Enhanced grants, HDB Resale Portal to boost resale transactions in 2018

HOUSING and Development Board (HDB) flats form the bedrock of housing for Singaporeans, with an estimated 82 per cent of residents living in more than a million HDB flats island-wide.

As the government conducts sales launches for new flats only quarterly, many who wish to buy an HDB flat often turn to the secondary market. In recent months, we have seen several key announcements that are likely to have an impact on the HDB resale market.

The new and enhanced Proximity Housing Grant

As part of Budget 2018, Finance Minister Heng Swee Keat announced changes to the Proximity Housing Grant (PHG).

Introduced in August 2015 by Prime Minister Lee Hsien Loong during his National Day Rally speech, the PHG was a one-time disbursement of S$20,000 to families who bought resale flats within a 2km radius of their parents or married child, or S$10,000 to singles who bought resale flats to live in with their parents.

A major difference from previous policies is that every Singaporean would be eligible for this grant regardless of previous housing subsidies, income, and ownership of private property.

From August 2015 to December 2017, about 12,000 households made use of the PHG. This represents about a quarter of all resale flat transactions in the same period, according to the HDB. It also mentioned that 54 per cent of the households would not have qualified for any grants prior to the introduction of the PHG.

The PHG has now been enhanced.

Families who buy resale flats to live with their parents or children will receive a grant amount of S$30,000, up from S$20,000. Singles buying resale flats to live in with their parents will be eligible for a S$15,000 grant, up from S$10,000.

Singles who buy flats near their parents will now be eligible for a grant of S$10,000. Also, the government has simplified its criterion of determining what is "near" to "within 4km".

The HDB Resale Portal

The new HDB Resale Portal, which went live on Jan 1, 2018, aims to streamline the resale process for buyers and sellers, and cut down on unnecessary waiting time.

For instance, the new portal integrates all eligibility checks onto a single platform, eliminating the need for buyers and sellers to visit different links to access their eligibility.

Information will also be personalised, showing each individual's eligibility to buy and sell their flat, as well as their eligibility for any housing grants or concessionary loans.

By using the new system, buyers and sellers can complete the entire resale process in eight weeks, compared to 16 weeks in the past.

HDB resale market in 2018

These new measures are expected to boost HDB resale transactions. Transaction volume has been steadily increasing since 2014, and 2017 saw 22,077 resale flats changing hands. Year 2018 is expected to see an estimated 10-15 per cent increase in resale flat transactions to about 24,000-25,000.

Resale flats remain the only way for buyers to pick a flat in a location of choice, and unlike new flats, the eligibility conditions are far less stringent, especially if the buyer is not applying for Central Provident Fund (CPF) housing grants or taking a home loan through the HDB.

With the enhanced PHG, the total grant amount available to an eligible first-time buyer is S$120,000, comprising a S$50,000 Family Grant, S$40,000 Additional CPF Housing Grant and S$30,000 PHG. The PHG has no income requirement.

Effectively, this makes resale flats more affordable for buyers. This is expected to swing buyers to the resale market, especially those still deciding between a new flat and resale flat, as they can capitalise on the higher grant amounts.

A common grouse among resale flat buyers is the seemingly tedious administrative process of purchasing a resale flat, which can take up to 16 weeks before the process is completed.

With the new portal, the time is halved to eight weeks. This is itself a huge leap in efficiency and will greatly boost the attractiveness of resale flats.

For the whole of 2017, resale flat prices decreased by 1.5 per cent. This came as a surprise, given that HDB resale prices fell by a mere 0.1 per cent in 2016. However, given the recovery in the private residential market, prices of resale flats are expected to bottom out, due to the spillover effect.

Additional demand may also flow into the resale HDB market as some of the owners of private collective sale units, especially retirees, look to purchase resale HDB flats as replacement units when they receive their sales proceeds.

Also, with the new HDB Resale Portal, buyers remain price-sensitive and would want to ensure that the price they have negotiated and agreed on with the seller is at a value that can be confirmed by HDB as the market value.

Although interest rates are widely expected to increase later this year, any increase is expected to be gradual. Furthermore, due to the lower loan amount, the effect of interest rate increases on borrowers is also less significant.

For 2018, we are expecting resale HDB prices to remain flat. Any price increase is likely to be very moderate and may not exceed 1 per cent for the full year 2018.