New HDB grants announced

The government just announced two new measures to make public housing more affordable and accessible to more Singaporeans. First, is the raising of income ceilings of eligible buyers for HDB and ECs, the second, is the merging of the Special Housing Grant (SHG) and Additional Housing Grant (AHG) into the new Enhanced Housing Grant (EHG).

The first measure of raising the income ceiling makes the newer HDB projects nearer the city more affordable. Which helps us connect the dots considering that the government has made a commitment to offer more units in mature estates including the much anticipated Greater Southern Waterfront (GSW) project in the near future.

I foresee that these units will increasingly be filled with the semi-affluent sections of the population. Also, it allows the government to raise prices in these areas thereby allowing the HDB to reap the full economic benefit of these plots as well as avoiding the issue of the ballot “windfall”, where lucky bidders were able to buy under priced properties in good locations.

The unintended consequence is that because of affordability issues, these areas will become enclaves of the higher middle income and encourage stratification of society. One could also argue that poorer households of these developments would sell their units anyway, leaving the base case unchanged.

For the second measure, given that the grant payout quantum are low compared to the overall cost of buying homes, I don’t expect it to have too much of an impact on the resale market.

But given that BTO prices are not expected to move upwards immediately especially in non-mature estates, I suspect the earliest beneficiary of the EHG would be the mature/resale estate market.

It remains to be seen how much more the prices in the RCR regions are able to appreciate given that so much of this would trickle down into the central area and already mature estates.

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