Prime and Plus flat buyers to give up 6-9% of resale price under new HDB BTO subsidy clawback
‘Modest’ subsidy recovery rates and restrictions unlikely to deter buyers, but subsidy structure creates ‘price anomaly’ that could steer buyers towards Plus flats: analysts
BUYERS of the new Plus and Prime flats will have between 6 and 9 per cent of their resale price (or valuation) clawed back when they sell the flats, the Housing and Development Board (HDB) said on Wednesday (Oct 16).
The first batch of Prime flats under the HDB’s new Build-To-Order (BTO) framework faces a subsidy recovery rate of 9 per cent. The 312 Crawford Heights flats offered in the popular Kallang-Whampoa area are priced from S$390,000 for a three-room flat, while a four-room unit will cost from S$568,000.
At the starting prices, the BTO launch prices (excluding grants) for the Crawford four-room flats work out to roughly 36 per cent less than current resale prices for four-room units in the area, which were transacted between S$890,000 and S$938,000.
Owners of Plus flats will have to fork out between 6 and 8 per cent of their resale price or valuation (whichever is higher) when they sell their units. Plus flats are being offered in seven projects in Ang Mo Kio, Bedok, Geylang and Kallang-Whampoa.
The BTO selling prices for the 3,273 Plus flats available in the October launch range from S$187,000 for a two-room flexi at Central Trio @ AMK to S$530,000 for a four-room unit at Merpati Alcove.
The discount to current market prices ranges from 39 per cent for three-room units in Bedok sold at S$605,000 to S$663,000, to about 40 per cent for four-room resale flats transacted in Kallang-Whampoa at between S$868,000 and S$1.2 million.
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The subsidy recovery is in place to “maintain parity with other BTO flat buyers who are not accorded additional subsidies”, HDB said.
Buyers of Plus and Prime flats will receive additional subsidies on top of market discounts, so that flats in favoured locations are accessible to more people.
Plus and Prime flat buyers also face stricter resale and rental curbs to keep a lid on resale prices and reduce the BTO “lottery effect”, where sellers of flats in coveted locations reap large gains upon resale.
Both Prime and Plus flats can be sold only after a 10-year minimum occupation period (MOP). Standard flats, which form the bulk of the BTO offering, have the usual five-year MOP.
The restrictions and “modest” subsidy recovery rates are unlikely to deter buyers who are drawn to the better locations, said analysts.
Ismail Gafoor, chief executive officer of PropNex, said: “Assuming a buyer purchased a four-room Prime flat at S$650,000 and resells it for S$1.2 million in the future, the 9 per cent subsidy clawback sum works out to S$108,000.
“The owner may still be able to enjoy gross gains of more than S$400,000.”
While an income ceiling could limit the pool of resale buyers, Gafoor noted that the cap may be raised in the future. The BTO household income ceiling was last adjusted in 2019.
However, the additional subsidies create a subtle “price anomaly” in the market, said Lee Sze Teck, Huttons Asia’s senior director of data analytics. This could steer buyers towards Plus flats, away from both Standard flats close by in the same estate and Prime flats in better locations, he said.
He pointed to two similar BTO projects in Ang Mo Kio town: the upcoming Central Trio @ AMK and Central Weave @ AMK, which was launched in August 2022. The price for a four-room Plus flat at Central Trio starts from S$481,000 (excluding grants), while a similar four-room flat at Central Weave was priced from S$535,000 (excluding grants).
The difference between the two comes up to S$54,000, and may be equated to the 6 per cent subsidy clawback now imposed on Plus flats, he said.
“If not for the additional subsidies, the four-room flats at Central Trio @ AMK should be similar to Central Weave @ AMK,” he added.
“With all these slight differences in pricing, some savvy buyers are likely to go for Plus flats than Standard or Prime flats. They get to enjoy the best of both worlds – having more subsidies than Standard flats and (fewer) restrictions than Prime flats.”
The subsidy recovery rates differ with the subsidies required to keep projects of varying market values affordable, said HDB.
In Bedok, for example, the Bayshore Vista and Bayshore Palms projects will command higher market values than Kembangan Wave due to their better locations nearer to East Coast Park. So, more subsidies are required to ensure they remain affordable to a wider pool of buyers, HDB said.
Nicholas Mak, chief research officer at Mogul.sg, noted that the subsidy recovery rates for prime-location flats have increased – from 6 per cent in 2021 to 9 per cent in the recent launch – as the government has had to price flats with bigger discounts as resale prices continued to rise.
With resale prices expected to face upward pressure and the cost of building new flats rising with higher land and construction expenses, the government will have to increase the market discount for BTO flats to keep prices affordable, said Mak. It may then have to further raise the subsidy recovery rates in the future, he added.
The October BTO exercise will offer 8,573 flats. Prices range from S$109,000 for a two-room flexi flat in Jurong West to S$644,000 for a 3Gen flat in Pasir Ris. Some 265 Community Care Apartments (CCAs) for seniors will be offered, at Merpati Alcove in Geylang.
HDB will also pilot a “white flat” concept at the sole Prime project at Crawford Heights, where homebuyers can configure their living spaces without any internal partition walls. Prices for “white flats” will be lowered by S$6,000 for a three-room flat and S$8,600 for a four-room flat.
This launch also allows eligible first-time singles to apply for almost 2,000 two-room flexi flats across all categories. Singles were previously limited to BTO flats in non-mature estates.
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