How will the new housing policies announced during the National Day Rally 2023 affect you? Let’s break down the main points and explain what they mean for you and the HDB market.

From 2024 onwards, new BTO flats will be divided into three categories: Standard, Plus, and Prime. These categories are based on the location of the flats, such as proximity to MRT stations, malls, or the city center. The Standard category remains the same as before, with a normal MOP of 5 years. The Plus category is for flats in better locations than the Standard ones, but not as central as the Prime ones. These flats have more subsidies and higher resale value, but also more rules, including a longer MOP of 10 years and restrictions on renting out the entire flat. The Prime category is for flats in the best and most central locations, with the most subsidies, highest resale value, and additional rules. These flats have a super long MOP of 10 years, and owners must pay back even more of the resale price to the government if they sell the flat later, along with restrictions on renting out the entire flat or buying another flat with a resale levy.

The goal behind these categories is to ensure that everyone can afford a home in Singapore, regardless of income. It also aims to create diverse communities in every town and ensure fairness in the housing system.

Another significant change is that singles can now apply for 2-room flexi flats in all locations across the three categories. This opens up more options for singles who want to own their own home, especially if they want to live closer to work or family. This change is necessary due to Singapore’s aging population and smaller families, which require more housing options for singles.

How do these changes impact the HDB market? It largely depends on the type of flat you want, your budget, and your goals. If you want a flat with a good location or investment potential, Plus or Prime projects might be suitable, but keep in mind the higher upfront costs, longer waiting time before selling the flat, and reduced resale profits. Also, remember that you can’t rent out the entire flat under these categories. If you prefer an affordable and flexible option, Standard projects are a good choice. They offer regular subsidies and a 5-year MOP, and you can rent out the entire flat after fulfilling the MOP if desired. For single buyers, the new policy allows them to apply for 2-room flexi flats in all locations, except for Three-Generation flats. Prime resale flats are only available in a two-room unit. If retirement planning and future-proofing your home are concerns, consider looking for flats with flexible spaces that can adapt to your changing needs. Additionally, explore the HDB improvement scheme EASE 2.0 for upgrading your flat with senior-friendly features.

The changes in the HDB market may lead to shifts in supply and demand for flats in different locations and categories. More people might be interested in buying Plus and Prime projects due to their better locations and higher resale value potential at a relatively affordable price. As a result, there could be fewer Standard projects as HDB prioritizes land allocation for Plus and Prime projects to meet demand and ensure social diversity. The resale prices of older flats in mature or central locations may increase as they become rarer and more valuable without the new rules applied to the new flats. Conversely, the resale prices of older flats in non-mature or peripheral locations may decrease due to increased competition from the new flats offering better locations and subsidies.

These changes in the HDB market may also have a spillover effect on the private housing market. The demand for private properties from HDB upgraders, especially those buying Plus or Prime flats, could decrease. These upgraders will have to wait longer before selling their flats and using the proceeds to purchase private properties. They will also need to pay back a portion of the resale price to the government, reducing their cash flow and budget for private properties. Additionally, they won’t be able to rent out their entire flats, limiting rental income and loan servicing for private properties. Conversely, the supply of private properties in the market may increase as more private property owners opt to sell their properties and buy HDB flats instead. The appeal and affordability of the new HDB flats, particularly Plus and Prime flats, may attract these owners. The prices of private properties in different locations and segments may be affected. For example, prices in mature or central locations may increase as they become scarcer and more desirable compared to new HDB flats with longer MOPs and restrictions. Prices in non-mature or peripheral locations may decrease due to competition from new HDB flats offering better locations and subsidies. Mass market segment prices may decrease as they face competition from Plus flats targeted at the middle-income group, while luxury segment prices may increase as they cater to the less affected high-income group.

In conclusion, it’s important to note that the new classification and Plus model will not be retroactively applied to existing flat owners and the current resale market. It will take more than 10 years before Plus flats are available in the resale market, so significant changes in market demand are not expected in the near term. The best approach to making a housing choice is to consider your own needs, budget, and goals and compare the available options. Utilize tools like HDB’s e-Services to find and compare flats that suit your criteria. These new HDB policies aim to provide more housing options and ensure affordability for everyone. They also hold implications for the private housing market in Singapore, potentially impacting demand, supply, and property prices in different segments. Stay informed and make choices that align with your specific circumstances and goals.

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Benjamin Low
Benjamin Low

Benjamin is known as The Passive Income Guy. He has helped hundreds of people to build passive income. He is also a member of the Million Dollar Round Table, and Certified Financial Planner™ (CFP®) and Certified Private Banker (CPB).

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