New Housing Grant: A Blessing in Disguise

The Government has announced more grants for new homes buyers. The responses were mixed, like many policies that were implemented.

New homebuyers were, of course, delighted.

Many, like myself, were a bit annoyed, mainly because of jealousy.

However, after thinking about it, it can be a good thing.

For those who have fulfilled their Minimum Occupation Period (MOP), they can plan to sell their house. With a bigger grant, their HDB property will look more affordable. Just imagine a $400,000 property will cost only $240,000 with maximum grant of $160,000.

In my opinion, the resale HDB market will get a boost in demand and the property value will increase for a short while. They should cash out as soon as they fulfill the MOP.

Based on HDB’s record of completed residential developments, an estimated 27,000 BTO flats and 3,500 Design, Build and Sell Scheme (DBSS) flats may reach their MOP this year (2019), contributing to a new wave of eligible sellers and upgraders.

About another 50,000 flats may be crossing their MOP in 2020-2021.

In 2013-2014, only 9,000 flats reached MOP. This is a stark difference from the current situation, and it will cause an increase in the supply of resale HDB flats again and will push the property prices down like what we have seen for the past years.

I believe that the resale HDB market will continue to be affordable in years to come. That is also one of HDB’s core mission: affordable homes.

If you are planning to find a home, I suggest implementing the 5 basic checks first. Do note that this is particularly useful when paying by CASH and not CPF. I believe that if you plan to use your retirement fund to pay your home, be strategic about it. At the end of the day, CPF is YOUR MONEY.

For those who are planning to enhance their net worth through property, using HDB flats as a medium, can be quite difficult.

For example, buying a BTO might not be a good idea. From the time of your application of a newly launched BTO to the 5 years MOP, it takes an estimated of 8 years for the plan to materialise in total.

Buying a resale will take minimum 5 years. However, as mentioned earlier, there will be a bumper supply of resale HDBs in the future.

If you do not want to take much risk while increasing your net worth, I highly recommend that you follow the 5 basic checks and use cash to pay your monthly house mortgage. The money in your CPF will grow instead of incurring the accrued interest. However, this would also mean most of your net worth is trapped in CPF before you are able to “cash out”. But I feel, that’s okay, because then you’re pretty much settled for retirement.

If you are going to use your CPF to pay your home, then you will need to be very careful and play your cards right. Using CPF to pay your home can snowball into a huge opportunity cost because of the accrued interest. Check out some strategies to help you minimise the blow of accrued interest. If you’re thinking of selling or buying a house, feel free to contact me for more insights on your property.