Future HDB flats launched under the PLH model have tighter rules like an extended MOP period of 10 years, which may push potential buyers towards flats in city-fringe areas that are not subject to such restrictions.
Analysts believe the stricter resale conditions for flats under the new prime location public housing (PLH) model would drive demand for flats in nearby areas not subject to similar restrictions, reported Channel News Asia (CNA).
This comes as authorities on Wednesday (27 October) announced that buyers of future Build-to-Order (BTO) flats located in prime areas would have to deal with a longer Minimum Occupation Period (MOP) of 10 years as well as restrictions on renting out the entire flat even after achieving MOP.
They will also have to face a subsidy clawback after the sale of the flat.
These conditions will apply to certain Housing and Development Board (HDB) projects within central locations like the city centre and surrounding areas, including the Greater Southern Waterfront.
Analysts described the move as a step in the right direction in curbing the “lottery effect” and promoting inclusiveness in prime areas.
However, they pointed that the tighter rules may have the unintended impact of fuelling demand for nearby flats that are not subject to these regulations.
“These kinds of older flats or previous launches are not affected by this – owners can still sell them in five years, sublet it out. Definitely for those looking for future rental returns or capital appreciation gains, they will probably look for these homes,” said Dr Lee Nai Jia, Deputy Director of the Institute of Real Estate and Urban Studies (IREUS) at the National University of Singapore, as quoted by CNA.
“They will also know that in future, there will not be any such products in the market, especially in the city centre area. So I think definitely demand and pricing will see some spike.”
However, buyers should be mindful of the length of the remaining leases on these older flats, he said.
Nicholas Mak, Head of Research and Consultancy at ERA Realty, agreed that demand is likely to spill over to surrounding areas but does not expect to see a significant increase in prices.
“The overall stock of HDB flats in that location will increase with the completion of the PLH flats. Based on economic theory, an increase in supply can moderate the rise in prices,” he said as quoted by CNA.
“Hence, any increase in the resale prices of the non-PLH flats will still depend on other major factors, such as the state of the economy, household income, market conditions and government intervention.”
Buyers may also turn to mature estates that are not located within prime areas, said analysts.
Analysts noted that while the doubling of the MOP to 10 years may weed out speculative buyers, this could also cause inconvenience to buyers whose circumstances change over time, like families who have children and require more space.
However, National Development Minister Desmond Lee explained that appeals by those genuinely facing extenuating circumstances would be subject to review on a case-by-case basis.
Mak noted that the extended MOP might result in less liquidity within the market as more buyers are locked into their home acquisition for a longer period.
HDB upgraders’ demand for private homes may also slow if the proportion of PLH flats out of the total BTO supply increases over time.
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Cheryl Chiew, Digital Content Specialist at PropertyGuru, edited this story. To contact her about this story, email: firstname.lastname@example.org.