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SG Analysts: New housing grants the right move

Property Here - Tuesday, August 20, 2013

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The new housing grants announced by Prime Minister Lee Hsien Loong in his National Day Rally speech on Sunday are a move in the right direction, consultants said. However, they differ on whether or not these grants will affect the wider market, local media reported.

Among the measures was the extension of the Special CPF Housing Grant (SHG) to middle-income households looking to buy four-room flats. The Step-Up Housing Grant was also launched to help families looking to upgrade from two-room to three-room flats.

According to Ong Kah Seng, Director at R'ST Research, the grants will not impact the resale market as the tighter mortgage servicing ratios (MSR) put effective controls on overbuying.

“Buyers will opt for the appropriate flat size and location in accordance with their earning capacity and loan limits...This is already effectively shown in the recent months of stabilised resale flat prices and lowered cash-over-valuation (COV),” he noted.

But DTZ’s Research Head Lee Lay Keng believes the grants will cool the resale market by diverting demand to the primary sales pool, particularly buyers looking at four-room resale flats.

“This could lead to an easing of transaction volumes, prices and COVs in the HDB resale market.”

Alan Cheong, Senior Director, Research and Consultancy at Savills Singapore, said the market would react very differently depending on whether the Step-Up Housing Grant would target BTO or resale flats.

“Intuitively, if the additional grants extend only to BTO flats, then it should be a negative on the resale market as it will siphon first-timer demand from the latter to the former. Resale demand will cool and this will have negative concatenating effects on the entire housing chain.”

“But if it also applies to first time buyers of resale flats, if the BTO building rate is not improved, then increasing the grant amounts to an increase in liquidity flowing into the resale market. This will have positive concatenating effects,” added Cheong.


Romesh Navaratnarajah, Senior Editor at PropertyGuru, edited this story. To contact him about this or other stories email