28 Sep 2023

New classification for HDB BTO flats

By Lynette Tan

If you’ve only got a minute:

A new classification for HDB Build-to-Order flats will be implemented from 2H2024.
The new classification aims to keep home ownership affordable, maintain a good social mix in every town, and keep the system fair.
Singles above 35 years old will be eligible to buy BTO flats across the 3 types of housing (i.e. Standard, Plus and Prime).

In his National Day Rally speech this year, Prime Minister Lee focused on policies to help Singapore’s ageing population, and introduced a new classification system for HDB flats that is aimed at keeping public housing affordable for Singaporeans.

New classifications of HDB flats

One of the major changes to housing policies announced at the National Day Rally this year is the new classification of HDB Build-to-Order (BTO) flats from 2H2024.

Currently, HDB flats are classified under mature and non-mature estates. Mature estates are usually more centrally located with more amenities. They tend to be more popular and their prices reflect the higher demand.

On the other hand, non-mature estates are further out in the suburbs. While they lose out in terms of location and convenience, they make up for their lower BTO flat price.

However, as non-mature estates grow and develop, these non-mature estates are also becoming “mature”. Thus, there is a need for a new housing classification framework to help achieve 3 important objectives:

1) Keep home ownership affordable for all income groups.

2) Maintain a good social mix in every town and region.

3) A fair system for everyone.

Under the new classification framework, HDB BTO flats will be split into 3 categories from 2H2024: Standard, Plus or Prime.

a. Standard flats will form the majority of the housing supply, with standard subsidies and restrictions such as the existing 5-year minimum occupancy period (MOP).

b. Plus flats will be located in choicer locations within each region across Singapore (e.g. near MRT station, town centre). Flat owners will enjoy more subsidies, but tighter restrictions compared to the Standard BTO flats.

c. Prime flatsare in the choicest locations within Singapore, usually closer to the city centre. They will come with the most subsidies across the 3 categories and will have the tightest restrictions. These flats are currently offered under the Prime Location Public Housing (PLH) model.

Key features of the new Plus housing model

More subsidies to ensure affordability

Prospective buyers of BTO Plus flats can look forward to more subsidies, on top of those already provided for Standard flats today. This helps to ensure affordability of the Plus flats, given that their attractive locations will likely command higher prices.

Subsidy recovery upon resale of flat

Plus flat owners will have to “return” the subsidy should they choose to sell their flats later. This is to mitigate excessive windfall gains and ensure equity with other flat owners who do not enjoy these additional subsidies.

Tighter sale restrictions

The MOP for Plus flats will be similar to that of Prime flats, which is 10 years. This means that flat owners will need to occupy their flats for at least 10 years before they can sell their flats in the open market.

Furthermore, only Singaporeans with a household income ceiling of $14,000 will be able to buy Plus flats on the resale market. There will also be a 30-month wait-out period for private property owners before they can acquire a Plus flat.

Besides the resale restrictions, Plus flat owners will be restricted from renting out their entire flat.

Implications of the Plus housing classification for homeowners

With a longer MOP and tighter resale conditions, the move will steer homeowners away from the mindset of “profiteering” from the sale of Plus flats.

Additionally, Plus flat owners are forbidden from renting out their entire flat as well, thus reducing their chances of earning high rental income due to the choice location.

Since the new classification will only apply to BTOs that are available or launched from the second half of 2024, it will take more than 10 years before the first Plus flats are available on the resale market.

This may mean that current HDB flats in “Plus” locations will be highly sought after due to the less restrictive resale conditions and potential higher resale value.

Existing flat owners or those who have already booked their flats will not be affected.

More housing options for singles

Come 2H2024, singles who desire to buy their own flat will have more choices as well. Currently, singles who are above 35 years old can only apply for a 2-room flexi flat in a non-mature estate.

With the new classification, eligible first-timer singles can:

a) Apply for 2-room Flexi BTO flats in all locations across Standard, Plus and Prime housing projects

b) Buy a Standard or Plus flat of any size (except 3Gen flats) in the resale market

c) Buy a 2-room Flexi Prime flat in the resale market

While singles are still restricted to the size of BTO flats they can buy, they will now have more choice of locations.

With the new BTO classification, the government wants to align the purchase of HDB flats with the aim of providing affordable housing for Singaporeans, instead of viewing it as a means to “profit” from the sale.

Buying a home is one of the largest financial commitments we may have in our lifetime and home buyers should remain prudent when making the decision.

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Disclaimers and Important Notice
This article is meant for information only and should not be relied upon as financial advice. Before making any decision to buy, sell or hold any investment or insurance product, you should seek advice from a financial adviser regarding its suitability.