a matter of urgency. Think of it as a preference to whether you need the “express shipping cost” on your home or not.

 

What is the Government’s intention?

With this in mind, I can’t help but ponder why the government is subsidizing resale flats at this point of time. I mean, it’s obvious this new change is something to celebrate about, but on the other hand, it kind of just evens out the playing field at best? So what is the government’s real intention?

Is it because the government wants to shift HDB sales towards the resale market now that demand is off the rails again because of the cut down in BTO supplies? Judging by the turn-out of the last BTO exercise, the demand massively exceeded the flats supplied (11 bids to 1 for Bidadari!). Could the government be setting its sights to increase sales in the resale sector to regulate the property market? Are they trying to make resale homes look (cue: the word “look”) affordable again?

On the surface, there is no doubt that this new grant “package” the government is offering is attractive. That $20,000 difference is significant. I’ve already been sitting here all day trying to stop my finger from clicking on resale adverts instead of focusing on work. After all, won’t an increase in demand for resale flats push resale prices up again in the years to come? Profits galore!

But if you don’t have the funds to get a resale flat now, then you’ve probably missed the boat.  Well, until the Government increases the Housing Grant amount for resale flats again.

 

Will you be taking advantage of the increased CPF Housing Grant? Why or why not?

 

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Lynnette Goh

Spoilt kid turned free-spirit, I’ve struggled finding and funding myself taking a road less travelled. These days, I enjoy writing lifestyle topics that bring value to life and its future, injecting humour to otherwise boring topics. Who said personal finance can’t be fun? In my free time, you can find me chasing American dramas, and having the occasional glass of wine over conversations with friends.

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