Govt unveils measures to support home ownership even in hard times

Source : Channel NewsAsia - 6 Feb 2009

The National Development Ministry has announced a slew of measures to ensure Singaporeans have a roof over their heads, especially during these difficult times.

Speaking in Parliament on Friday, National Development Minister Mah Bow Tan said the key thrusts are to keep home ownership affordable, help home owners with financial difficulties, increase help for the needy and safeguard rental flats.

Madam Tan Suay Yan’s family has been unable to pay the S$1,000 monthly mortgage instalment on their five-room flat since her husband lost his job. The family of six eventually decided to downgrade and buy a smaller unit, after being counselled by the Housing and Development Board.

In April, they will move to a studio apartment in Toa Payoh. It will be a squeeze, but Madam Tan will pocket a profit of about S$10,000 after selling her bigger flat and paying off other debts.

Madam Tan is among the many homeowners approaching the HDB these days for help amid the recession. Some 6,500 households are currently in mortgage arrears for more than two years.

Mr Mah said: “So HDB will help households in financial difficulties to downgrade. They will facilitate this process. HDB generally will not provide another loan to downgraders. Why? Because they usually have enough proceeds from the sale of their larger flat.

“But for those who need help in these difficult times, HDB will help them with another loan to buy a smaller flat. So there’s no overall change in policy, but recognising the situation, HDB will be more flexible for such things.”

For new homeowners with tight purse strings, the government will increase the supply of studio apartments, two- and three-room flats to add to the 4,800 such units already available.

1,400 such flats will be launched in the first half of this year, and another 2,000 a year on average over the next two years.

To make such flats more affordable, there will be tweaks to the Additional CPF Housing Grant (AHG). The maximum grant quantum for first-time flat buyers will be increased by S$10,000.

The buyers must be continuously employed for at least a year instead of two. The income ceiling will be raised to include households earning up to S$5,000 a month.

Here’s how the grant works out.

For a household with a monthly income of S$1,500 buying a new two-room flat at S$90,000, they will get a grant of S$40,000.

To take out a loan of S$50,000, they will have to pay only S$200 a month to service the loan and can do so using their CPF so that they do not have to fork out any cash.

For a household with a monthly income of S$4,000 buying a resale 4-room HDB flat at S$315,000, they can get a combined grant of S$55,000 and take out a loan of S$260,000.

They will have to pay about S$1,000 in monthly instalments, most of them through CPF, and only about S$120 in cash.

For elderly Singaporeans, they can look towards the Lease Buyback Scheme from March. This scheme helps to monetise the value of their flats. Some 25,000 households are expected to be eligible for this.

Mr Mah said: “These are not, I emphasise, not short-term reactive measures - reacting to the current situation. These are long-term solutions designed to help Singaporeans in need while we strengthen the social security framework so that people not only have to not worry about a roof over their heads but they will also have security in their old age.”

Mr Mah however cautioned that the generous subsidies from the government should not be seen as a windfall to be spent prematurely. He said the sums are meant to help citizens build nest eggs for their golden years.

The minister also urged first-time homeowners to live within their means - buy a right-sized flat and upgrade only when they can afford it.