SINGAPORE: Changes to a scheme that helps young couples buy a home will allow them to opt for pricier flats depending on their future income but this comes with its own set of risks, property experts said. 

Known as the deferred income assessment, this scheme allows them to apply for a new flat and delay their income assessment for housing grants or loans until just before they collect their keys.

This will be expanded such that only one party in a couple needs to be a full-time student or National Serviceman to be eligible, Minister for National Development Desmond Lee announced on Wednesday (Mar 26).

As grant and loan eligibility are usually dependent on household income, deferring this assessment could help couples qualify for a higher loan amount.

At present, both parties must either be studying full-time or serving National Service (NS), or have completed their studies or NS within the last 12 months of applying for the Housing and Development Board (HDB) flat eligibility letter.

"LIKE A BLIND BOX" TO BUY HOME BASED ON FUTURE INCOME

With no earning abilities for now, young couples will find it challenging to buy from the resale market amid higher property prices. Hence, the deferred income assessment scheme opens up other housing options for this group and its expansion allows more to qualify for it, analysts said. 

The changes to the scheme shift the focus from immediate income assessment to future income assessment, said Ms Christine Sun, chief researcher and strategist at OrangeTee.

As the housing loan amounts will likely be higher if assessed at a later time, buyers will be more confident and eligible to purchase pricier flats even if they are not earning at the moment or only have a single income stream now, she said. 

With the eligibility for the scheme relaxed, BTO flats are made more accessible to young couples, encouraging them to start their financial planning early. 

They can better plan for the long term with the expectation of future income growth and have a greater leeway to purchase a larger home, said key executive officer at ERA Singapore Eugene Lim. 

In addition, prices of BTO flats in the future may be higher than present day. Hence, having their income assessment deferred allows young couples to see some savings if they were to commit to a purchase now, noted Mr Lee Sze Teck, who is senior director for data analytics at Huttons Asia. 

But this scenario is "like a blind box" as couples would have to guess what their future income would be, Mr Lee said. Under the scheme, the assessment for housing grants or loans is deferred for about three years following the BTO application. 

"This may inadvertently lead to some young couples (opting) for BTO (flats) with a longer construction period to buy themselves more time to save up," he said. 

In other cases, couples who may in future potentially breach the income ceiling of S$14,000 (US$10,500) a month - the limit to be eligible for a housing loan from HDB - may end up opting to buy a flat first.

Some may even apply for Prime or Plus flats - a new classification system for HDB flats - which are in more attractive locations and therefore command higher market values.

Agreeing, Ms Sun pointed out that some couples may overestimate their future income and commit to purchasing flats that are too expensive. "Their combined income may fall short of covering the monthly instalment of their chosen property," she said. 

The deferred assessment based on future income also assumes that buyers will secure employment after graduation or once they receive the keys to their homes, she added. 

"However, in the event of an economic recession, some of these young graduates may face challenges in finding a job promptly."

STAGGERED PAYMENTS AND CANCELLATION RATES

To help ease the cost that young couples have to fork out for their flats, down payments are split into two instalments under a Staggered Downpayment Scheme. The first down payment is either 5 or 10 per cent, depending on the type of loan taken. The second instalment is due at key collection.

Should couples still face difficulties paying the reduced initial down payment, the amount payable will be brought down further to 2.5 per cent of the flat price. 

As with all HDB purchases, in the event that a couple under the deferred income assessment scheme can no longer afford the unit and is rendered ineligible to continue with the purchase, the flat application will be cancelled.

If the cancellation was after signing the lease agreement and before key collection, the couple has to forfeit 5 per cent of the purchase price, according to the HDB website. 

In response to CNA's queries, the statutory board said past data shows the cancellation rates for those under the deferred income assessment are similar to those of other young couples not under the scheme.

"Only a small minority of households have cancelled their flat applications due to financial difficulties," HDB said. 

"We encourage flat buyers to plan their finances carefully and buy a flat within their means. HDB has a steady pipeline of flat supply for different budgets and needs, and there is no need to rush to apply for a flat."

WHAT DO YOUNG COUPLES THINK?

Financial circumstances aside, earlier applications could also create problems if the relationship between the young couple does not work out when the flats are ready for collection, said Professor Sing Tien Foo, provost's chair professor for the real estate department at the National University of Singapore (NUS) Business School.

Moreover, having a higher income level at the deferred income assessment stage will mean couples receive fewer benefits under the Enhanced CPF Housing Grant which varies by income, he added. 

Their average household income must be below S$9,000 in order to receive grants from S$5,000 and above. 

CNA spoke to some university students to find out how they felt about the scheme.

Final-year Nanyang Technological University (NTU) student Ms Huang applied for a BTO flat with her boyfriend of seven years back in 2022 and came across the deferred income assessment while doing her research. 

But the couple did not qualify for the scheme then under its current rules as only Ms Huang was a full-time student; her partner had signed on with the Air Force and was earning an income.  

But the computer science student, now 24, said she still would not have taken up the scheme even if the rules had been relaxed earlier. 

"If we are assessed later on, we might get (a smaller) grant because (I) would have graduated already and the income level will be higher," she said, echoing NUS' Prof Sing.

"We will end up loaning more money which we, in the end, need to pay off. It's not like a discount, whereas a grant is more of a discount," said Ms Huang, who only gave her last name.

"It's not motivating enough for me to apply under this scheme (even if I qualified)."

Second-year chemistry student Jesslyn Tan felt that the expanded scheme would help couples who have been together for several years and are planning to settle down.

But in her case, the 21-year-old has been with her boyfriend for about two years and is not looking to apply for a BTO flat so soon, she told CNA. 

"I think it's suitable for those who are in long-term relationships already. But for people who just got together in university and (are) not looking to settle down so fast, maybe it's not useful," said Ms Tan, whose partner studies in ITE. 

The NTU student also does not think that applying for a flat would be her top priority when her boyfriend enrols in university and she enters the workforce. "For now, I just want to focus on my career … (My concerns) are more of like 'what job am I going to get and how (am) I going to earn?' 

"I'll worry about that kind of stuff (about BTO) later on in my life," Ms Tan said. 

For others like art design and media student Wong Yi Xiu, 21, getting a BTO flat is "not a huge thing" at the moment and she did not want to rush into applying for one. 

The first-year student added that she was also not ruling out the option of turning to the private property market for her future home. "Personally, I think it's better when my partner is in the same phase in their life as me (before) I get a (flat)," she said.