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Changes to HDB Build To Order Classification: The Introduction of Plus Flats

Updated: Oct 17, 2023


Image: Free to use under Unsplash license

In this Policy Explainer, find out...

  • What concerns does the reclassification of Build to Order (BTO) flats seek to address?

  • How will BTO flats be divided under the new reclassification?

  • What will the impact of the new BTO classification be?


A Reclassification of Public Housing

During Prime Minister Lee Hsien Loong’s National Day Rally speech on 20 August 2023, it was announced that a new Plus category of BTO flats will be introduced in the second half of 2024.¹ These flats will be found in ‘choicer’ locations near amenities like public transport, taking into account its distance to the city centre.²


Why the Change?

The current classification framework of mature and non-mature estates does not take into account the local attributes of developments but merely, the location from the city centre.³ Over time, the distinction between mature and non-mature estates has become less clear, as the growth of non-mature estates has led some developments to command prices akin to those in mature estates.⁴ For example, the median resale price in Punggol and Sengkang estates was between S$540,000 to S$550,000 in 2022, a significant departure from mature estates in Bedok or Ang Mo Kio which only sold for S$425,000 to S$440,000.⁵


What Happens Now?

This reclassification of public housing projects will render the current mature and non-mature classification obsolete. New public housing flats will now be divided into three categories:⁶

  1. ‘Standard’ flats

  2. ‘Plus’ flats

  3. ‘Prime’ flats

With reference to Figure 1, the level of subsidies and restrictions on each flat classification will vary based on the location and local attributes of and around the flat. This means that Standard flats (which encompasses the majority of Singapore’s housing supply), will see minimal restrictions while Prime flats will face the tightest restrictions.


For new Plus flats, while buyers will enjoy greater subsidies on top of the Standard subsidies, tighter resale restrictions will apply. This includes tighter eligibility conditions on resale including that of an income ceiling, subsidy recovery upon resale (though lower than for Prime flats), and a 10-year Minimum Occupation Period (MOP).⁷

Figure 1: A breakdown of the new reclassification with a focus on the new Plus flat category⁸

Why Does It Matter?


Affordability and Fairness in the Housing Market

Present: Before the BTO Reclassification

BTO flats are traditionally viewed as the first step Singapore’s property ladder. Consequently, acquiring a BTO flat can be seen not merely as securing a home, but also as seizing a golden investment opportunity.⁹ This perception stems from the potential for individuals who successfully secure a BTO flat — often likened to winning a 'lottery ticket' — to buy at a lower cost from the government and later sell at a higher price on the resale market.¹⁰ The profits garnered from such transactions can then be reinvested into purchasing more upscale housing.


Future: In Light of New Policy Structure

While greater subsidies allow for greater affordability, analysts believe that tighter resale conditions and a longer MOP requirement allow for slower wealth accumulation and will dampen the lottery effect.¹¹ Hence, the policy change can be seen as a signal to future buyers that BTO flats are targeted for those who intend to live in them and is not a profit-making scheme.


In a commentary piece, Senior Research Fellow at the Institute of Policy Studies Dr Woo Jun Jie predicts that Plus and Prime resale flats will have a smaller pool of eligible buyers due to the income ceiling restrictions and longer MOPs, potentially leading those who do not qualify to buy Standard resale flats instead. This shift in demand might increase Standard resale flat prices, while curbing price growth for Plus and Prime flats, possibly reducing the price gap across different locations.¹²


Shortened Waiting Period to Secure Housing

Present: Before the BTO Reclassification

Exacerbated by the Covid-19 pandemic, the consistently higher number of applicants for three-room and larger BTO flats compared to the available supply has led to prolonged waiting periods, as seen in Figure 2.¹³ The current median waiting time for BTO flats stands at 3 years 5 months.¹⁴ Despite measures taken by the Government to meet housing demand by judiciously increasing the number of BTO projects in advance, demand for BTO flats in desirable locations continue to soar.¹⁵

Figure 2: Demand for BTO flats is consistently higher than its supply¹⁶

Future: In Light of New Policy Structure

With this new categorisation of projects being introduced, coupled with various levels of restrictions, we could observe a moderation in the demand for Prime and Plus flats. This would act as a catalyst to control the number of applications for these desirable projects, and hence lower the waiting period for public housing.


Potential Concerns

Division of HDBs: Pre- and Post-Policy

Some property analysts have expressed concerns that, since the new Plus flats policy will only be applied starting from the second half of 2024, there will be varying resale restrictions — more specifically, different resale income ceiling requirements — for similar flats sold before and after the policy is implemented. This could affect resale flats of the same characteristics or those located within the same area.


The divergence in resale restrictions may result in a two-tier HDB resale market in the future.¹⁷

  • The first tier of the market will be for HDB resale flats that are under the newly introduced categories. Their prices might be more moderated in the future.¹⁸

  • The second tier of the market will form a larger portion of the market, as it comprises flats that had been sold before the changes.¹⁹

It is probable that the resale prices for the current flats will continue on an upward trajectory. Owners are anticipated to seek higher prices, given the fewer restrictions associated with these flats and their minimum occupation period of only five years.²⁰ This increase is likely to be more pronounced for flats situated in prime locations. Consequently, instances of million-dollar flats in the resale property market may still periodically arise.


Although the true effects of such a disparity will only be known in at least 15 years — four to five years to build the flats and another 10 years to hit the MOP before owners can resell — this can be seen as a necessary trade-off to achieve fairer housing allocation in the long term.²¹


Conclusion

Ultimately, the reclassification of BTO flats in Singapore is a policy change made with the longer term in mind. A comprehensive assessment of the evolving housing landscape will only be apparent once the new Plus flats have been constructed. In the meantime, it will be essential for HDB to monitor the price trends of existing BTO and resale flats to determine whether additional measures are required to complement or supplement the new BTO framework.


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This Policy Explainer was written by members of MAJU. MAJU is an independent, youth-led organisation that focuses on engaging Singaporean youths in a long-term research process to guide them in jointly formulating policy ideas of their own.


By sharing our unique youth perspectives, MAJU hopes to contribute to the policymaking discourse and future of Singapore.

 
¹ Ng, Michelle. 2023. “NDR 2023: HDB to launch new Plus flats at choicer locations with 10-year MOP, stricter conditions.” The Straits Times, August 20, 2023. https://www.straitstimes.com/singapore/politics/ndr-2023-hdb-to-launch-new-plus-flats-at-choicer-locations-with-10-year-mop-stricter-conditions.
² Ibid.
³ Singapore Business Review. 2023. “'Prime' time for change: Why the HDB reclassification is long overdue.” Singapore Business Review, August 22, 2023. https://sbr.com.sg/residential-property/in-focus/prime-time-change-why-hdb-reclassification-long-overdue.
⁴ Ibid.
⁵ Ibid.
⁶ Ng, Michelle. 2023. “NDR 2023: HDB to launch new Plus flats at choicer locations with 10-year MOP, stricter conditions.”
⁷ Ibid.
⁸ Ibid.
⁹ Chow, Cecilia. 2023. “New HDB classifications: Will tighter restrictions limit upgrading behaviour and capital upside?” EdgeProp, August 23, 2023. https://www.edgeprop.sg/property-news/new-hdb-classifications-will-tighter-restrictions-limit-upgrading-behaviour-and-capital-upside.
¹⁰ Ibid.
¹¹ Ibid.
¹² Woo, Jun Jie. 2023. “Snap Insight: Singapore's public housing landscape gets a shake-up.” CNA, August 21, 2023. https://www.channelnewsasia.com/commentary/snap-insight-national-day-rally-2023-hdb-bto-property-public-housing-standard-plus-prime-3711761.
¹³ Elangovan, Navene. 2022. “The Big Read: Too Choosy? Why Young Buyers Won’t Compromise on Dream BTO Home despite Long Waits, Rising Prices.” TODAY. October 22, 2022. https://www.todayonline.com/big-read/young-buyers-dream-bto-home-long-waits-rising-prices-2025501.
¹⁴ Housing and Development Board. 2023. “HDB Launches Nearly 7000 Flats in May 2023 BTO and SBF Exercises.” Housing and Development Board, May 30, 2023. https://www.hdb.gov.sg/about-us/news-and-publications/press-releases/30052023-HDB-Launches-Nearly-7000-Flats-in-May-2023-BTO-and-SBF-Exercises.
¹⁵ Insider, CNA. 2023. “New BTO Classification: Will My HDB Flat Be More Affordable? - Forum.” Video. YouTube. https://www.youtube.com/watch?v=hg5UnE06kp4.
¹⁶ Ibid.
¹⁷ Ibid.
¹⁸ Ibid.
¹⁹ Ibid.
²⁰ Ibid.
²¹ Ong, Justin. 2023. “Analysis: What HDB's new Plus housing category could mean for resale value of flats in medium and long term.” Today Online, August 21, 2023. https://www.todayonline.com/singapore/analysis-hdb-new-plus-flats-resale-value-price-property-market-2237136.



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