What the Raised Income Ceiling Means For the Property Market

By Dennis Ng (guest contributor)

The news was expected as the then Minister for National Development (Mr. Mah) had mentioned in the run-up to General Elections in May 2011 that the income ceiling for HDB flats would be increased.

The changes announced by Prime Minister Lee during National Day Rally on Sunday night 14 Aug 2011 are as follows:

1. Income ceiling for purchase of new HDB flats and for qualifying for grants for HDB Resale flats will be raised to S$10,000 from S$8,000 previously.

2. Income ceiling for buying ECs (Executive Condos) will be raised to S$12,000 from S$10,000.

3. Income Ceiling for Singles will be raised from S$3,000 to S$5,000 to qualify for the HDB Housing Grant, and the housing grant will be increased from S$11,000 to S$15,000.

Those earning up to S$10,000 will get S$30,000 CPF Housing Grant when buying new ECs. Those who earn between S$10,000 to S$11,000 would get S$20,000, while those earning between S$11,000 to S$12,000 would get S$10,000 instead.

This is still better than before, where anyone earning more than S$10,000 cannot buy New ECs and will NOT get any Housing Grant at all.

What are the possible impacts?

1. Demand for DBSS (Design, Build and Sell Scheme) flats might drop. DBSS flats were previously for those whose income exceeded S$8,000 but are below S$10,000. There is NO longer this sandwiched class in the new ruling.

People earning S$8,000 to S$10,000 can now either buy new HDB flats or resale HDB flats and be entitled to a Housing Grant.

2. Demand for 3 room Resale HDB flats will go up. Many more singles will be given the Housing Grant to buy a Resale flat and many of them are likely to rush out to buy 3 room Resale HDB flats.

3. Some of the demand for Mass Market condos, especially those priced between S$1,000 psf to S$1,300 psf will drop, as part of the demand will shift to ECs and HDB Resale Flats.

4. With more higher income families (those earning above S$8,000 to S$10,000) qualifying to get the grant when they buy HDB Resale flats, this might push up demand for HDB Resale flats and there might be upward pressure on COVs (Cash Over Valuation).

My outlook for property prices

All in all, I do NOT see the possibility of Singapore property prices falling much in the next 6 to 12 months as we still have a tight supply situation within this period. Most of the 25,000 new HDB flats announced by Minister Khaw to be built in year 2011 would probably only be completed in year 2013 earliest.

Next year, Minister Khaw again promised to build another 25,000 new HDB flats. So I worry that there might be an over-supply of new HDB flats in year 2013 and year 2014. Especially if it coincides with a slowdown in the Singapore economy as by 2013 we might be in the midst of a Global Financial Crisis that could hit the world in the next 3 to 10 months.

Year 2013 and year 2014 will also see over 30,000 units of new condos being completed, so there might be an over-supply situation in condos during the same time period as well.

By guest contributor Dennis Ng, Director of Leverage Holding and Master Your Finance.

7 Replies to “What the Raised Income Ceiling Means For the Property Market”

  1. your statement about income group 8k to 10k becoming eligible for resale flat is misleading. There is no income cap for resale flat. so this group has always been eligible. the only motivation they may have is that now they qualify for CPF housing grant.

  2. Although the 25k units of new flats each that’re planned to be built in 2011 and 2012 will only hit the market in 2013 & 2014, wouldn’t anticipation of those new flats already have a cooling effect. Also, registrations for these 50k new units shld happen way prior to the 2013-2014 completion dates. This shld channel demand much earlier to this new pocket of supply, reducing pressures on the HDB resale market which in any case is pricing out many buyers. Discuss.

    1. Anticipation of supply is only one factor. Current marginal demand and supply is what drives the market. Certainly the flood of HDB flats that is promised will cool sentiment. The key variable is where demand will go (how many foreigners/PRs are let into Singapore, how many foreign investors come in etc).

      1. When the 50k flat is ready in 2013-2014.
        The prices of Resale Flat will be in for a fall.

        Imagine the number of people who currently have a flat getting the keys to their new flats and force to sell within 6 months.

        HDB got to learn to moderate. At the rate they are building, many will be burnt.

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