Announced on October 27th, Build-To-Order (BTO) flats under the new housing model, entitled Prime Location Public Housing (PLH) is one of the most recent attempts by the government to salvage the rising housing cost for the general Singapore public.
Housing in Singapore has always been a socio-political quagmire highly contested since the birth of the nation, given our lack of land and subsequently dramatic diversion towards public housing reform.
The topic of BTO and resale flats reached a new definition of controversy the past few years as prices of BTO flats soared, an average of 2.4 times high of a price jump since the new millennium.
The lottery effect as many people know it to be is when homeowners get selected for their ballots on prime housing areas, and subsequently sell it for a windfall.
The main pointers coming from this scheme is the lengthened minimum occupation period (MOP) to 10 years for BTO based in prime location, with additional subsidies recovery subjected as a government clawback upon resale (applies on selling price regardless of profits).
There is also a permanent ban on whole unit rental even after MOP has been fulfilled, encouraging buyers who are looking for a long term homestay to be incentivised. This ban applies to both first-time homeowners as well as all subsequent resale buyers.
Quotas for BTO flat allocation under the Married Child Priority Scheme have also been reduced with the introduction of this prime location-specific BTO scheme.
This was created to avoid providing added advantage to homeowners who might potentially be well-off and have families living in the same area.
This serves as an interesting parallel as a recent public feedback report released by the Ministry of National Development (MND) a few days before, on October 20th, shows a general consensus by Singaporeans supporting the removal of Housing Priority Schemes in prime real estate zones.
It also supports setting up stronger criterias on potential homeowners (income cap), as well as barring full rental after the 5 year MOP. This has been a 10 month long public engagement on the topic of prime BTO flats.
One controversial set up for this scheme is that singles above 35 years old will be ineligible to partake in BTOs under the PLH scheme, which was highlighted as an attempt to place focus on supplying housing to growing families. Apart from these, most logistical steps to BTO balloting still applies.
As a whole, the objective for this scheme is to discourage potential buyers who are purchasing flats with sole intentions of asset progression.
This meant that these buyers purchase the BTO flats with intentions of utilising the priority schemes and subsidies to attain a housing asset with intentions to sell after the MOP has been met.
After a few years of appreciation and sales using this tactic, they can climb up a typical ladder of residential asset class and profit significantly. This inversely results in the general Singapore population lacking the opportunities to possess their own home, a reason why such policies were drafted.
Some offshoot side effects of this scheme includes appreciation of subprime housing areas or the resale prime market.
This is still a buyers market nevertheless. With the tightening of the restrictions on incoming prime BTO locations, potential homeowners might flock towards surrounding areas without the setups, or towards existing prime area flats where HDB has mentioned would not be cast with retroactive PLH setups.
This in turn might cause a sharp demand on such places, and thus have the same effect as what would be on pre-PLH BTOs.
Furthermore, selection on the BTOs to be inducted into the PLH Scheme is based solely on the location instead of the price range, this helps to prevent inverted selective control on housing prices.
Business Times Singapore’s interview with Christine Sun, Senior Vice President of OrangeTee & Tie mentions the unlikelihood that the PLH would have significant impact on private housing demand cycle since the “two serve different market segments”.
Furthermore, the number of PLH flats offered would likely be inconsequential as a whole on the housing economic circuitry.
As a whole, because this policy is new and sets itself up as a benchmark to counteract an issue plaguing the general Singaporean population for years, it is hard to say the detriments or benefits it brings until we see it active and running.
However, its primary aim is to cultivate an owner-occupier mentality where homeowners do not see these prime location housing as a chance to make money out of those who really need the housing, instead see it as a solution for accessible public housing.
It is a consensus that it is a socio-political strategy that prevents gentrification and promotes housing equality, where the long term impact can only be told when we put pen to paper.
“New Rules For Prime HDB Flats Not Likely To Impact Private Market: Analysts”
Lisa Kriwangko 27 October 2021- https://www.businesstimes.com.sg/real-estate/new-rules-for-prime-hdb-flats-not-likely-to-impact-private-market-analysts
“Most Singaporeans Want HDB Priority Schemes Removed, Buyers Limited For Resale Flats In Prime Areas”
Michelle Ng 20 October 2021-
About Central Area November 2021 BTO