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Overall property market finds new confidence with gov’t initiatives, DBS

by • September 27, 2019 • Research and AnalysisComments (0)173

DBS Research said in one of its recent notes that the overall property market in Singapore is now more confident from the Government’s re calibrations of grants for public housing.

The Housing Development Board (HDB) and Ministry of National Development (MND) announced several measures aimed at making public housing more affordable for a larger number of households in Singapore. These new policies will take effect from 11 Sept 2019 and include:

  • Introduction of the new Enhanced CPF House Grant (EHG) to replace Additional CPF Housing Grant (AHG) and Special CPF Housing Grant (SHG)
  • Raising household income ceiling for the new HDB built-to-order (BTO) and resale HDB homes from S$12k/mth to S$14k/mth.
  • The household income limit for the purchase of new Executive Condominiums (EC) has also been raised from S$14k/mth to S$16/mth.

The DBS Note commenting on overall property market sentiment, and in referring to the Enhanced Housing Grant, one of the new measures the Government recently introduced, said:

“We believe the new EHG grant will drive more transactions within the HDB resale property market, especially those in mature estates. The additional demand will be timely especially as we anticipate that an average of c.20k units per annum will reach their 5-year Minimum Occupancy Period (MOP) from 2019 onwards.

The changes would result in a gradual bottoming and increased stability in the HDB resale market. In 2Q19, the property price index (PPI) for the HDB resale market dipped 0.2% q-o-q vs 0.4% rise for properties outside central region (OCR). Over time, these new changes should arrest the decline in HDB resale prices as transactions pick up over time. In the medium term, as the gap between HDB and OCR PPI narrows, we believe the domino effect will likely infuse more confidence to upgraders to either upgrade to a resale flat/EC, or private property.”

overall property market

With confidence returning to overall property market, EC pricing will continue to head north said the DBS Note (Image credit: HDB)

Besides the EHG, the Government also raised the income ceiling for those who want to apply for Built-To-Order (BTO) flats. This the DBS report noted, also served to boost the overall property market confidence here.

“Raising household income limit will benefit Executive Condominium (EC) segment; increased stability to return to the private residential market in the medium term.

An estimated 75% of Singapore households (or +40k residential households) will qualify for public housing grants. The higher income ceiling to purchase a flat from HDB – S$14k for new or resale flats, and S$16k for ECs – will result in an increased number of households qualifying for a new public home and EC.

Based on 2018 data from Singapore Statistics (Singstat), the higher income ceiling to qualify for public housing grants will now cover a larger 74.4% of households in Singapore (vs 72% as of end-2014, prior to the last adjustment in Aug-15). This implies an additional 40k households qualifying for the grants based on 1.32m households as of end-2018. For ECs, the income limit will enable an additional 2ppts of households or 36k additional households qualifying to purchase an EC.

ECs to benefit the most from increase in pool of buyers, CDL Piermont Grand could see a boost in sales. In recent years, ECs have been one of the preferred housing options for Singaporean households which has resulted in robust bidding for such sites under the government land sales (GLS) programme in recent years. Listed developers who have existing EC developments for sale include City Developments (CDL) which recently launched Piermont Grand at Sumang Walk at estimated price of S$1,080 psf.

Based on c.375 units already sold, there is close to 400+ unsold units, which should see good interest in our view. Upcoming launches by other developers.Two new EC projects – at Canberra Link and Anchorvale Crescent – with around 1000 units in total, are expected to be launched in 1Q2020. With estimated break-even at close to S$950 – 975psf, we believe that pricing will continue to head north of S$1,050psf given the increased pool of buyers for ECs going forward.”

The DBS Report said that the overall property market sentiment will be positively affected as a result of these new Government initiatives and demand for private residential to pick up in the medium term.

“We expect the higher grants to create more buying interest in the public housing market, especially the HDB resale market space for now. In the medium-term, as HDB resale prices stabilise or even increase, we expect confidence to return to the private residential market as upgrader households cash out of existing homes to fund their next property purchase.”

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