New Housing Policies Will Reshape The Public Housing Landscape: Propnex KEO Lim Yong Hock

This non-selection rule change will encourage applicants to ponder more carefully their decision to apply for a flat, rather than approaching their BTO application with a mindset of “trying their luck” or treat it like a lottery. This could help to narrow the applicant pool and improve the chances of genuine buyers in getting a new flat. A case in point, we have already witnessed more modest application rates in the October and December 2023 BTO exercises.

The other change that was striking for me was the introduction of the HDB Flat Eligibility (HFE) letter in May 2023 – which streamlines the flat buying process from BTO flat applicants as well as resale flat buyers. The HFE letter incorporates the eligibility checks for flat purchase, CPF housing grants and HDB housing loan all in one single application, making it less cumbersome for buyers, compared with the previous Intent to Buy method. We think the HFE letter – which will take about a month to be approved – will help to facilitate the flat buying process.

In my view, the various policies announced in 2023 which either have been implemented or will be implemented soon mark a milestone or perhaps a turning point for public housing in Singapore. In a sense that we are departing from long-standing ways of doing things, be it the HFE letter, the revised non-selection count, or the upcoming new flat classification framework.

So, buyers who do not want to wait 3 to 4 years for their new flat, those who are looking for move-in ready homes because they want to be closer to their workplace or certain schools or even family members, will still seek buying options in the resale market. In addition, I feel that prospective buyers who want a 5-room flat in the central area, for instance, may also have to look at the resale market as the HDB usually does not offer such flats in city fringe or central area in the BTO launches. Furthermore, some buyers may prefer relatively “new-ish” resale flats that are well-renovated so they can have some cost savings, while being able to buy a home with a relatively long remaining lease. In a nutshell, I believe the demand for resale flat will remain healthy.

As for the growing attractiveness of BTO flats, I do agree that the plans that the government have outline for Pearl’s Hill, Tanglin Halt, Bayshore, Mount Pleasant etc. are appealing. But it is very likely that these flats will come under the Plus and Prime classification given their choice locations, which means the buyers will be subjected to tighter resale/rental conditions, 10-year minimum occupation period (MOP), and subsidy clawback upon resale. These strict conditions are needful in order to keep public housing fair and equitable, and we think it sends a message that HDB housing is first and foremost a home, and not to be treated like an investment asset. Also, I think the government is slowly trying to encourage this mindset shift, that one should not have an investment mentality when buying a flat.

Many people will think carefully before they commit to buying these Plus and Prime BTO flats. Attractive as they may be, there are strings attached and buyers will be wary. A 10-year MOP can be challenging for some buyers who are concerned that their needs may outgrow the flat in a few years, or what would happen if they run into financial difficulties and could not afford the flat within the 10-year period.

The way I see it is that the BTO and resale segments serve different group of buyers, depending on the urgency of their housing needs and their mindset. I do not think more attractive BTO flats will negatively impact the resale market.

Some flat owners are looking to cash out their HDB flat because prices have risen in the last few years, and wish to sell and recycle the proceeds to upgrade to a private home. I think buyers should treat their next upgrade as something for the long-term – at least 5 to 10 years – rather than take a short-term mindset of maybe holding the property for 3 years and then look to sell again. The reason is that home prices in general have gone up and are peaking, I feel that there could be more potential capital upside if they opt to hold it for a longer period. Hence, they need to ensure that the next property can meet their needs. My advice is for would-be upgraders to speak to our PropNex agents who will be able to help them work out their finances, make recommendations on suitable properties, and also give them a detailed update on the ongoing market trends.

The other thing I want to highlight is for HDB owners, even if they do not have concrete plans to upgrade or sell yet, to review their property portfolio, such as the usage of CPF monies to service the loan repayments - how much CPF principal amount has been withdrawn and used for housing over the years and what is the total accrued interest. Another consideration is the potential pitfalls of ageing flats and declining lease. This is important because as the flat becomes older, it will curtail future price increase or even lead to softer pricing; but on the other hand, the prices of the private property that they are looking at may continue to rise gradually or stay stable. What this means is that it could impact their upgrading plans. Therefore, it is always beneficial for owners to take stock of their present position and consider what are their plans ahead.

My advice for EC buyers is to do a thorough financial planning analysis before making the purchase, to ensure that it is well-within their affordability threshold over the long-term. The fact that ECs have garnered good profits has been well-documented in the media. However, buyers should not take an investment mindset to the EC purchase because they are still bound by the 5-year MOP, and there is a resale restriction (cannot sell to foreigners) until after the EC gets fully privatised after 10 years.