The resale market in Singapore has been booming since 2020, with HDB resale prices rising for 31 consecutive months as of January.

The resale prices of HDB flats, which are often in the millions, have been in the news more often than not, making many Singaporeans, especially first-time buyers, worried.

In the face of public pressure, the Singaporean government introduced targeted measures in the Budget on Tuesday (14) to ease the pressure on first-time buyers in the "ever-rising" resale market.

The measures focus on increasing the Home Purchase Allowance (HPA) for.

First-time buyers of two- to four-bedroom HDB flats will receive up to S$80,000 in CPF housing allowance, an increase of S$30,000 from the previous level.

Even if they buy a five-bedroom or larger home, they can receive up to S$50,000, an increase of S$10,000 from the previous amount.

First-time single buyers who buy a four-bedroom or smaller flat will receive a higher allowance of $40,000, up from the previous $25,000.

At the same time, young couples aged 40 and below who are first-time buyers, and families with children, will also be given an additional chance in the lottery for future applications to pre-buy HDB flats.

However, some property analysts believe that the increase in the purchase allowance may be a double-edged sword, as some sellers may raise their bids and indirectly push up the price of resale HDB flats.

According to The Straits Times, Sun Yanqing, vice president of research and consultancy at OrangeEasy, said that some sellers of four-bedroom or smaller resale HDB flats may take the opportunity to increase their prices, as buyers are expected to have more purchasing power with the higher allowance.

The increase in the purchase allowance may also prompt more first-time buyers to enter the resale market.

According to PropertyGuru's Regional Manager for Singapore, Tan Chee Koon, demand for four-bedroom and smaller resale HDB flats from first-time buyers is expected to continue to increase in the short term.

Lee Sze Teck, Senior Head of Research at Hopedan Group, told the Union-Tribune that resale HDB flats are still in short supply, so prices are expected to continue to rise.

The Ministry of National Development (16) emphasised that the authorities are mindful of the potential impact that an increase in the Home Purchase Allowance could have on the strong resale market. This is why the authorities have restricted the benefit to first-time buyers who meet certain eligibility criteria, rather than all buyers in the resale market.

Only households with a monthly income of up to S$14,000 and single persons with a monthly income of less than S$7,000 will be able to receive the higher allowance.

In the past two years, about one-third of resale HDB buyers received the Home Purchase Allowance.

The authorities expect that more than 10,000 first-time buyer families will benefit from the increase in the Home Purchase Allowance in the first year.

The Ministry of National Development added that resale HDB flats are ultimately priced according to the wishes of sellers and buyers, and those who offer higher prices run the risk of being squeezed out of the market amidst high interest rates and a global economy fraught with uncertainty.

The idea that sellers who offer higher prices could be squeezed out of the market is also shared by some property analysts.

But how high is high enough to be pushed out of the market? I'm afraid that today's market trends do not provide a clear answer.

According to the latest figures released by property website 99.co and Singapore's Joint Real Estate Trading Network on the 9th of this month, resale HDB flat prices rose by 1.4% in January this year, marking the 31st consecutive month of growth. Overall, the increase in HDB resale prices for the whole of 2022 is 9.4 per cent.

Although the government has introduced two rounds of cooling measures in December 2021 and September 2022, the effectiveness of the cooling measures seems to be limited given the post-epidemic opening and high interest rate environment.

The increase in housing allowance may help some Singaporeans, especially first-time buyers with families and children who are in desperate need of housing, to find a permanent home in the short term, however, in the long run, the solution may be to avoid a flurry of local buyers, especially first-time buyers, to the resale market.

Singapore has had a resale market for HDB flats since 1971, allowing HDB flats to be sold under the free market mechanism.

But the market nature of resale HDB flats is now the biggest source of challenge for the authorities in dealing with housing issues, and any overly aggressive intervention may affect the free market spirit of HDB resale.

According to Dr Walter Theseira, Associate Professor at the School of Business at the Sun Yat-sen University, some interventions, such as price controls, would go against the basic principle of the free sale of HDB flats and would affect the majority of the country's population who own HDB flats.

He said that many buyers are flocking to the resale market because they are unable to secure a pre-bought HDB flat in a prime location. He therefore suggested that the authorities should find ways to make HDB flats in other areas more attractive to buyers in order to narrow the gap with prime locations.

For example, the authorities could consider providing more incentives for non-prime pre-purchase HDB flats, as well as placing more restrictions on the latter on top of the prime HDB model already in place today.

Other analyses in recent months have also pointed out that the biggest challenge to Singapore's Home Ownership Policy is not that people cannot afford HDB flats, but that they are unable to buy the HDB flats they "want".

The reason why some Singaporeans have turned to the resale market to find their targets is because of the overall conditions in non-mature areas, including the convenience of living and infrastructure, which are often quite different from those in mature areas.

Simply put, by allowing more first-time buyers to choose to purchase pre-built flats, more buyers will be able to avoid the influx of buyers into the resale market, pushing up prices, and increasing their willingness to buy in non-mature areas is the most direct way to do so.

How to improve the conditions of non-mature HDB flats to make them more convenient, livable and closer to the level of mature HDB flats, so that non-mature HDB flats can also become the HDB flats that buyers "want", will be one of the core issues of Singapore's next "Home Ownership Scheme" policy. This will be one of the core issues of Singapore's Home Ownership Policy.