reporter2
18-07-22, 10:48
Bigger HDB BTO flats: Clawback needed on first resale proceeds?
Jul 05, 2022
THE HDB is on track to launch up to 23,000 new flats in 2022. Still, it can be challenging for first-time applicants to secure a built-to-order (BTO) flat, especially a larger unit.
In the May BTO exercise, the application rate among the non-elderly first-time applicants was the highest for the 4-room and 5-room flats at Yishun Beacon, with application rates of 9.4 times each as at Jun 2, 2022. The 4-room and 5-room flats at this project have an estimated floor area of 93 square metres (sq m) and 113 sq m respectively.
https://i.imgur.com/ob0lNt4.png
At Lakeside View in Jurong West, the application rate among non-elderly first-timers was 2.4 times, 5.3 times and 9.1 times for 3-room, 4-room and 5-room flats respectively.
With the Prime Location Public Housing (PLH) projects Ghim Moh Ascent and Bukit Merah Ridge, the application rate among the non-elderly for first timers was between 0.5-0.6 times for 3-room units, and between 3.0-3.2 times for 4-room units.
At Kim Keat Heights in the mature town of Toa Payoh, the application rate among non-elderly first-timers was 1.8 times for 3-room units and 7.4 times for 4-room units.
One may infer that the HDB should build proportionately more 4-room and 5-room units to meet demand.
But, household size is shrinking. In 2021, the average household size among resident households in HDB dwellings of 3.09 persons was over 10 per cent lower than that of 3.45 persons in 2010.
Average household size in 4-room flats was 3.27 persons in 2021 versus 3.66 persons in 2010, while that in 5-room and executive flats was 3.63 persons in 2021 versus 3.96 persons in 2010.
Perhaps first-time applicants desire larger flats because they need more space as a result of work-from-home playing a major part in the lives of many knowledge workers.
As it is, Singapore’s population is rapidly ageing, and the birth rate is low. Possibly, some young couples are trying to get a larger flat because they intend to have two or more children. Maybe there is hope for the birth-rate to rise.
Investment angle
For many people, owning an HDB home offers a comfortable place to stay while being a financial investment.
Based on the flash estimate for Q2 2022, the HDB Resale Price Index is up 11.8 per cent year-on-year. Compared to pre-pandemic days in Q4 2019, the index is up 24.5 per cent.
Amid upgrading of infrastructure by the government, rising inflation and growing wealth of households, HDB resale prices may grow over the long term.
The likelihood of reaping capital gains from buying an HDB flat rises substantially for those buying in the BTO market, including buyers who cannot receive a housing grant, as BTO flats are sold at subsidised prices.
The price range for the 4-room BTO flats at Yishun Beacon was S$328,000-S$418,000 versus that of S$490,000-550,000 for comparable resale flats nearby, which have land lease outstanding of around 95 years. Taking the mid-point of the price ranges, the resale flat costs about 39 per cent more than the BTO flat.
As BTO flats are subsidised, some buyers may opt to buy bigger units so that they can reap potentially larger absolute gains when they sell their units. Such gains can come in handy for upgrading to a private home or funding retirement needs.
Moreover, buying a larger BTO flat offers more flexibility to rent out a room to generate passive income. Room rental of HDB flats in popular locations can fetch over S$800 per month today.
With an ageing population, government expenditure is rising to help to fund spending on needs such as health care. Hence, raising government spending to build more larger-sized HDB flats needs careful consideration.
Clawback mechanism
When the government unveiled the PLH model last year, it introduced concepts such as a longer minimum occupation period for PLH flats and clawing back a percentage of the resale proceeds of such flats.
Be it with the PLH model or property cooling measures that make it costly for locals to own multiple private homes, the government’s recent property market moves largely emphasise the use of homes for living instead of investing.
Perhaps clawing back part of sales proceeds from the resale of HDB flats that were bought directly from the HDB can be more widely applied.
Possibly, have policy nudge only young couples, who want to have a large family, towards buying larger BTO flats. For example, claw back some of the resale proceeds when couples without children sell their 4 or 5 room BTO flats.
Afterall, it may be fair to argue that larger-sized subsidised public housing flats should be for the use and enjoyment of those with larger households.
Perhaps, the clawback mechanism can also apply to buyers who become eligible to buy BTO flats because the income ceiling for buying such units is raised.
To qualify to buy a BTO flat, a couple comprising a Singapore citizen and another citizen or a permanent resident cannot have an average monthly household income that exceeds S$14,000.
Earlier this year, I had argued in The Level Ground that it may be timely to raise the income ceiling that applies to buyers of BTO units soon. Several property consultants disagreed, arguing that such a move may worsen the difficulty facing applicants in securing a BTO unit.
Perhaps the raising of the income ceiling for buying BTO units can be done concurrently with introducing a mechanism to claw back part of the resale proceeds from higher income earners who purchase BTO flats.
There are many exciting plans for Singapore’s long-term urban development, such as the use of thoughtful urban design to preserve and enhance the unique character of various spaces, while also improving the pedestrian and cycling experience. There are also plans to help Singapore continue to be a city in nature as well as to conserve surface land by going underground, for example.
Still, what matters greatly for many households, given that nearly 8 in 10 resident households live in HDB flats, is the type of public housing they live in. Let us hope that many residents will be happy with their HDB homes, even if the desire from some people for larger HDB homes cannot be met.
Jul 05, 2022
THE HDB is on track to launch up to 23,000 new flats in 2022. Still, it can be challenging for first-time applicants to secure a built-to-order (BTO) flat, especially a larger unit.
In the May BTO exercise, the application rate among the non-elderly first-time applicants was the highest for the 4-room and 5-room flats at Yishun Beacon, with application rates of 9.4 times each as at Jun 2, 2022. The 4-room and 5-room flats at this project have an estimated floor area of 93 square metres (sq m) and 113 sq m respectively.
https://i.imgur.com/ob0lNt4.png
At Lakeside View in Jurong West, the application rate among non-elderly first-timers was 2.4 times, 5.3 times and 9.1 times for 3-room, 4-room and 5-room flats respectively.
With the Prime Location Public Housing (PLH) projects Ghim Moh Ascent and Bukit Merah Ridge, the application rate among the non-elderly for first timers was between 0.5-0.6 times for 3-room units, and between 3.0-3.2 times for 4-room units.
At Kim Keat Heights in the mature town of Toa Payoh, the application rate among non-elderly first-timers was 1.8 times for 3-room units and 7.4 times for 4-room units.
One may infer that the HDB should build proportionately more 4-room and 5-room units to meet demand.
But, household size is shrinking. In 2021, the average household size among resident households in HDB dwellings of 3.09 persons was over 10 per cent lower than that of 3.45 persons in 2010.
Average household size in 4-room flats was 3.27 persons in 2021 versus 3.66 persons in 2010, while that in 5-room and executive flats was 3.63 persons in 2021 versus 3.96 persons in 2010.
Perhaps first-time applicants desire larger flats because they need more space as a result of work-from-home playing a major part in the lives of many knowledge workers.
As it is, Singapore’s population is rapidly ageing, and the birth rate is low. Possibly, some young couples are trying to get a larger flat because they intend to have two or more children. Maybe there is hope for the birth-rate to rise.
Investment angle
For many people, owning an HDB home offers a comfortable place to stay while being a financial investment.
Based on the flash estimate for Q2 2022, the HDB Resale Price Index is up 11.8 per cent year-on-year. Compared to pre-pandemic days in Q4 2019, the index is up 24.5 per cent.
Amid upgrading of infrastructure by the government, rising inflation and growing wealth of households, HDB resale prices may grow over the long term.
The likelihood of reaping capital gains from buying an HDB flat rises substantially for those buying in the BTO market, including buyers who cannot receive a housing grant, as BTO flats are sold at subsidised prices.
The price range for the 4-room BTO flats at Yishun Beacon was S$328,000-S$418,000 versus that of S$490,000-550,000 for comparable resale flats nearby, which have land lease outstanding of around 95 years. Taking the mid-point of the price ranges, the resale flat costs about 39 per cent more than the BTO flat.
As BTO flats are subsidised, some buyers may opt to buy bigger units so that they can reap potentially larger absolute gains when they sell their units. Such gains can come in handy for upgrading to a private home or funding retirement needs.
Moreover, buying a larger BTO flat offers more flexibility to rent out a room to generate passive income. Room rental of HDB flats in popular locations can fetch over S$800 per month today.
With an ageing population, government expenditure is rising to help to fund spending on needs such as health care. Hence, raising government spending to build more larger-sized HDB flats needs careful consideration.
Clawback mechanism
When the government unveiled the PLH model last year, it introduced concepts such as a longer minimum occupation period for PLH flats and clawing back a percentage of the resale proceeds of such flats.
Be it with the PLH model or property cooling measures that make it costly for locals to own multiple private homes, the government’s recent property market moves largely emphasise the use of homes for living instead of investing.
Perhaps clawing back part of sales proceeds from the resale of HDB flats that were bought directly from the HDB can be more widely applied.
Possibly, have policy nudge only young couples, who want to have a large family, towards buying larger BTO flats. For example, claw back some of the resale proceeds when couples without children sell their 4 or 5 room BTO flats.
Afterall, it may be fair to argue that larger-sized subsidised public housing flats should be for the use and enjoyment of those with larger households.
Perhaps, the clawback mechanism can also apply to buyers who become eligible to buy BTO flats because the income ceiling for buying such units is raised.
To qualify to buy a BTO flat, a couple comprising a Singapore citizen and another citizen or a permanent resident cannot have an average monthly household income that exceeds S$14,000.
Earlier this year, I had argued in The Level Ground that it may be timely to raise the income ceiling that applies to buyers of BTO units soon. Several property consultants disagreed, arguing that such a move may worsen the difficulty facing applicants in securing a BTO unit.
Perhaps the raising of the income ceiling for buying BTO units can be done concurrently with introducing a mechanism to claw back part of the resale proceeds from higher income earners who purchase BTO flats.
There are many exciting plans for Singapore’s long-term urban development, such as the use of thoughtful urban design to preserve and enhance the unique character of various spaces, while also improving the pedestrian and cycling experience. There are also plans to help Singapore continue to be a city in nature as well as to conserve surface land by going underground, for example.
Still, what matters greatly for many households, given that nearly 8 in 10 resident households live in HDB flats, is the type of public housing they live in. Let us hope that many residents will be happy with their HDB homes, even if the desire from some people for larger HDB homes cannot be met.