THE message put out with the introduction of a new public housing model was clear – HDB flats are to be reserved and appropriately priced for those looking for a home to live in, not to invest in, and not to flip for quick capital gains.

An income cap of S$14,000 a month placed on resale buyers, that stays in place for subsequent owners. A ban on renting out the whole flat. A 30-month waiting period for private homeowners looking to buy a Plus flat after they sell their property – twice the time that such owners are currently required to wait out to buy a standard resale flat today.

These are some of the resale conditions buyers can expect under the Housing and Development Board’s new framework for future Build-To-Order (BTO) flats, said National Development Minister Desmond Lee on Monday (Aug 21). 

This comes a day after Prime Minister Lee Hsien Loong introduced Plus flats, a new classification of public housing in desirable locations near transport nodes or town centres. Plus flats will come with more subsidies but with strict curbs on resale, such as a 10-year minimum occupation period (MOP) and a clawback of the subsidy at the first resale. 

The other two categories for BTO flats from next year are Standard flats, which account for the bulk of supply, and Prime flats, which fall under the existing Prime Location Housing model. The scheme replaces the current classification that sorts flats according to whether they are located in a mature, older estate or not.

At a post-National Day Rally conversation on Monday, the National Development minister explained that the restrictions for Plus flats were set to “moderate demand” while ensuring that resale prices are “kept within reach of a wider range of Singaporeans”.

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The income ceiling of S$14,000 a month – set for both families and singles – is the prevailing cap for married couples purchasing a BTO and covers eight in 10 Singaporean households, he said. It is also higher than the BTO income ceiling for singles at S$7,000 a month. 

Currently, there is no income cap for those purchasing a resale flat, except for Prime flats.

As with Prime flats, owners of Plus flats will not be allowed to rent out the entire place, even after the MOP. “This is to ensure owner-occupation for such flats and deter those who intend to ‘flip’ the flats for quick gains or rent them out for long-term yields,” said Lee. 

These conditions, save for the subsidy recovery, will apply to subsequent buyers to keep flats affordable beyond the first sale, he said. “Many Singaporeans tell us that they are willing to pay more for a flat in a good location. And the HDB Plus model helps make such flats affordable to a wider range of Singaporeans.” 

The minister gave an example of how, under the new Plus model, pricing would be lower than for an equivalent flat under the current system. “In today’s market conditions, such BTOs are priced around S$650,000 before grants, if offered as ordinary flats in mature estates,” he said. 

Under the Plus model, “the tighter resale restrictions will help bring the price down. On top of this, we will also give additional subsidies to further improve affordability. The combined effect of both is to reduce the price to around S$550,000, and this is before we apply grants.” 

The restrictions would reduce speculative interest for choice BTO flats, discourage an investment mindset for HDB flats, and curb the rise of “million-dollar” resale flat deals, said PropNex.

The resale restrictions also ensure that prices of Plus and Prime flats, when they eventually hit the resale market, would not be vastly more expensive than those of Standard flats, even with their “superior locational attributes”, said Mogul.sg chief research officer Nicholas Mak.

At the same time, the wait-out period of 30 months for condominium owners is likely to discourage this group from purchasing Plus flats, reducing the competition for these resale flats, he added.

Still, the income ceiling of S$14,000 a month means that singles with “high earning capability” will now be in competition with other households for larger resale Plus flats, noted Lam Chern Woon, head of research and consulting at Edmund Tie. 

“While this demographic of singles could quite easily afford private housing, some of them, especially the elderly singles, might consider public housing to enjoy the interaction and care of a (close-knit) community, (which is more likely to be found) in public housing,” he said.

In any case, high-earning households are still likely to opt for resale flats in central locations; this may result in “significant upward pressures on existing (prime location) flats”, said Lam. 

“Some high-income households may also opt for resale Standard flats by virtue of their relatively long remaining leases. As such, we might witness some pricing anomalies in the future, where resale Standard flats could trade at higher prices compared to resale Plus or Prime flats. But it may be a case of crossing the bridge when we get there.”

Capital gains will be capped as long as the income ceiling stays in place.

“Future price gains (will be) dependent on the government revising the income ceiling,” said Lee Sze Teck, Huttons senior director of data analytics. “It may not significantly affect the first owner of a Plus flat, but the second owner may not be able to realise potential gains if the income ceiling is not raised.” 

Flats in more desirable Plus locations may have fetched higher rents than Standard flats, he said, so the rental ban goes back to the fundamentals that a HDB flat should be meant for one’s own stay and not for investment gains. “The investment element is also nipped in the bud,” Hutton’s Lee said.

Ismail Gafoor, CEO of PropNex, said: “In the next few years, we will see the market adjusting to these changes – perhaps greater demand for BTO Standard flats, or more interest for certain resale flats due to their attractive locations without the extra strings attached – but over the longer term, we believe the changes will lead to a more equitable and stable HDB housing market.”

“The government is sending a clear message that affordable, choice flats are not out of reach, but one would have to reciprocate the privilege with a strong occupation commitment and keep in check expectations of climbing the private property ladder,” added Lam.

These changes will only take effect from the second half of next year, and will not apply to existing HDB flats, which will continue to fall under the current rules. “This means that Singaporeans who fall outside of the S$14,000 income ceiling will still have access to the existing 1.1 million flats and Standard flats as they enter the resale market,” said Minister Lee.