The new prime-location public housing (PLH) model is likely to have little impact on private residential demand, analysts say. This is because the two serve different market segments.
Announced by the Ministry of National Development (MND) and the Housing Development Board (HDB) in a joint statement on Wednesday (27 Oct), the model aims at keeping prime HDB flats affordable and inclusive.
Under the new scheme, Housing Board (HDB) flats that are built in prime, central locations in Singapore from hereon will be subjected to a 10-year minimum occupation period (MOP). Additional subsidies will be clawed back by the government upon their resale as well.
Christine Sun, OrangeTee & Tie's senior vice-president of research and analytics, said buyers who are able to afford private homes in the prime and city fringe will not be turning to the HDB market upon the introduction of the scheme.
“This is because they are buying private homes for the facilities, privacy, price appreciation, and potential rental yield that will not be equally matched if they were to buy HDB flats,” she said.
She added that the number of units offered under the scheme is “very small”, which means the majority of build-to-order (BTO) flat applicants will still have to buy other housing types.
Therefore, introducing this model will likely not affect the selling price or attractiveness of other flats in a major way,” she said.
Lee Sze Teck, senior research director at Huttons Asia, added that the private market gives buyers more freedom to “sell freely at any time to anyone”.
He said that the subsidy clawback rate, which will be revealed later in the year, could also make the private market “even more attractive” than the PLH flats.
Nicholas Mak, ERA's head of research and consultancy, said that the subsidy reversion could moderate the prices of HDB flats in the city centre, which would in turn slow the rise of private property prices in the core central region (CCR).
However, he noted that the impact of the PLH scheme on the private prime properties in the CCR will be “very limited, if any”.
That said, Lee Nai Jia, deputy director of Institute of Real Estate and Urban Studies at the National University of Singapore, highlighted that developers acquiring prime sites would have to consider the possibility that adjoining state land parcels may be HDB sites, so they will need to position the product correctly.
He said: “It might be more challenging to sell luxury private homes facing HDB projects. If the architecture of the PLH housing is good, the impact may be marginal.”
“Overall, I think this is a worthwhile social policy as it encourages an inclusive society. However, the policy change is bold, and it is difficult to see how well the final product is will be received by the market,” said Lee Nai Jia.
MND and HDB said that the first project under the new PLH model will be launched in Rochor in November's build-to-order (BTO) sales exercise.
Located along Kelantan Road and Weld Road, the pilot project will have 960 units of 3-room and 4-room flats for sale, and 40 units of 2-room rental flats.
PLH flats will be priced with additional subsidies, on top of the existing subsidies provided for BTO flats, to moderate the area's higher market values.
However, to also ensure "fairness" with BTO buyers in other parts of Singapore, PLH flat owners will have to pay a percentage of the flat's resale price to HDB upon the sale of their homes.
The subsidy recovery percentage will be commensurate with the extent of the initial additional subsidy provided, and adjustable depending on future market conditions, the agencies said.
The exact percentage will be announced during November's BTO sales exercise.
PLH flats' purchase eligibility conditions (including citizenship status, private property ownership and income cap) will be the same as that of BTO flats.
However, the priority quotas for flat allocation under the Married Child Priority Scheme (MCPS) will be reduced.
Currently, up to 30 per cent of BTO flats are set aside for families under the MCPS, which gives priority to applicants whose parents live in the same area.
"This is because priority schemes like the MCPS could give buyers an added advantage in the balloting process if their families are more well-off or are already living in or near these prime locations. But on the other hand, we recognise - and so do many Singaporeans - that it is important to facilitate mutual care and support across family generations," the minister said.
"We will look at each development that we launch and decide whether it is appropriate to make adjustments to the quota depending on the location," he added.
The PLH flats' minimum occupancy period (MOP) will 10 years, compared to other BTO flats' current 5 years.
Further, PLH flat owners will be barred from renting out their units whole, even after the MOP. These conditions will apply 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, and seek to deter speculative demand and moderate resale prices," said minister Lee.
"Where these conditions create difficulties for those who genuinely face extenuating circumstances, we can review their appeals on a case-by-case basis," he added.
The PLH model will be implemented for selected public housing projects in prime and central locations, such as the city centre and surrounding areas, including the Greater Southern Waterfront. It will apply only to future public housing in prime locations, not existing flat owners.
Those looking to buy these flats on the resale market after the 10-year MOP will have to meet the prevailing eligibility conditions for buying a flat directly from the HDB. These include having at least one applicant who is a Singapore citizen and meeting the household income ceiling of $14,000; the applicant must also not be holding a private property or have sold any in the last 30 months.
Singles above 35 years old will be ineligible to buy these PLH flats. This is in contrast to current rules, which do not place limitations on singles above the age of 35 buying resale flats. According to the agencies, this distinction was made to prioritise the supply of flats for Singaporean families during the model's initial launch phase.
Public rental flats will also be built on these prime sites, where feasible, for lower-income households. "This will ensure that public housing is kept inclusive and diverse across Singapore and HDB towns continue to be home to residents from all walks of life," the agencies said.
The PLH model was designed by MND and HDB after taking into account public feedback from more than 7,500 Singaporeans, a summary of which was released last week.
"We will not hesitate to act boldly and decisively against some of these invisible socio-economic forces that tend to pull in the opposite direction, toward stratification and fragmentation. Fundamentally, our housing policies are not just about providing homes. They are also about enabling Singaporeans to live together, to interact with one another, and to build strong, enduring and cohesive communities," minister Lee said.