New HDB classifications: Will tighter restrictions limit upgrading behaviour and capital upside?

August 23, 2023

Prime Minister Lee Hsien Loong outlined three new public housing classifications of Prime, Plus and Standard in his National Day Rally speech on Aug 20 to address the evolving housing landscape.

The distinction between “mature” and “non-mature” estates, introduced in the early 1990s, has blurred. “In the future, many more BTO developments will be in estates or locations that are effectively ‘mature’,” says PM Lee. “This means that the framework of mature and non-mature estates will no longer work.”

He emphasised that the overarching objectives must be achieved even under the new Standard, Plus and Prime HDB framework: To keep homeownership affordable for all income groups, maintain a good social mix in every town and region, and keep the system fair for everyone. The Prime flats are currently offered under Prime Location Housing (PLH), first rolled out in the November 2021 BTO launch. These are locations in the Central Area, where the most subsidies are given to keep the prices affordable. Plus flats are those in HDB projects outside the Central Area but are in “choicer locations” near MRT stations or amenities.

New restrictions

Buyers of Prime and Plus BTO flats will be given additional subsidies to keep such flats affordable, but there will be a clawback of sub- sidies and restrictions on selling. For instance, the minimum occupation period (MOP) for both Plus and Prime flats will be 10 years instead of the five-year MOP for Standard flats.

Prime and Plus flat owners can rent out bedrooms but not the whole flat. “This nips the investment element in the bud,” says Lee Sze Teck, senior director of data analytics at Huttons Asia. Only Singaporeans can buy Plus and Prime flats in the resale market. Private homeowners who want to buy a Plus or Prime resale flat have a 30-month wait-out period. Buyers of the Plus and Prime resale flats must also meet BTO conditions, including the $14,000 monthly household income ceiling.

Singaporean couple Charmayne Aw, 27, and her boyfriend, Damien Ng, 30, said they would still prefer the Standard HDB option. “Even though the Plus and Prime flats come with higher subsidies, selling the flat in the future would be more difficult, and I would have to wait 10 years before I can sell,” says Aw, an interior designer. “The Plus and Prime flats are quite expensive given their locations. My friend got the ballot for a prime location flat. It’s a four-room flat, and the price was $700,000.”

In hindsight, the couple is happy with their choice of a 116 sq m (1,249 sq ft), five-room flat at Tampines Green Jade overlooking Bedok Reservoir, secured in the August 2021 BTO launch for $525,000. It was their first BTO application, too. “We were very lucky,” says Aw. “My cousin and friends who applied too were unsuccessful.” They will be getting the keys to their new flat sometime in 2025.

More HDB housing options

Another 27-year-old, Nicole Lim, would opt for a Plus flat despite the restrictions. “Location is key to me,” she says. “The 10-year MOP doesn’t weigh as much in importance as location.”

HDB dwellers make up 77.9% of Singapore’s residential households, based on the Singapore Department of Statistics in 2022. In comparison, 17% live in apartments and condos, and the remaining 4.9% live in landed properties, ranging from terraced, semi-detached to detached houses. PM Lee has said that most HDB projects will still be Standard projects in the future. Besides the five-year MOP, there are no restrictions in the resale market.

“The intent is to have more options to suit a wide spectrum of demographics,” says Lam Chern Woon, Edmund Tie’s head of research and consulting. “Previously, prime flats were accessible only to high-income earners in the resale market or to lucky ‘lottery winners’ in the BTO market.”

More at: https://www.edgeprop.sg/property-new...capital-upside