Prime Location Public Housing With Ten Years MOP

credits: hdb

• 1. Citizenship, Household Income Cap & Private Property Ownership:

  At least one buyer has to be a Singapore citizen with a $14,000 household income cap, and not owning or having sold a private property in the previous 30 thirty months.

• 2. Singles More Than 35 Years Old Eligibility:

  PLH flats will not be available to singles over the age of 35. Singles over 35 are not restricted from purchasing resale flats under existing guidelines. The government has their concern that If such limits are not established, resale values in premium areas may expand beyond the reach of most locals. These resale pool rules will also serve as protections to prevent sellers from including the subsidy recovery in their asking price in order to maximize profits.

• 3. Fulfillment Of BTO Eligibility Conditions A Must:

  Buyers will be limited to persons who fulfill BTO eligibility conditions, which implies that not everyone will be able to purchase. Buyers must also consider the impositions on later resale on him or her.

Conditions For Owning Prime Location Public Housing (PLH) Flats:



credits: hdb

For all flat owners who acquire BTO and resale flats under the PLH model, these terms and conditions will apply.
• 1. MOP Increased:

  HDB flats located in premium locations would have a longer MOP from five to ten years. In recent years, a good number of flats are sold for $1 million, bucking the believe that HDB flats cannot reach that figure. Thus, this is to deter those buyers who are thinking of flipping their flats after 5 years to get the lottery effect.

• 2. Letting Out Of Entire Flat

  Furthermore, owners will not be allowed to let out their entire flat at any time, even after the MOP has ended.

Resale Limits Consideration:

The government plans to reconsider the resale limits after half of the 99-year lease of each premium location HDB flat has passed.
The aim is to improve owner-occupation rates of public housing and at the same time control resale prices and prevent speculation.

Housing Grants, Ethnic Integration Policy:

The HDB will continue to provide housing grants to qualified purchasers and continue to implement the current ethnic quotas in its Ethnic Integration Policy.

Prime Location And Fringe Of City:

Prime sites are those that are in Singapore’s city centre and the Greater Southern Waterfront.
The HDB estates and towns directly around the city centre may qualify, depending on their characteristics.
For the time being however, the PLH model will focus on the prime locations in the city centre. The government has a clear specific social purpose when they introduce flats in areas that would otherwise be reserved for private housing. Anyway, there are eligibility constraints put in place on who can purchase these units.
National Development Minister Mr Desmond Lee stated that if practical, public rental units will be incorporated at these locations.
He noted that the new PLH model represents all the considerations and trade-offs that public housing must balance, while still meeting its primary social objectives. However, as the PLH model is fairly new, the government will continually assess the criteria based on other launches along the way.

Who Will The Prime Location Public Housing (PLH) Flats Appeal To?:

These measures are aimed at making the PLH flats affordable and inclusive. Appeal for living in these central prime locations can be very convenient but the heartlands have so many amenities. Who are the people wanting to buy a PLH flat?
• 1) people who have sold their private property and want to downsize their house;
• 2) retired couples who don’t need a big unit anymore as their children have left the nest;
• 3) families in their 30s / 40s who are financially stable; or
• 4) 20-something young couples who value a central location and who are earning very good income or have strong financial support.

REVIEW:

The prime location public housing (PLC) model is really a new concept mooted and it is early days yet how this will pan out. But to wait for 15 years (estimated 5 years construction time frame and 10 years minimum occupation period) before a owner can resell his / her unit is really a very long wait.
Assuming a couple who are both 28 years old and decides to apply for such a unit, they will be 43 years old before they can start to sell their house. There is no way they can do anything in between to right size their house, be it to downgrade to a smaller unit or to upgrade to a new Singapore condo.
The pool of buyers for a resale PLH unit is also smaller compared to that of a standard resale BTO unit as singles above the age of 35 years old are not eligible for the purchase.
Down the road, let’s assume that a family consisting of a couple at age 28 years old wishes to purchase a resale PLH flat from the secondary market. Let’s also assume that the mortgage servicing ratio (MSR) remains at 30% and is used to calculate the maximum amount that a person can borrow to service his / her loan. Let’s take the couple’s household income is $14,000 which is the income cap to buy a resale PLH so that we can work out the maximum loan amount for them.
Scenario 1: Borrow from HDB

$925,000 represents 90% loan. At 25-years loan tenure, the maximum purchase price of the flat cannot exceed $1.027 mil.

Scenario 2: Borrow from the Bank

$838,000 represents 75% loan. At 25-years loan tenure, the maximum purchase price of the flat cannot exceed $1.117 mil.

HDB transactions for 4-room flats at Clementi Towers since January 2020 have fetched between $800,000 to $900,000. Imagine 15 years later when the first batch of Rochor PLH flats can be resold in the open market, what do you think the sales price for 4-room flats would be like? Will it be $1 mil or even higher since those flats are located in the prime area of Singapore? More specifically, they are in the Downtown Core within the Central Area of Singapore. One wonders if household income cap of $14,000 will be really enough to afford a resale PLH 4-room flat by that time.
When the time comes about 15 years from now, the government may adjust the income cap on resale PLH flats accordingly to factor in price increases, inflation and also to take into account the rise in Singaporeans’ rise in median income.
Here’s a look at some changes made in other HDB products in recent years. For the purchase of Executive Condo (EC), family household income ceiling has been adjusted up from $14,000 to $16,000. And the family household income ceiling for purchase of a standard BTO flat has increased from $12,000 to $14,000.
Currently, a new condo Singapore launch atop Bugis MRT station called Midtown Modern is already selling at above $2 mil for a 3-Bedroom apartment. What will prices be like for Singapore condominiums in 15 years’ time? Morgan Stanley predicts Singapore’s property prices to double by 2030 for private homes. Would you like to place your bet on a private apartment in Singapore or a PLH flat? Other new condo in Singapore in the Bugis locale are The M by Wing Tai and Midtown Bay by GuoccoLand.
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Sources:
1) https://www.straitstimes.com/singapore/housing/subsidy-clawback-10-year-mop-for-new-prime-location-hdb-flats-to-keep-them
2) https://www.channelnewsasia.com/singapore/bto-prime-area-10-year-mop-resale-subsidy-hdb-2271766