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What’s the impact on the property market for the Prime HDB Flats?

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Sep, 18

As we all know, the Singapore property news for Prime HDB Flats have recently been released. There are a few new rules for potential Prime HDB Flats buyers to take note of. But what is the impact on the property market? According to analysts, the new prime-location public housing (PLH) model will have little impact on private residential demand. It is because these two serve different market segments.

The model, announced in a joint statement by the Ministry of National Development (MND) and the Housing Development Board (HDB) on Wednesday (27 Oct), aims to keep prime HDB flats affordable and inclusive.

Built in prime, central locations in Singapore, Housing Board (HDB) flats will now be subject to a 10-year minimum occupation period (MOP) under the new scheme. The government will also claw back additional subsidies if they get resold.

According to Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, buyers who can afford private homes in prime and city fringe areas will not turn to the HDB market once the scheme gets implemented.

“This is because they are buying private homes for the facilities, privacy, price appreciation, and potential rental yield that HDB flats will not provide,” she explained.

She also stated that the number of units available under the scheme is “very small,” implying that build-to-order (BTO) flat applicants will still have to purchase other types of housing.

“As a result, introducing this model is unlikely to have a significant impact on the selling price or attractiveness of other flats,” she said.

According to Lee Sze Teck, senior research director at Huttons Asia, the private market allows buyers to “sell freely at any time to anyone.”

He added that the subsidy clawback rate, announced later this year, could make the private market “even more appealing” than PLH flats.

According to Nicholas Mak, ERA’s head of research and consultancy, subsidy reversion could moderate the prices of HDB flats in the city center, slowing the rise of private property prices in the core central region (CCR).

However, he stated that the PLH scheme’s impact on prime private properties in the CCR will be “very limited, if any.”

However, Lee Nai Jia, deputy director of the National University of Singapore’s Institute of Real Estate and Urban Studies, stated that developers acquiring prime sites must consider the possibility that adjoining state land parcels may be HDB sites. So they must position the product correctly.

“It may be more difficult to sell luxury private homes facing HDB projects,” he said. “If the PLH housing is well-designed, the impact may be minimal.”

“Overall, I believe this is a worthwhile social policy because it promotes a more inclusive society. However, the policy shift is risky, and it’s unclear how well the final product gets received by the market,” said Lee Nai Jia.

According to MND and HDB, the first project under the new PLH model gets launched in Rochor. It is during the build-to-order (BTO) sales exercise in November.

The pilot project will have 960 units of 3-room and 4-room flats for sale and 40 2-room rental flats along Kelantan Road and Weld Road.

To moderate Kelantan Road’s and Weld Road’s higher market values, PLH flats get priced additional subsidies with the existing ones provided for BTO flats.

To ensure “fairness” with BTO buyers in other parts of Singapore, PLH flat owners will have to pay HDB a percentage of the flat’s resale price when they sell their homes.

According to the agencies, the subsidy recovery percentage will be proportionate to the initial additional subsidy provided and is adjustable based on future market conditions.

The precise percentage gets announced during the BTO sales exercise in November.

The purchase eligibility conditions (including citizenship status, private property ownership, and income cap) for PLH flats will be the same as for BTO flats.

However, priority quotas for flat allocation under the Married Child Priority Scheme (MCPS) will be reduced.

Currently, up to 30% of BTO flats get reserved for families under the MCPS. The scheme prioritises applicants whose parents live in the same neighbourhood.

“This is due to the fact that priority schemes such as the MCPS may give buyers an advantage in the balloting process if their families are more affluent or already live in or near these prime locations. However, we recognize – as do many Singaporeans – the importance of facilitating mutual care and support across family generations,” said the minister.

“We will look at each development that we launch and determine whether it is appropriate to make quota adjustments based on location,” he added.

The minimum occupancy period (MOP) for PLH flats will be ten years, compared to the current five years for other BTO flats.

Furthermore, even after the MOP, PLH flat owners get prohibited from renting out their entire units. These terms get applied to both first-time home buyers and all subsequent buyers on the resale market.

“These policies will help to strengthen the owner-occupation intent of public housing, as well as deter speculative demand and moderate resale prices,” Minister Lee said.

“Where these conditions cause difficulties for those who genuinely face extenuating circumstances,” he added, “we can review their appeals on a case-by-case basis.”

The PLH model gets used for specific public housing projects in prime and central locations such as the city center and surrounding areas, including the Greater Southern Waterfront. It will only apply to future public housing in high-demand areas, not to existing flat owners.

Those looking to purchase these flats on the resale market after the 10-year MOP must meet the current eligibility requirements for buying a flat directly from the HDB. These include having at least one applicant who is a Singapore citizen and meeting the $14,000 household income ceiling. The applicant must also not own or have sold any private property in the last 30 months.

Singles over the age of 35 will be ineligible to purchase these PLH flats. In contrast, current rules do not impose any restrictions on singles over age 35 purchasing resale flats. According to the agencies, this distinction prioritises the supply of flats for Singaporean families during the model’s initial launch phase.

Where possible, public rental flats get built on these prime sites for lower-income households. “This will ensure that public housing across Singapore remains inclusive and diverse, and HDB towns continue to be home to residents from all walks of life,” the agencies said.

The PLH model was developed by MND and HDB in response to public feedback from over 7,500 Singaporeans, a summary of which was released last week.

“We will not be afraid to take bold and decisive action against some of these socioeconomic forces that tend to pull in the opposite direction, toward stratification and fragmentation. Fundamentally, our housing policies are about more than just providing shelter. They are also concerned with allowing Singaporeans to live together, interact with one another, and build strong, long-lasting, and cohesive communities,” Lee, the minister, stated.

Engage your property lawyer today, to help you make the best decisions for your HDB purchase. The property lawyer fees spent will definitely be worth it for your dream home.

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