Families to have priority for new prime location HDB flats, to keep flats affordable

Families to have priority for new prime location HDB flats, to keep flats affordable

Jan 10, 2022

THE Prime Location Public Housing (PLH) model will give priority to Singaporean families who may need more space because they have bigger households, the Ministry of National Development said on Monday (Jan 10). The ministry was responding in a written answer to a question raised in Parliament on whether singles would be allowed to buy PLH resale flats.

"To keep PLH flat prices affordable for a wide range of Singaporeans, new PLH flats will be priced with additional subsidies, on top of the substantial subsidies already provided for Build-To-Order flats. Beyond the initial purchase, we also want to ensure that the prices of these flats remain within reach of Singaporeans when the PLH flats are sold subsequently on the open market," MND said.

"Without policy intervention, resale prices for PLH flats would likely increase beyond the reach of many Singaporeans," the ministry added.

Introduced in October last year, the PLH scheme will see new HDB flats built in prime and central locations in Singapore, but subject to a 10-year minimum occupation period, up from the usual 5, and additional subsidy clawbacks of 6 per cent upon their resale.

The ministry iterated on Monday that singles who can form a family unit with their parent(s) or single sibling(s) whose parents have passed on are eligible to buy a BTO flat from HDB and a resale PLH flat in the future.

Single Singapore citizens aged 35 and above can also buy resale flats of any size and in any location, including those in existing HDB estates within prime locations that are not launched under the PLH model.

"Singaporeans are familiar with the means-tested conditions in our BTO eligibility criteria which cover a broad range of Singaporean households. Today, more than 8 in 10 Singaporeans are eligible to buy a subsidised flat," MND said.

"The PLH model is very new. We will continue to review it over time to ensure it meets the needs of different population segments," the ministry added.

To meet growing demand for HDB flats, MND is also planning to launch up to 23,000 BTO flats per year in 2022 and 2023.

The first launch in February this year will have expected waiting times of between 2.5 to 5.5 years, the ministry said on Monday.

Meanwhile, projects launched in the past two years will have waiting times of about 3 to 5 years, similar to that of launches in pre-Covid times.

"For ongoing projects, after factoring in delays due to Covid-19 of about 6 to 12 months beyond their original Estimated Completion Dates (ECD), we expect that most flat buyers will be able to move into their new homes within 4 to 5 years after booking their flats, barring any further unforeseen circumstances," the ministry added.

"We are monitoring the global COVID-19 pandemic closely, including the new Omicron variant, and have rolled out extensive assistance measures to minimise any potential disruption to BTO projects," it said.

The increased supply is also coupled with cooling measures announced last month to ensure that homes "remain affordable over time". This includes the tightening of the Total Debt Servicing Ratio (TDSR) from 60 per cent to 55 per cent.

The change was made to encourage financial prudence among home buyers, as interest rates are likely to rise in 2022 and beyond, Minister for National Development Desmond Lee said, in a written answer to questions on how such changes would affect young Singaporeans' ability to own their first HDB flat or private property.

"HDB buyers are already subject to the stricter Mortgage Service Ratio (MSR) of 30 per cent which was not changed in the latest round of cooling measures. The tightened TDSR will encourage prospective first-time owners of private properties to right-size their intended purchases and mortgages, without overstretching themselves, so that they can better service their debt obligations," Lee said.

According to MND, the past three years saw MSR, which is the proportion of monthly income used to service mortgage instalment payments, remaining at about 23 per cent or below for both new and resale flat buyers taking an HDB housing loan, on average.

"This means that buyers generally require little or no cash outlay in servicing the payments for their flats as their mortgage loans can be paid using their Central Provident Fund (CPF) contributions," MND noted.

The cooling measures also include a reduction in Loan-to-Value (LTV) limit from 90 per cent to 85 per cent for HDB loans, which is "not expected to significantly affect first-timers taking an HDB loan", said Lee.

He noted that more than 9 out of 10 buyers who took an HDB housing loan in 2020 had an LTV of 85 per cent or less. This includes young couples, gig economy workers, and the self-employed.

"Looking more specifically at households with an income of S$7,000 or less, only 1 per cent would be affected. For reference, S$7,000 is half the current income ceiling of S$14,000 for families to purchase a subsidised flat," Lee added.