Prime Location Public Housing (PLH) Model Singapore: Additional Subsidies, 10-Year MOP and More

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Prime Location Public Housing (PLH) Model Singapore: Additional Subsidies, 10-Year MOP and More
Prime Location Public Housing (PLH) Model Singapore: Additional Subsidies, 10-Year MOP and More

When the Government announced the new HDB Prime Location Public Housing (PLH) model in November 2021, it became the talk of the town.

The HDB market is hotter than ever – HDB resale prices are at record highs and have increased for 23 months in a row, with many buyers willing to pay above market value (Cash Over Valuation or CoV) for resale flats. The year is not yet over and 2022 has already seen more million-dollar HDB flat transactions than ever, which is really saying something.

The “lottery effect” of certain prime HDB flats has been a key point of discussion in recent years. In short, this happens when one is lucky enough to secure a new flat in a very prime location and manages to sell it for a sizeable profit after. A famous example is the Pinnacle @ Duxton.

This is problematic for a few reasons: firstly, public housing should primarily be for owner-occupation, not for investment. It should be used to help Singaporeans afford a roof over their heads, not give us a windfall. Secondly, without intervention, gentrification may occur when only the wealthy can afford to buy homes and live in these expensive areas.

That’s where the new Prime Location Public Housing model comes in. Here’s everything you need to know about it, plus your burning questions answered below.

HDB Prime Location Public Housing Model Summary

Here’s a quick summary of what measures will take place under the PLH model:

Key measures under the Prime Location Public Housing model

New or resale flat

Description

Additional subsidies for PLH flats, with subsidy recovery upon resale

New flats bought from HDB (e.g. PLH BTO flats)

New PLH flat buyers will enjoy additional subsidies, on top of existing EHG. However, if they sell the flat in future, they must pay back a percentage of the resale price.

MOP extended to 10 years

Both new and resale PLH flats

The MOP for PLH flats will be 10 years instead of the current 5 years. The MOP will apply to new flats as well as when they’re resold.

Reduced quota for Married Child Priority Scheme (MCPS)

New flats bought from HDB (e.g. PLH BTO flats)

The quota for the MCPS will be adjusted, depending on individual projects in the PLH model.

Resale buyers subject to BTO eligibility criteria

Resale PLH flats

Resale buyers who buy PLH must fulfil BTO eligibility criteria (e.g. income ceiling, citizenship, etc)

Renting of whole flat not allowed

Both new and resale PLH flats

MOP or not, owners will not be allowed to rent out the whole HDB flat, only rooms.

Source: HDB

The first BTO flats launched under the PLH model were River Peaks I & II, the November 2021 Central Area (Rochor) HDB BTO flats. Subsequently, King George’s Heights in Kallang/Whampoa was launched during the Feb 2022 BTO exercise. These flats saw competitive overall BTO application rates.

However, the May 2022 BTO flats launched under the PLH model in Queenstown and Bukit Merah were not as popular as their predecessors. We can’t help but wonder how the public will respond to the upcoming Bukit Merah Aug 2022 HDB BTO launch.

Related article: Prime Location Public Housing: 4 Reasons Why the May 2022 PLH Flats Saw Low BTO Application Rates

Additionally, the 6,000 Greater Southern Waterfront BTO flats, expected to be launched in the next three years, will likely fall under the PLH model; the same goes for the upcoming Farrer Park BTO flats. Likewise, there is speculation that future public housing in the Bayshore neighbourhood will be considered to be sitting on prime land too.

1. Additional Subsidies for Prime Location Public Housing Flats, with Subsidy Recovery Upon Resale

Currently, BTO buyers enjoy subsidised prices and CPF Enhanced Housing Grants or EHG (if eligible). For the new Prime Location Public Housing flats in prime areas, prices will be further reduced with additional subsidies from the Government. It is not announced how much the additional subsidies will be, but it will likely be fixed for each project (i.e., unlike the EHG, it will not consider your income).

This will ensure that the PLH flats remain affordable for BTO applicants. The catch is that if you do intend to resell your home after the Minimum Occupation Period (MOP), then you will need to pay it back. How much you will need to repay will be a percentage of the flat’s resale price then.

2. MOP Extended to 10 Years

For Prime Location Public Housing flats, the MOP is doubled to 10 years and will apply to both new flat and resale flat buyers.

10 years is really quite a long time, especially for new flat buyers – say you’ve successfully applied for a PLH BTO flat in November 2021 and the project takes four years to build, you can only sell the flat 14 years later.

This is intentional and meant to “strengthen the owner-occupation intent”. Buyers will be discouraged from buying these prime flats with speculative intent to ‘flip’ them shortly after.

Related article: 31,000+ MOP HDB Flats Coming in 2022, How Will This Supply Affect Price?

3. Reduction of Married Child Priority Scheme (MCPS)

Currently, the Married Child Priority Scheme (MCPS) allocates up to 30% of BTO units for first-timer families and 15% for second-timer families.  For Prime Location Public Housing projects, HDB will review and adjust the quota depending on the location.

For example, the MCPS flats allocated may be kept more or less the same if there are many older HDB flats nearby. However, if the PLH project is surrounded by private properties, then the quota may be lowered to give others more opportunities to buy flats there.

4. Resale Buyers Subject to BTO Eligibility Criteria

This one’s big news: for Prime Location Public Housing flats, the BTO criteria will apply even for resale buyers. This means that 10+ years down the road if you are interested to buy a resale unit that was previously launched under the Prime Location Public Housing model, you must fulfil the BTO eligibility criteria.

This includes conditions around citizenship, family nucleus, income ceiling and private property ownership. In a nutshell:

Factors

PLH new and resale flats

Typical resale flats

Citizenship

At least one applicant and household occupant must be Singaporean

At least one applicant is a Singaporean or SPR. A household can be all SPRs.

Family nucleus

Must have an eligible family nucleus (e.g. married couple)

Must have an eligible family nucleus or single above 35 years old

Income ceiling

Prevailing (currently $14,000)

NA

Private property ownership

Must not own or have an interest in private property and have not disposed of any in the last 30 months

Allowed, but must dispose of private property within six months of buying the resale flat

A big change is that PLH resale flats are for primarily Singaporeans only. Also, singles are not eligible for now. The prevailing BTO income ceiling will apply (whatever it is 10+ years down the road). The rules around private property ownership are also tightened – while the disposal period for typical resale flats is only six months of purchase, for PLH flats it is in the past 30 months.

“There is an income ceiling (currently $14,000) for PLH resale flats while other resale flats have no income ceiling. This, again, is to prevent stereotyping that PLH resale flats are for the higher-income buyers only, and a bid to keep them affordable and more inclusive for all,” said Dr Tan Tee Khoon, Country Manager – PropertyGuru Singapore.

This seems one of the tighter conditions, and the Government said that they will wait until around half of the 99-year lease before considering a review.

5. Renting of Whole PLH Flat Not Allowed

Finally, to further discourage investors, renting the whole unit will not be allowed for the Prime Location Public Housing model – even after you’ve completed the long MOP. You may rent out rooms as usual, but not the entire apartment.

Typical BTO

PLH BTO flats

Resale of flat

Allowed after 5 years

Allowed after 10 years

Buying another private property

Allowed after 5 years

Allowed after 10 years

Renting out a whole flat

Allowed after 5 years

Not allowed

Renting out spare rooms

Allowed

Allowed

HDB Prime Location Public Housing Model: Yea or Nay?

As you can see, the main focus of the new Prime Location Public Housing model is to reduce speculative activity and encourage inclusiveness. There is a strong social objective to ensure that these ‘atas’ areas don’t become wealthy enclaves.

So, since we can all agree that public housing should be kept affordable and accessible to all, the new PLH model by and large makes sense.

The 10-year MOP will weed out those who just want to ‘flip’ the property for profit, and in case there are some who are willing to wait it out, there is the subsidy recovery to dampen the windfall.

Furthermore, the tightened rules disallowing rental of the whole unit will also stop people from treating HDB properties as pure investments. With this, owners will no longer be able to buy the prime BTO flats and then upgrade and move out to a private property, while keeping the HDB flat for rental income. They can buy a private property as an investment (after the MOP is fulfilled) but must continue to stay in the HDB flat.

Related article: HDB to EC, Condo, or Landed Property: How Much Must You Save to Upgrade in Singapore (2022)

“The clawback of additional subsidies under the Prime Location Public Housing model when the HDB lessee is able to dispose of the flat after an extended MOP of 10 years, is a mechanism put in place for equitability. This prevents HDB lessees of the prime housing location from over-benefitting as compared to another HDB lessee in a non-prime housing location.

Though the details are only available next month, the key to this new policy would be the formulae to compute the clawback which is specifically targeted at additional subsidies in the first sale. Unlike other housing locations, the MOP is extended. So the formulae may have an adjustment factor for parity too,” said Dr Tan Tee Khoon, Country Manager – PropertyGuru Singapore.

The only thing that may be tricky is the strict eligibility criteria for the resale of these flats. This heavily penalises many groups of buyers in the HDB resale market – e.g., PRs, singles over 35, and those earning just slightly above the income ceiling.

Should You Still Buy a Prime HDB Flat Under the Prime Location Public Housing Model?

That’s up to you, but we say – if you’re eligible and intend to live there for the long-term, go for it! In terms of accessibility and convenience, these are the best HDB flats you can hope for. The additional subsidies to keep BTO prices down are a plus.

One thing to take note of is that depending on the land size, these projects may comprise mostly smaller units. For those who foresee having children or more family members, the 10-year MOP is a long time and should be considered when you’re making plans.

If you had your eye on prime-area HDB flats for the profits, then you can probably give it up. The Prime Location Public Housing model was designed to manage this intent, and most of the ground (if not all) is covered.

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