PropNex Budget 2023 Wish List Highlights Proposals To Further Support Home Ownership And Meet Housing Aspirations

12 January 2023, SINGAPORE - PropNex Realty has released its wish list for the Singapore Budget 2023, with recommendations to further support home ownership as well as to meet housing aspirations of Singapore households.

The Singapore residential property market witnessed strong growth in 2021 and remained relatively resilient in 2022, despite heightened uncertainties. The topic of housing affordability was also widely discussed amid rising interest rates and firm property prices. In recent years, the government has introduced new cooling measures (in December 2021 and September 2022) to moderate housing demand and to encourage home buyers to be more prudent with their property purchase.

Ismail Gafoor, Executive Chairman and CEO of PropNex said, “The recent cooling measures have acted like speed bumps, slowing the pace of price growth in both the private residential and HDB resale markets in Q4 2022, as indicated by the flash estimates released earlier this month. In addition, the government has also ramped up housing supply to meet healthy demand for homes. These moves will help to ensure that the housing market remains sustainable, even as we look to navigate continued uncertainties – weaker global growth, geopolitical tensions, and inflation - this year. In Budget 2023, we hope that some housing policies could be tweaked to help certain segments of the population own homes and upgrade to a private property.”

PropNex’s recommendations are:

1. Additional buyer’s stamp duty (ABSD) remission treatment for married couples upgrading from HDB flats to private homes to be aligned with that of those upgrading to new Executive Condominiums from developers

The desire to own and live in a private residential property remains strong among many Singaporean families. Based on data from the Department of Statistics Singapore, 16.5% of resident households in Singapore are residing in condominiums and other apartments in 2021 – up from 16.0% in 2020. The corresponding figure in 2012 was 12.1% (see Chart 1).

Chart 1: Resident Households by Type of Dwelling

Source: PropNex Research, Singstat

Currently, married couples who upgrade from an HDB flat to a private home will have to pay ABSD upfront, within 14 days of signing the Sales and Purchase Agreement. They can apply for an ABSD remission if they sell the HDB flat within 6 months after the date of purchase or temporary occupation permit (TOP) or certificate of statutory completion (CSC), whichever is applicable.

The upfront ABSD payment is the biggest hurdle for many families who wish to upgrade from their HDB flat to a private home. To avoid paying ABSD – at 17% for Singaporeans buying a second residential property - some families opted to sell their HDB flat first before buying a private home. Following the sale of their flat, many of these families rent in the interim, which not only causes inconvenience but could result in them incurring unnecessary expenses to relocate to the temporary accommodation.

Some HDB upgraders have taken the alternative route to purchase new ECs – a public-private housing hybrid - from developers. Presently, HDB upgraders buying new ECs do not need to fork out the large ABSD payment upfront and are required to sell their flat 6 months after their new EC receives TOP. This makes ECs appealing to HDB households. However, many couples may not be eligible to buy ECs as they have exceeded the monthly household income ceiling of $16,000. In addition, the stock of new ECs in the market is also limited and 70% of EC units are set aside for first-timer buyers during the initial project launch, with fewer options left for upgraders.

To help more families achieve their aspirations of living in a private home, the government can consider aligning the ABSD remission rules for married couples who are upgrading from an HDB flat to a private home to that of those who are upgrading to new ECs. There can be some form of contractual undertaking to ensure that the private home buyers sell their HDB flats within 6 months from collecting keys to their new home.

2. Provide more clarification on the 15-month wait-out period

In September 2022, as part of a package of cooling measures, the government introduced a new wait-out period of 15 months (from sale of private property) that restricts private home owners from purchasing an unsubsidised HDB resale flat. It has said that this is a temporary measure which will be reviewed. [Exemption: seniors who are buying a 4-room or smaller HDB resale flat.]

PropNex hopes that the government can provide more clarity as to when this rule will be reviewed, and perhaps offer an update in the second half of 2023 on the initial impact of the wait-out period on moderating resale flat demand and prices. Such updates, particularly a guidance on when the measure could be lifted will be helpful to many private home owners in their real estate planning.

Mr Gafoor said, “Some private home owners who intend to sell their private property and move to an HDB resale flat are concerned and anxious about the 15-month wait-out period. They feel a little left in limbo because it is a temporary measure with no end-date; it affects their ability to plan and poses uncertainty for them. There are also knock-on effects on the rental market and collective sale interest.”

Many private home owners – who are not seniors - have shelved their plans on putting their property up for collective sale because they are unable to purchase an HDB resale flat as their replacement home owing to the 15-month wait-out period. This affects the owners’ ability to monetise their asset and could disrupt their financial planning goals – some owners may be looking at selling their private home and moving to a resale flat, keeping part of the sales proceeds to build up their savings.

Meanwhile, private home owners who have sold their private property and are unable to purchase a resale flat may have to rent a home in the interim. This puts additional pressure on the home leasing market, which has seen robust growth amid strong demand over the past year. According to the URA private residential property rental index, rentals have jumped by 20.8% in the first three quarters of 2022 from end-2021.

3. Increase OCR residential land supply on the GLS Confirmed List

The government has ramped up the supply of private homes on the Confirmed List of its half-yearly Government Land Sales (GLS) programme since 1H 2021, in keeping with demand for private housing.

In 1H 2022, the Confirmed List sites offered an estimated 2,785 residential units (incl. EC), with 1,555 units and 1,230 units in the Rest of Central Region (RCR) and Outside Central Region (OCR) respectively (see Table 1). The supply was further boosted in 2H 2022, with the Confirmed List sites yielding 3,505 dwelling units (incl. EC) – 2,550 of which are in the OCR.

Although the 1H 2023 slate offers a stepped-up supply of 4,090 private residential units (incl. EC) on the Confirmed List, the number of units in the OCR has fallen to 2,120 units. As the OCR serves a wider pool of demand – from first-time home buyers and HDB upgraders - PropNex hopes that the government will consider injecting more GLS sites to this sub-market in the 2H 2023 programme.

Mr Gafoor added, “From our observations, the OCR has an imbalance in the demand for and supply of new private homes. As at Q3 2022, the number of unsold uncompleted private homes in the OCR was at a record low of 3,417 units (ex. EC). Meanwhile, the average annual new home sales in the OCR from 2017 to 2021 was about 4,900 units (ex. EC). By that measure, the remaining stock would be sold out in less than a year. Given the low unsold stock, there’s pent-up demand for new homes in the OCR which will likely keep prices firm. We believe the injection of more OCR residential supply will play a part in keeping mass market home prices stable in the future.”

Table 1: Sites and estimated number of dwelling units offered on the GLS Confirmed List

Source: PropNex Research, MND

4. Shorten BTO waiting time to 3 years

The HDB has increased its supply of Build-to-Order (BTO) flats in 2022 by launching more than 23,000 new flats for sale. It plans to offer up to 23,000 BTO flats in 2023. Beefing up the BTO supply has given flat applicants more options and has helped to meet the healthy demand for new flats.

To shorten the waiting time to less than 3 years, the HDB has brought forward the construction and building of selected BTO projects ahead of their sales launch since 2017. The HDB has launched about 7,200 flats with shorter waiting times in the last 2 years, according to a media report in December 2022. However, the waiting times for many standard BTO projects are still lengthy, estimated at more than 4 years (see Table 2).

As the borders reopen and workers return to support the construction sector post-pandemic, and with the continued use of productivity measures such as precast technology, perhaps the government can consider building more BTO projects in advance ahead of the sales launch. By bringing down the waiting time to 3 years for BTO projects, it will help young couples in planning their marriage and in starting a family, as many of them prefer to secure a flat first before having children.

Table 2: Estimated waiting time for projects offered under recent BTO exercises

Source: PropNex Research, HDB (*59 months for community care apartments, 63 months for 3- and 4-room flats)