New Reporter
12-09-23, 10:27
New HDB Plus flat segment could be a boon for young seniors
Leslie Yee
Sep 11, 2023
I AM unsure whether it’s a positive thing to be called a young senior. However, I am happy that Prime Minister Lee Hsien Loong acknowledged in this year’s National Day Rally (NDR) that those in their 50s and early 60s, a group he termed “young seniors”, are in a particularly sandwiched phase of life.
Many young seniors – myself included – care for both the young and old in our families. While many of us grumble occasionally, I am confident young seniors will shoulder this responsibility well.
To help us meet our retirement needs, we have the Majulah Package. This package for Singaporeans born in 1973 or earlier comprises an “Earn and Save” Bonus, a Retirement Savings Bonus and a MediSave Bonus. The Majulah Package will cost the government about S$7 billion.
Perhaps, it’s not only the Majulah Package that helps young seniors. They may be big beneficiaries of the new public housing framework unveiled by PM Lee at the NDR. With this new framework, many Housing and Development Board (HDB) flats in popular locations will be priced more affordably in both the primary and secondary markets.
HDB will remove its current classification by mature and non-mature estates. It will designate flats as Standard, Plus or Prime, differentiating projects by locational attributes. The changes will apply to Build-To-Order (BTO) projects from H2 2024.
New HDB framework
The new HDB framework aims to keep homeownership affordable, maintain a good social mix in public housing, and keep the system fair.
Standard projects will form the bulk of BTO projects, and come with rules such as a five-year minimum occupation period (MOP), after which the owner can resell the flat. There is no income ceiling for resale buyers. Households comprising permanent residents (PRs) who have had PR status for at least three years can buy such resale flats.
Prime flats will fall under the existing Prime Location Housing model. These flats are in the most prime central locations, such as the Greater Southern Waterfront. Prime BTO flats are priced with the most subsidies and come with the tightest restrictions.
https://i.imgur.com/ZPhkytN.png
Plus flats are a new category. They will be offered in choice locations within each region, such as being next to the MRT station or near very good amenities. Plus flats will also be built in developed estates and central locations such as Bishan, Bukit Merah, Kallang/Whampoa, Queenstown and Toa Payoh.
Plus BTO flats are priced with higher subsidies, and come with tighter restrictions than Standard flats. Today, a four-room BTO flat in a mature estate may be priced at S$650,000. Under the Plus model, the flat could be priced lower, at, say, S$550,000.
Similar to Prime flats, the MOP for Plus flats is 10 years. Also, BTO buyers of Prime and Plus flats will pay a proportion of the resale price if they sell their flats later on. The clawback will be smaller for Plus flats than for Prime flats.
Owners of Plus and Prime flats cannot rent out their entire flat at any time. And the purchase of resale Plus and Prime flats is restricted to Singaporeans. An income cap of S$14,000 a month applies to families and singles buying resale Plus flats. Also, a 30-month waiting period applies to private homeowners looking to buy a Plus flat after they sell their property.
Features such as a 10-year MOP, clawback of the subsidy upon resale for first owners, and restrictions on resale buyers, including an income ceiling, will constrain the financial gains a young couple who bought a BTO Plus flat makes from selling their home. This can hamper the couple’s ability to move from HDB to private homes and build wealth through homeownership.
Retirees
Young seniors may not have the same reservations on such constraints limiting potential financial gains. In particular, local young seniors who own private homes or sought-after HDB flats and are looking to retire in about 15 years could benefit greatly from the introduction of Plus flats. This includes singles who can buy any resale Plus flats but are restricted to two-room Prime flats.
A local retiree who sells a private home and buys a resale Plus flat can save on purchase costs from not needing to compete for many well-located flats with PR households or households earning over the income ceiling.
Buying a resale Plus flat in 2040 with, say, 88 years of land lease left provides a retiree a good home to live in, as well as a valuable asset to pass to the next generation. In 2040, a resale HDB flat at The Pinnacle@Duxton will have about 70 years of land lease outstanding, and some resale flats in existing mature estates may have under 40 years of remaining land lease.
A local retiree couple can also gain from being able to buy a BTO Plus flat for a lower price due to the greater subsidies given for such flats than Standard units.
The new HDB framework sends the message that HDB flats are to be reserved and appropriately priced for those looking for a home to live in, not to invest in, and not to flip for quick capital gains.
Such a message may better suit the aspirations of retirees, who are looking for good homes to live in at affordable prices, and who are less focused on the investment aspect of owning a home. In contrast, younger persons, with a longer runway ahead, may be more keen to build wealth via homeownership.
Young couples can still build wealth from homeownership. A couple who collects their keys to a BTO Plus flat in their early 30s can sell it when they are in their early to mid 40s for a profit and upgrade to private housing at a time when they may be close to their peak years of income. The couple will be pleased that they can sell their HDB Plus flat to local retirees who are funded by proceeds from divesting a private home or a large, centrally-located HDB flat.
Today, HDB homeownership serves many needs – well beyond providing a roof over one’s head. Serving multiple and possibly conflicting needs can be challenging for policymakers.
It is hoped that young families can have good homes as well as build wealth with Plus flats. And young seniors may find that selling an existing home in order to buy a Plus flat is a great way to free up funds for retirement, and to own a good home for living in.
https://www.businesstimes.com.sg/opinion-features/new-hdb-plus-flat-segment-could-be-boon-young-seniors
Leslie Yee
Sep 11, 2023
I AM unsure whether it’s a positive thing to be called a young senior. However, I am happy that Prime Minister Lee Hsien Loong acknowledged in this year’s National Day Rally (NDR) that those in their 50s and early 60s, a group he termed “young seniors”, are in a particularly sandwiched phase of life.
Many young seniors – myself included – care for both the young and old in our families. While many of us grumble occasionally, I am confident young seniors will shoulder this responsibility well.
To help us meet our retirement needs, we have the Majulah Package. This package for Singaporeans born in 1973 or earlier comprises an “Earn and Save” Bonus, a Retirement Savings Bonus and a MediSave Bonus. The Majulah Package will cost the government about S$7 billion.
Perhaps, it’s not only the Majulah Package that helps young seniors. They may be big beneficiaries of the new public housing framework unveiled by PM Lee at the NDR. With this new framework, many Housing and Development Board (HDB) flats in popular locations will be priced more affordably in both the primary and secondary markets.
HDB will remove its current classification by mature and non-mature estates. It will designate flats as Standard, Plus or Prime, differentiating projects by locational attributes. The changes will apply to Build-To-Order (BTO) projects from H2 2024.
New HDB framework
The new HDB framework aims to keep homeownership affordable, maintain a good social mix in public housing, and keep the system fair.
Standard projects will form the bulk of BTO projects, and come with rules such as a five-year minimum occupation period (MOP), after which the owner can resell the flat. There is no income ceiling for resale buyers. Households comprising permanent residents (PRs) who have had PR status for at least three years can buy such resale flats.
Prime flats will fall under the existing Prime Location Housing model. These flats are in the most prime central locations, such as the Greater Southern Waterfront. Prime BTO flats are priced with the most subsidies and come with the tightest restrictions.
https://i.imgur.com/ZPhkytN.png
Plus flats are a new category. They will be offered in choice locations within each region, such as being next to the MRT station or near very good amenities. Plus flats will also be built in developed estates and central locations such as Bishan, Bukit Merah, Kallang/Whampoa, Queenstown and Toa Payoh.
Plus BTO flats are priced with higher subsidies, and come with tighter restrictions than Standard flats. Today, a four-room BTO flat in a mature estate may be priced at S$650,000. Under the Plus model, the flat could be priced lower, at, say, S$550,000.
Similar to Prime flats, the MOP for Plus flats is 10 years. Also, BTO buyers of Prime and Plus flats will pay a proportion of the resale price if they sell their flats later on. The clawback will be smaller for Plus flats than for Prime flats.
Owners of Plus and Prime flats cannot rent out their entire flat at any time. And the purchase of resale Plus and Prime flats is restricted to Singaporeans. An income cap of S$14,000 a month applies to families and singles buying resale Plus flats. Also, a 30-month waiting period applies to private homeowners looking to buy a Plus flat after they sell their property.
Features such as a 10-year MOP, clawback of the subsidy upon resale for first owners, and restrictions on resale buyers, including an income ceiling, will constrain the financial gains a young couple who bought a BTO Plus flat makes from selling their home. This can hamper the couple’s ability to move from HDB to private homes and build wealth through homeownership.
Retirees
Young seniors may not have the same reservations on such constraints limiting potential financial gains. In particular, local young seniors who own private homes or sought-after HDB flats and are looking to retire in about 15 years could benefit greatly from the introduction of Plus flats. This includes singles who can buy any resale Plus flats but are restricted to two-room Prime flats.
A local retiree who sells a private home and buys a resale Plus flat can save on purchase costs from not needing to compete for many well-located flats with PR households or households earning over the income ceiling.
Buying a resale Plus flat in 2040 with, say, 88 years of land lease left provides a retiree a good home to live in, as well as a valuable asset to pass to the next generation. In 2040, a resale HDB flat at The Pinnacle@Duxton will have about 70 years of land lease outstanding, and some resale flats in existing mature estates may have under 40 years of remaining land lease.
A local retiree couple can also gain from being able to buy a BTO Plus flat for a lower price due to the greater subsidies given for such flats than Standard units.
The new HDB framework sends the message that HDB flats are to be reserved and appropriately priced for those looking for a home to live in, not to invest in, and not to flip for quick capital gains.
Such a message may better suit the aspirations of retirees, who are looking for good homes to live in at affordable prices, and who are less focused on the investment aspect of owning a home. In contrast, younger persons, with a longer runway ahead, may be more keen to build wealth via homeownership.
Young couples can still build wealth from homeownership. A couple who collects their keys to a BTO Plus flat in their early 30s can sell it when they are in their early to mid 40s for a profit and upgrade to private housing at a time when they may be close to their peak years of income. The couple will be pleased that they can sell their HDB Plus flat to local retirees who are funded by proceeds from divesting a private home or a large, centrally-located HDB flat.
Today, HDB homeownership serves many needs – well beyond providing a roof over one’s head. Serving multiple and possibly conflicting needs can be challenging for policymakers.
It is hoped that young families can have good homes as well as build wealth with Plus flats. And young seniors may find that selling an existing home in order to buy a Plus flat is a great way to free up funds for retirement, and to own a good home for living in.
https://www.businesstimes.com.sg/opinion-features/new-hdb-plus-flat-segment-could-be-boon-young-seniors