For decades, Singapore’s Housing and Development Board (HDB) flats have represented affordability, stability, and the fulfilment of the “Singapore dream.” Government housing policies, particularly the provision of grants such as the CPF Housing Grant, Proximity Housing Grant (PHG), and Enhanced CPF Housing Grant (EHG), have been central to enabling Singaporeans to buy their first home. 

 

In recent years, however, questions have emerged about whether the increase in HDB grants has unintentionally fuelled price growth in the resale market, thereby reducing affordability for future buyers.

 

We will examine the economic dynamics between increased grants and HDB price movements, with a focus on the resale HDB market. It also considers the broader implications for affordability, intergenerational equity, and Singapore’s housing sustainability.

 

The Role of Grants in Singapore’s Housing Policy

Grants have always been positioned as a social leveller, enabling young couples, families, and even singles to achieve home ownership.

 

For instance, the Enhanced CPF Housing Grant (EHG), introduced in 2019, allows eligible first-time buyers to receive up to $80,000 depending on household income. Similarly, the Proximity Housing Grant (PHG) offers up to $30,000 for families buying near their parents, promoting family cohesion.

 

The rationale behind these grants is straightforward:

• Offset affordability challenges caused by rising housing prices.
  
  
• Support first-time buyers and prevent widening inequality.
  
  
• Encourage social objectives, such as multi-generation living.
  
  

Yet, housing markets are sensitive to subsidies. When grants are expanded, purchasing power rises, but since housing supply is limited in the short term, sellers often respond by raising prices, thus forming a vicious circle. 

 

HDB Price Trends Before and After Major Grant Increases

Historical Context

The CPF Housing Grant was first introduced in 1994 at $30,000 for first-time couples purchasing resale flats. Over time, the scope expanded:

• 2006: Family Grant increased up to $40,000.
  
  
• 2015: Proximity Housing Grant launched.
  
  
• 2019: Enhanced CPF Housing Grant introduced (up to $80,000).
  
  

Price Movements

According to HDB’s resale price index (RPI):

• Between 2015–2019, resale prices were relatively flat, even dipping slightly.
  
  
• Post-2019, when the EHG was introduced, resale prices rose nearly 30% by 2023.
  
  
• The surge coincided with pandemic disruptions, low interest rates, and record-high grants.
  
  

Although external factors (COVID-19 delays in BTO projects, strong demand for larger flats, low mortgage rates) played a role, grants amplified the upward trend by giving buyers more capacity to bid aggressively.

 

How Grants Drive Prices

The impact of grants on housing prices can be explained through demand-supply economics:

1. Increased Buyer Power
   
   
   • Grants act as a wealth transfer from the government to households.
     
     
   • Buyers perceive flats as more affordable and raise their maximum bid.
     
     
   • Sellers, aware of higher grant availability, adjust asking prices accordingly (upwards).
     
     
2. Inelastic Supply in the Short Run
   
   
   • HDB resale supply is relatively fixed in the short term, owners only sell when upgrading, downgrading, or relocating.
     
     
   • With limited supply, more generous grants lead to higher competition per flat rather than greater availability.
     
     
3. Anchoring Effect
   
   
   • Sellers often reference maximum grant amounts in negotiations.
     
     
   • For example, a resale flat priced at $500,000 becomes psychologically easier to market when buyers can offset $80,000 with grants.
     
     
4. Price Stickiness
   
   
   • Once resale prices rise due to grants, they rarely fall even if grants are later reduced.
     
     
   • This creates a ratchet effect, locking in higher baseline prices.
     
     

 

Impact of Enhanced CPF Housing Grant (EHG)

The EHG’s introduction in September 2019 provides a valuable case study:

• Pre-2019 RPI: Flat to declining.
  
  
• Post-2019 to 2022: RPI rose by over 25%.
  
  
• Median resale flat prices crossed $500,000 in many mature estates, with some 5-room flats exceeding $1 million.
  
  

Although not the sole factor, the EHG undeniably expanded affordability on paper, which quickly translated into greater price resilience and upward pressure.

Read more on how much you actually need to buy a HDB flat in Singapore 2025

 

Broader Implications of Grant-Driven Price Increases

1. Affordability for Younger Buyers

Ironically, while grants aim to improve affordability, the inflationary effect raises entry barriers for future cohorts. Young couples find themselves competing in a market where sellers have already factored in subsidies.

2. Wealth Inequality

Current homeowners enjoy windfall gains from capital appreciation, while new entrants struggle. This risks widening intergenerational inequality, particularly between those who purchased before grant expansions and those entering later.

3. Resale Market Distortion

Grants shift demand towards resale flats, especially when BTO supply is limited or delayed. This creates uneven demand spikes, driving resale premiums.

4. Long-Term Policy Sustainability

If grants continue to rise in tandem with prices, it creates a self-reinforcing cycle. Breaking the cycle would require either cooling measures (e.g., loan-to-value restrictions, supply expansion) or rethinking grant structures to avoid fuelling price growth.

 

Alternatives and Policy Adjustments (Our 2 cents)

Singapore faces the challenge of balancing homeownership support with market stability. Possible refinements include:

1. Targeted Grants Instead of Broad-Based
   
   
   • Narrow eligibility (e.g., specific flat sizes, locations) to avoid pushing up prices across the board.
     
     
2. Tying Grants to Income-to-Price Ratios
   
   
   • Peg grants to prevailing income-to-flat price multiples, ensuring subsidies reflect actual affordability gaps.
     
     
3. Enhancing BTO Supply
   
   
   • Reducing reliance on the resale market by expanding new HDB supply to meet demand.
     
     
4. Capping Resale Prices Linked to Grants
   
   
   • Explore mechanisms where sellers cannot simply absorb grant amounts into valuations.
     
     
5. Increased Public Rental Options
   
   
   • Providing viable alternatives for families not yet ready to buy helps relieve demand pressure.
     
     

Conclusion

The increase in housing grants has been both a blessing and a paradox. While they have helped many Singaporeans achieve the dream of home ownership, they have also contributed to higher resale HDB prices, reducing affordability for future buyers.

 

This dynamic illustrates the complexity of housing economics; well-intentioned subsidies can create unintended inflationary effects in markets with constrained supply. To ensure long-term affordability and intergenerational fairness, Singapore must continue fine-tuning grant structures, expanding supply, and ensuring that its housing policy does not inadvertently undermine its original social goals.

 

FAQs

1.Do HDB grants directly cause prices to rise?
Not directly, but they increase buyer affordability, which in turn fuels higher bidding and gives sellers an incentive to raise prices.

 

2.Which grants affect HDB resale prices the most?
The Enhanced CPF Housing Grant (up to $80,000) and Proximity Housing Grant (up to $30,000) have had significant effects, especially in mature estates.

 

3.Are HDB loans or bank loans better when grants are factored in?

HDB loans offer stability at 2.6%, while bank loans (pegged to SORA) can be cheaper but more volatile. Grants apply regardless of financing choice, but higher resale prices mean larger overall loans.

 

4.Will grants keep increasing in the future?

Unlikely in their current form. Policymakers are aware of the inflationary impact and are exploring alternatives, such as increasing BTO supply instead of further raising grants.