Propnex's Comments On The Ministry Of National Development Committee Of Supply 2024 Debate

PropNex’s comments on housing announcements at the Ministry of National Development Committee of Supply 2024 debate

05 March 2024, Singapore – The Ministry of National Development (MND) has today provided more details on the announcements made during the Singapore Budget speech in February. Among them, the Parenthood Provisional Housing Scheme (PPHS) (Open Market) Voucher, which is aimed at supporting eligible families rent an HDB flat/bedroom in the open market.

Currently, eligible families who may need temporary accommodation while they wait for their new build-to-order (BTO) flats to be completed, can rent a flat at a subsidised rate from the HDB under the PPHS. However, demand for PPHS flats is strong and some families with more urgent accommodation needs may have to rent an HDB flat in the open market, where rentals are higher than that of PPHS flats.

The MND said that the 1-year PPHS (Open Market) Voucher scheme will commence from July 2024 to June 2025 and eligible families will receive $300 per month on a reimbursement basis, based on the months of tenancy that coincides within the one-year period of the scheme. The MND said the voucher amount was carefully scoped to provide some relief to eligible families, but at the same time minimise the potential impact on the broader rental market.

Ismail Gafoor, CEO of PropNex, said, “At $300 per month, the PPHS voucher amount will certainly help to defray some rental expenses but the sum is on the modest side, considering the difference in rental rates of PPHS HDB flats and those on the open market. The rents of PPHS flats vary depending on their location, the rental rates of 2-room PPHS flats could range from $400 to $550 per month, while that of 3-room PPHS flats could be from $600 to $900 per month, according to the HDB website. In contrast, the average monthly rental rate for HDB 2-room, and 3-room flats in the open market was $2,147 and $2,647 respectively in 2023. After factoring the $300 PPHS voucher, we expect that families will still have to bear a substantial rental cost in the interim while they are leasing in the open market. Given that this is a temporary scheme, the eligibility criteria for PPHS, and that the voucher amount is not too significant, we do not expect it to have an inflationary effect in the HDB flat rental market.”

Meanwhile, the ramping up of the supply of PPHS flats from 2,000 flats currently to 4,000 flats by 2025 will also help to meet the demand for such flats among eligible families, who will then not need to tap the open market to lease flats.

The MND also shared that the HDB will enhance the Staggered Downpayment Scheme (SDS) to further ease the initial financial burden for young couples, who are full-time students or National Servicemen applying for a BTO flats first, while deferring their income assessment till nearer to the key collection date. The enhanced SDS will reduce the initial downpayment required, from the current 5% of purchase price (for HDB loan or no loan) or 10% of purchase price (for bank loan), to 2.5% of purchase price, regardless of the financing option. This change will take effect from the June 2024 BTO exercise.

Mr Gafoor added, “We expect the enhancement in the SDS to be welcomed by eligible young couples, who will not have to fork out as much downpayment compared with previously, and it will make BTO flats more accessible to this group of buyers who are full-time students or NSF. Assuming the couple applies for a 4-room BTO flat in a non-mature estate which is priced at $420,000, the 2.5% downpayment works out to $10,500 compared with $21,000 at 5% which could make a real difference to some young couples who are just starting out. There are benefits to planning ahead and applying for a flat early- for instance, by the time the couple graduates and finds full-time employment, their new flat would likely be completed and ready for occupation. However, applying for a flat together is a serious commitment and young couples need to be mindful that there are varying costs involved should they breakup and cancel the application, depending on which stage of the BTO application process they are at.”

In addition, the government also announced plans for housing development in the Chencharu estate in Yishun, and Gillman Barracks to be studied as a potential site for a new residential neighbourhood. The Chencharu area has been identified as an area for new housing. The MND said that around 10,000 new homes – at least 80% of which will be slated for public housing - are expected to be built in the Chencharu estate. The first BTO project in Chencharu will be launched in the June 2024 sales exercise, offering 1,270 new flats, across various flat types from 2-room flexi to 5-room flats. The Yishun BTO project, which is near to the Khatib MRT station will also have facilities such as eating house, shops, minimart, preschool and a senior care centre.

PropNex expects demand for BTO flats in Chencharu could be healthy, as it is near to the Khatib MRT station, and various schools and amenities such as the HomeTeam NS Khatib, Yishun Sports Centre and Stadium, as well as the Peiying Primary School and Naval Base Secondary School. There could also be some pent-up demand for new flats in Chencharu as many of the existing HDB blocks around the Khatib MRT station were built in the 1980s. The HDB projects in the immediate vicinity, at Khatib Gardens and Khatib Vale, collectively have more than 3,000 existing flats which were built between 1985 and 2017.

MND also said that it is studying the possibility of introducing a new residential neighbourhood (a mix of public and private homes) in Gillman Barracks, an arts and lifestyle cluster. The government will commence heritage and environment studies in Q2 2024. The Gillman Barracks area is currently zoned as reserve site under the URA Master Plan 2019.

Presently, there are fairly limited private residential projects near Gillman Barracks including The Interlace in Alexandra Road, as well as Skyline Residences and Harbour View Towers in Telok Blangah Drive. Meanwhile, the last BTO sales exercise in Telok Blangah was in May 2021, where 175 BTO flats at Telok Blangah Beacon in Bukit Merah drew 4,078 applications (23.3 times application rate). Prior to Telok Blangah Beacon, the last BTO project launched in the area was Telok Blangah Parcview in July 2013, where the 1,480 flats offered attracted 4,557 applications (3.1 times). Should the Gillman Barracks area be transformed into a residential neighbourhood, the housing demand for both private and public housing will likely be robust.

On the new housing areas planned for, Mr Gafoor said, “The announcements on the Chencharu estate and feasibility studies at Gillman Barracks for residential development add to a slew of upcoming plans for new housing precincts, which were previously unveiled by the government. These include new housing on the Keppel Club site, in Mount Pleasant, Pearls Hill, Bayshore, Marina South, and Bukit Timah Turf City. We think these offerings will provide a diverse range of private and public housing options for home buyers in the future, especially those who wish to live closer to the city. As many of these locations are attractive, we think it could also potentially encourage some home owners to upgrade from their existing property to these new housing precincts in the future.”