Property agents and owners waiting with bated breath for any additional dampening measures to be announced at the budget can now breathe a sigh of relief. No new dampening measures were announced, and in fact some mildly supportive measures were released.
For example, in order to help low income first time home buyers planning to purchase a Build-to-Order (BTO) flat, the government will introduce a Special CPF Housing Grant, which will be provided to families who earn up to $2,250 per month. This is in addition to the S$40,000 Additional CPF Housing Grant to help low-income households earning a monthly salary of S$1,500 and below to own their first homes.
Another measure that will benefit the market is the increase in the Employer CPF contributions and CPF salary ceiling. The employer contribution rate will be increased by another 0.5 percentage points to 16%, thus bumping up the total contribution rate to 36%. Also, the CPF salary ceiling will be adjusted from S$4,500 to S$5,000 per month, ostensibly to keep pace with income growth in recent years, resulting in a slightly higher post-tax amount of capital to put to work buying a property (as CPF contributions are not taxed).
The budget may have been largely neutral to the property market, but the question now on everyone’s mind is this: Given the still fairly upbeat sentiment (at least as shown by how the new launches have been doing) despite the harsh measures announced on Jan 13 2011, what will the Government’s next move be?