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Announced yesterday by Minister for National Development Lawrence Wong, the Enhanced CPF Housing Grant for first-timers and higher income ceilings will provide more flexibility and housing options. We study how this will impact the property market.
By Khalil Adis
#1: Who will this benefit the most?
First-time homebuyers will benefit the most especially the middle to low-income bracket groups. It will also benefit first-time homebuyers who want to live close to their parents in mature estates.
#2: Why now?
This is because incomes have been rising since the HDB last reviewed the income ceiling in 2015. As such, the policy has been tweaked to address this.
#3: How will this affect the HDB market?
The sandwiched class may now opt to buy an HDB flat compared to buying a private property due to the increase in income ceiling and Enhanced CPF Housing Grant as it will mean less cash upfront.
This will help to prop up demand for resale HDB flats.
It is worth noting that the resale HDB market has been rather muted.
As such, we are likely to see an increase in activity particularly for those who want to live close to their parents.
#4: How will this affect the private housing market?
We may see the sandwiched class now switching to buy from the HDB market and thus ease pressure from the private housing market.
As such, we are likely to see the Private Property Index (PPI) see a slight correction in the next quarter.
#5: Will this affect HDB prices across the board?
It will affect prices in the HDB resale market as buyers are now given more help with the Enhanced CPF Housing Grant.
The HDB Resale Price Index has seen a decline since the first quarter of 2013.
However, with the increase in income ceiling and Enhanced CPF Housing Grant, we could see more sales activity in the otherwise muted resale market.
#6: How will this affect the rental market?
The HDB and private property rental market will be very soft as more buyers will be switching to buy rather than rent a property. In the HDB market, the HDB will be launching 15,000 units later this year.
Meanwhile, in the private property market, we have a total supply of 53,696 uncompleted private residential units (including ECs) in the pipeline with planning approvals as at the end of the second quarter of 2019.
Also, we have another 4,398 units (including ECs) that will be completed in the remaining second quarters of 2019.
This incoming supply, together with the sluggish economy due to the ongoing trade war, will make the rental market extremely soft.
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