I refer to "What's Wrong with PAP" Click on http://www.therealsingapore.com/content/ndr-2013-whats-wrong-pap
In the article, Mr Goh Meng Seng said, "It would practically mean that if more HDB grants are given to first time buyer without direct price control on the HDB prices, all these government grants will go straight to the reserves which will be managed in a very opaque way and not accountable to parliament nor public scrutiny. "
Giving Housing Grants "makes Singaporeans think that Government is giving them money or subsidies"
The Additional CPF Housing Grant (AHG) and Enhanced Grant Scheme, introduced in March 2006, is meant to help citizen families with a steady household income to buy their first subsidised HDB flat. Supposedly, the Grant is to reduce the monthly installment for the buyer.
From what I observed, buyers who took these housing grants will usually sell their flat at a loss with no money coming out from their sale. The longer they wait to sell their flat, the bigger their paper loss from their CPF account.
This is the true picture. Initially, the grant will be disbursed into you & your co-applicant’s CPF Ordinary Accounts and the grant will be deducted from your CPF Ordinary Account in one lump sum on the same day of purchase. There is no time for you to use the housing grant to re-direct to Special Account or for investment purposes.
However, when you sell your HDB flat, you are also required to use the sale proceeds to pay back whatever is outstanding in the HDB loan and followed by the housing grant that was given to you initially in CPF.
Therefore, if you sell your flat at $500,000 and you have an outstanding HDB loan of $200,000 followed by a CPF refund of $100,000. If you have taken a housing grant of $40,000, you are also required to make good of the whatever left sale proceeds to replace the $40,000 in your CPF with the accrued interest over the years. .
CPF interest rates are 2.5 per cent per annum. If you waited for 5 years to sell your flat, your accrued yearly interest on the housing grant would be 2.5% of the $40,000 which would be $1000 in the first year.
It is no wonder that many sellers who took housing grants would sell their flat without any cash proceeds coming out from their sale.
Of course, if the seller sells at valuation, CPF doesn't require the seller to top up the paper loss but then again, without any cash proceeds, the seller has to use his/her own money to fork out the cash to pay for his agent's commission. In some cases, under-the-table money and under declaration will occur.
I have observed how PRCs circumvent this loophole.
Evidence and observation has shown that PRCs are very street-smart and very calculative in beating Singapore's system.
They refused to take the housing grant but instead willing to fork out their own cash for higher installment.
Their rationale is that since banks' annual interest rates are lower than CPF interest rates of 2.5%, they are willing to use their own money cash from the bank to pay for the slightly higher monthly installment.
They then transfer all their CPF money to Special Account which earns them 4% per year and after they fulfil their minimum occupation period and made enough money in Singapore, they draw out everything from their CPF.
CJ
TRS Contributor