NDR 2023: New 'Plus' BTO projects in choice locations from second half of 2024; mature, non-mature estate classification to cease
SINGAPORE — A new “Plus” model to classify public housing projects will be introduced from the second half of next year, and the current mature and non-mature estate classification will be phased out.
Prime Minister Lee Hsien Loong said during his National Day Rally speech on Sunday (Aug 20) that Build-to-Order (BTO) public housing projects under this new Plus category will be found in “choice” locations across the island, such as near MRT stations or town centres.
While successful applicants for such projects will get more subsidies from the Housing and Development Board (HDB), they will also face tighter restrictions, such as a 10-year minimum occupation period. The extra subsidies that applicants received must also be paid back to HDB upon resale, among other restrictions.
Moving forward, new flats will be divided into three categories:
- Standard flats that will be the majority of the BTO supply
- Plus flats
- Prime Location Public Housing flats, which will be renamed to "Prime” flats
The changes will not affect existing projects.
Existing flats, or flats that have already been booked, will not be reclassified.
Mr Lee pointed out that if the new categories were applied to popular BTO projects in the past that would have hypothetically been classified under the Plus model, then prices of such flats would have been lower.
Take for example the Central Weave project in Ang Mo Kio, launched in August last year.
The flats under this project made headlines previously, with prices reaching almost S$900,000, but were still heavily oversubscribed, due in part to its favourable location to several amenities such as the MRT station and bus interchange, a hawker centre and a mall.
Mr Lee said that prices for flats in the Central Weave project would have been priced lower had it been under the Plus model.
WHY THIS MATTERS
The new public housing categorisation has been introduced to keep pace with the evolving housing landscape.
Since the early 1990s, HDB has used a simple framework to guide the public in buying flats, by categorising them as projects in “mature” and “non-mature” estates.
Mature estates are usually more centrally located and better connected, and had better amenities, such as those in Queenstown, Toa Payoh and Ang Mo Kio.
Non-mature estates are less central and further out, such as Jurong East, Woodlands and Punggol.
However, Mr Lee said that the housing landscape has evolved, due to several factors:
- There are fewer large tracts of undeveloped land left to build new towns and estates, which means that increasingly, new HDB flats will have to be built within or near to existing estates
- Non-mature estates have become more developed as towns like Jurong East, Woodlands and Punggol mature, with more connectivity and a full suite of amenities
Thus, the distinction between mature and non-mature estate is blurring, he added.
For instance, there have been BTO applications where some attractive projects in non-mature estates were even more popular than projects in mature estates, he noted.
He reasoned that this shows buyers are discerning and are looking for “specific attributes” of the project, rather than whether they are in mature or non-mature estates.
“In future, many more BTO developments will be in estates or locations that are effectively ‘mature’,” he said. “This means that the framework of mature and non-mature estates will no longer work.”
WHAT SHOULD THE NEW FRAMEWORK ACHIEVE?
Mr Lee said that the new classification system should achieve three objectives:
- Keep home ownership affordable for all income groups
- Maintain a good social mix in every town and region
- Keep the public housing system fair for everyone
Although HDB will continue to provide housing grants to maintain a good social mix in every town and region, this is not as feasible for “choicer” projects near MRT stations or town centres.
Such flats see high demand, because people believe that these would fetch much higher resale prices afterwards. This turns the BTO exercise into a lottery, with those who managed to get such a flat from ballots standing to gain a windfall upon resale.
Under the current classification, HDB faces a dilemma, Mr Lee continued.
For example, if it prices “choicer” projects such as Ang Mo Kio’s Central Weave at a higher price, then it would shrink the windfall gains and reduce the lottery effect, and so moderate demand.
However, this will also make such flats unaffordable to most families and could result in such precincts becoming higher-income enclaves.
On the other hand, if HDB prices the flats lower, there will be more households who can afford the flats and there will be a good social mix, but it would exacerbate the lottery effect because the potential windfall gains will be even higher.
“So under the present framework, whether we price such flats higher or lower, we cannot fully achieve all three objectives: Affordability, a good social mix, and a fair outcome.”
He added that while the Central Weave project has already been launched, the same situation may arise with other projects.
KEEPING HOUSING 'AFFORDABLE AND FAIR'
The new Plus model will thus be introduced for “choicer” locations with stricter sale conditions, so that prices can be moderated yet fairness is ensured, Mr Lee said.
“This will moderate the prices of Plus flats and put them within reach of more households.”
The sale conditions for Plus flats include:
- A longer minimum occupation period of 10 years to favour buyers who are planning to live and occupy the flat for the longer term, and to discourage those who may be thinking of flipping the property for resale and moving out as soon as they can
- Tighter restrictions when the home-owner resells the Plus flat later on, such as a subsidy recovery applied on the resale price, to take back the extra discounts so as to be fair to other buyers who did not get these Plus flats
- An income ceiling on resale buyers
With these conditions, it will moderate resale prices and help to maintain a better social mix, even in the resale market in the longer term, Mr Lee said.
While some new HDB projects will be Plus flats, the majority of the projects will still be “standard” flats, with the standard BTO rules that are familiar to Singaporeans.
This includes a five-year minimum occupation period and no income ceiling for resale buyers.
However, within each town or region, there will be both Standard and Plus flats, he said.
For instance, the Bayshore project in Bedok is “a very good location for building homes”, where it is a short walk to two MRT stations: Bayshore and Bedok South, near a future mall and Siglap Community Centre, and also near East Coast Park.
He said that the HDB projects at Bayshore will likely be Plus projects and will be sold under the above rules.
TIGHTER RULES, MORE SUBSIDIES
With the new Plus flats, there will thus be three categories of flats:
- Standard flats will be the majority of flats built all over Singapore, and will have HDB’s standard subsidies and standard restrictions
- Plus flats are in the choicer locations within a region, and will have more subsidies and tighter restrictions than Standard flats
- Prime flats (also known as Prime Location Public Housing flats) are in the choicest and most central locations in Singapore, and will have the most subsidies and tightest restrictions
In a joint media statement, the Ministry of National Development and HDB said on Sunday that the Plus flats will come with more subsidies and tighter restrictions compared to the Standard BTO flats, but will have fewer restrictions compared to Prime flats.
For instance, extra subsidies for Plus flats will be typically lower compared to Prime flats, and the subsidy recovery rate imposed on Plus flat buyers will be lower than that for Prime flats.
Mr Lee said that the Plus model is similar to the Prime Location Public Housing model, which has been keeping the selling prices of flats in prime locations reasonable.
For example, for the Bukit Merah Ridge, which was launched in May last year, the selling price for a four-room flat ranged from S$540,000 to S$737,000, lower than that of Central Weave.
Each flat attracted 5.4 applicants, also far fewer than Central Weave.
“We hope Plus projects will achieve similarly good outcomes,” Mr Lee said.
He added that the new Standard, Plus and Prime classification will be a major change to the way HDB sells flats.
WHAT ANALYSTS SAY
Commenting on the new move, property analysts told TODAY that the new Plus model is long overdue given the evolving housing landscape, but said that it will be a “good way forward” in ensuring that housing remains affordable yet accessible.
Ms Christine Sun said that in the past, buyers were willing to pay more for flats in mature estates because they were closer to the city centre, but this phenomenon has evolved.
The senior vice-president of research and analytics at real estate agency Orange Tee & Tie noted that in recent years, more flats in non-mature estates were sold at higher prices when compared to older estates.
For instance, last year, the median resale price in Punggol (S$550,000) and Sengkang (S$541,888) surpassed certain mature estates such as Bedok (S$440,000) and Ang Mo Kio (S$425,000).
She added that these trends indicate that buyers are now placing a higher value on a product’s attribute, such as its proximity to town centres, popular schools, MRT stations, for instance, rather than its closeness to the city centre.
“Therefore, reclassifying flats to be less associated with locational attributes can provide a more accurate depiction of the intrinsic value of certain flats, especially those outside of the city centre,” she said.
Agreeing, Dr Leong Chan-Hoong said that the new model is a fairer way to distribute resources and subsidies.
Dr Leong, who is head of policy development, evaluation and data analytics at research agency Kantar Public, added: “This approach will help to inform the kind of social compact that we want… It can't be one where it’s a function of luck, or a function of whether you have existing financial resources.”
He also said that restrictions such as the longer minimum occupation period, subsidy clawback, and income ceiling of resale buyers will help sift out those who truly want to live in the flats, as opposed to those seeking to make a profit.
Agreeing, Ms Sun said that the longer minimum occupation period is a “good move” and reinforces the message that a house is a home and not to be used for “speculative investments”.
“Moreover, many flats in mature estates are ageing and will be redeveloped into new housing units.
“With more prime land being free up for redevelopment, it is a good reminder to young Singaporeans to stay longer in these well-located, subsidised flats,” she added.
Mr Nicholas Mak, chief research officer of property website Mogul.sg, said that a 10-year minimum occupation period restricts both the geographical mobility and financial mobility of households because they would have to “wait an additional five years before they could realise the capital gains of their HDB flats”.
“This could also have a negative effect on the private residential property market, such as lower upgraders demand and slower price expansion.”
The analysts said, however, that it might not be easy to define which projects are supposed to be Plus flats.
“Is it just about transportation nodes, or the proximity to a mall or good school? So how to define what will be considered a Plus flat could be an issue,” Dr Leong said.
