Hike income ceiling for buying new HDB flats and Exec Condos.
Amid the ramp-up in supply of new HDB flats, the average application rate for first-timer families across all flat types was 2.1 times in 2024, versus the pre-Covid pandemic rate of 3.7 times in 2019.
For the July exercise, the median application rate for first-timer families was 1.4 times for three-room and bigger BTO flats. Among first-timer families, the application rate for four-room BTO flats ranged from 1.2 times for Sembawang Beacon to 6.7 times for Simei Symphony.
However, local couples eyeing a new HDB or executive condominium (EC) flat need to mind the income cap for such housing. Bust the monthly household income ceiling of S$14,000 and a couple cannot buy a new HDB flat. To buy an EC unit from a developer, a couple must meet the monthly household income ceiling of S$16,000.
The income ceilings for couples buying new HDB flats and EC homes from developers were hiked from S$12,000 to S$14,000 and S$14,000 to S$16,000 respectively in 2019. The adjustments in 2019 followed that in 2015.
Timely to raise income ceiling
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Given the income ceilings were last raised almost six years ago, the time looks right for another round of revision. This is particularly as more new HDB and EC are being built, the HDB BTO application rate among first-timers has declined, and incomes have risen.
HDB is looking to launch 55,000 BTO flats from 2025 to 2027. In addition, there are two EC sites on the confirmed list of the government land sales programme for H2, which can yield an estimated 990 units. And the EC supply for 2025 of about 2,000 units is the highest in a single year since 2014.
Meanwhile, the median monthly household employment income including employer CPF contributions of resident employed households rose by nearly 20 per cent from S$9,425 in 2019 to S$11,297 in 2024 or at a compound annual growth rate of about 3.7 per cent.
Perhaps, the monthly household income ceiling for couples to buy new HDB homes can rise by S$2,000 to S$16,000 while that to buy EC homes from developers can climb by S$3,000 to S$19,000.
In perspective, the monthly household employment income including employer CPF contributions among resident employed households was S$17,132 for the 70th percentile and S$21,488 for the 80th percentile in 2024.
A new S$1.7 million EC unit of slightly over 900 square feet would cost about 7.5 times the annual income of S$228,000 – which is the equivalent of a monthly income of S$19,000. A relatively high-prized HDB BTO four-room flat in a Prime project costing S$768,000 would be four times the annual income of S$192,000, which is equal to a monthly income of S$16,000.
Periodic fixed increases
Together with upping the income ceilings, consider revising how these are changed going forward.
Possibly, after raising the monthly household income ceilings for couples buying new HDB and EC homes to S$16,000 and S$19,000 respectively soon, hike the income ceilings by say S$1,000 for new HDB flats and S$1,500 for new EC units bi-annually over a certain period of time.
After a two-year gap, should the monthly household income ceilings for buying new HDB and EC homes grow from S$16,000 to S$17,000 and S$19,000 to S$20,500 respectively, the pace of increase will be at a CAGR of 3.1 per cent and 3.9 per cent, respectively. Subsequently, the income ceilings can rise further by stipulated fixed amounts bi-annually.
Two advantages
There are two key advantages to raising the income ceilings by fixed amounts at pre-determined dates.
One, introducing certainty into the timing and size of increases in the income ceilings will help potential homebuyers eyeing new HDB and EC homes make optimal choices.
A couple earning S$15,000 a month today may hope to buy a BTO flat because this is an affordable housing option. The couple could be wrong to wait one year for the existing income ceiling to rise from S$14,000 to S$16,000 by renting a home in the interim, if the income ceiling is revised much later when the couple's monthly income surpasses S$16,000.
On the other hand, the said couple above could be wrong to buy an HDB resale flat today if the income ceiling to buy a BTO unit rises within the next few months. In this case, the couple potentially loses out on securing a subsidised flat from the HDB on which they might make a larger financial gain versus buying a resale HDB unit.
Ditto, a couple eyeing a new EC home whose income is slightly above the prevailing income ceiling has to make a bet as to whether to wait for the income ceiling to rise so they can buy a new EC home.
Two, upping the income ceilings to buy new HDB and EC homes more frequently can lead to smaller increases in the pool of buyers for such homes each time the income ceilings change.
In short, jumps in demand for new HDB or EC homes should be more manageable. This in turn reduces the anxiety that many potential new HDB or EC home buyers who meet the existing income ceiling thresholds feel whenever the income ceilings are hiked.
In a recent media interview, National Development Minister Chee Hong Tat said the income ceiling for couples applying for HDB BTO flats is being reviewed and that changes – if any – will depend on upcoming flat supply and demand.
Certainly, upping the income ceiling for buying BTO homes has to be done carefully such that letting more higher-income earners buy BTO flats will not crowd out lower-income earners, who arguably have more need for affordable housing
Many locals can own high-quality and affordable HDB homes at a young age. Still, navigating the nuances and rules of the housing market is potentially daunting, especially as buying a home is a big-ticket purchase.
Adjusting the monthly household income ceilings for buying new HDB and EC homes based on a set time line and a fixed quantum helps couples hunting for their first home as they can know better what options to avail themselves of.
Perhaps, Prime Minister Lawrence Wong will bear good news for a significant number of local first home buyers at the National Day Rally on Aug 17 by announcing the raising of the monthly household income ceiling for buying new HDB flats and EC units from developers.
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