Deeper look into the difference between HDB BTO Standard, Plus and Prime Classification
Table of Contents
In his National Day Rally speech at the Institute of Technical Education (ITE) Headquarters on 20 August 2023, Prime Minister Lee Hsien Loong addressed the global situation in general and its economic outlook, before going into more details of the vision of Forward Singapore in our local context.
PM Lee spoke largely on retirement and ageing population with the introduction of Majulah Package, more mobility-friendly features across all neighbourhoods islandwide, and assisted living facilities. PM Lee also stressed the importance of Healthier SG programme that has kicked off in the recent month. Moving on, PM Lee deliberated extensively on the topic of public housing as we will discuss broadly in the following sections.
The Existing HDB Scenario
Historical Nuance
Housing Development Board (HDB) flats a.k.a. Public housing has been, is, and will always be a vital part of Singapore property scene. Currently, while 9 in 10 Singaporeans own our homes, 8 in 10 live in HDB flats. Ever since the first foundation stone laid in March 1963, Government has kept housing affordable and accessible by Singaporeans.A wide range of generous grants have been provided to HDB homebuyers.
COVID-19 has caused BTO projects to be delayed, seriously bringing a situation of public housing supply shortfall to meet the demands. HDB prices have since been increasing since Q32020. As many as 369 HDB transactions were valued above $1million (termed million-dollar HDB) in 2022, with some of them valued above $1.4mil. Government is ramping up supply by introducing new 100,000 flats by 2025.
Existing Classification Guide: Mature Estate and Non-mature Estate
Since the early 90s, HDB has used a simple framework to guide the public in buying flats. We distinguish between Mature Estates and Non-Mature Estates.
The Need of A New Framework to Adapt to the Evolving Housing Landscape
However, Singapore housing landscape has been evolving. Government has put in a lot of resources and efforts to improve everywhere throughout Singapore. Today, most towns have been developed, with Tengah being the last new town that is currently being developed, before the moving of Paya Lebar Air Base creates a new land to be developed. Any new HDB flats to be built now will be within or near the existing already developed estate, or in other words, effectively mature area, including those that are currently under Non-Mature Estates classification.
Many towns in Singapore are no longer just barebones with empty lands to be developed. These towns have matured and become desirable. At present, there is less synchronization between a town’s facilities and how it is being classified. For example, Marine Parade is classified as a Mature Estate even though there was no shopping mall, good road network and school. Toa Payoh was classified as a Mature Estate even though there were only few HDB flats surrounded by many bare lands. On the other hand, look at Jurong East, there are more than one (1) MRT lines serving it, many shopping malls, yet it is a Non-Mature Estate. The distinction is blurring as what matters more to buyers to determine a good deal are the specific attributes of the project, not the classification whether the estate is Mature or Non-Mature. Some projects in Non-Mature Estates are even more popular than those in Mature Estates, as reflected in BTO applications.
It is telling from the above scenario that the existing framework is no longer effective, and a new framework need to be established.
The Three Important Objectives of the New Framework
The new HDB framework has to achieve three important objectives:
- it has to keep home ownership affordable to all income groups
- it has to keep the system to be fair for everyone
- it has to maintain a good social mix in every town and every region
Housing grants will be continued, especially the ones well-tested, like the Enhanced Housing Grant. More will be introduced. Such grants work well for most HDB projects, but will leave a problem when faced with the preferred locations within a region. Such projects invite high demand at BTO exercise (for e.g. Central Weave at Ang Mo Kio was 17 times oversubscribed) as buyers are aware of their high price appreciation at resale. This creates a “lottery effect” as the ones get to ballot stand to win much while many are missing out. This is not a fair scenario.
For projects at choicer locations, let’s look at two scenarios:
(i) if they are price higher, the “lottery effect” can be reduced. But, these flats will become unaffordable to most families. We will not be able to achieve the good social mix objective, as those who can afford are only those near the income ceiling, or those who parents are able to help them pay. The projects will become higher-income enclaves.
(ii) if they are price lower, yes we can get good social mix, as most households can afford, but we exacerbate the “lottery effect”, the unfair scenario.
How do we solve this problem?
The New HDB Classification Guide: Standard, Plus, Prime
The New “Plus” Model
There have been existing Standard model and Prime Location Housing (will be called “Prime” in the new framework) model.
A new Plus model will be introduced. The Plus model is attributed to the projects that are near to town centre, near to transport nodes, better amenities in their immediate vicinities.
HDB will introduced differentiated measures for the three different models, from various factors such as: Minimum Occupation Period (MOP), subsidy/grant recovery upon resale, income ceiling on the resale buyers, and wait out period for private homeowners who have just sold their private units.
Such rules are made to ensure that the system is fair to other buyers who did not get these Plus or Prime flats. The grant recovery and income ceiling measures will moderate resale prices and help to maintain a better social mix, not just at BTO stage, but also in the resale market in the longer term.
The new classification guide will not affect the existing projects. They will be implemented from the second half of 2024.
For Single Homebuyers
Today, more and more Singaporeans choose to be single. There are ongoing concerns by singles who want to own their own homes. Currently, because we need to prioritize our limited supply of flats, first-timer singles can only apply for new 2-room Flexi flats and only in Non-Mature Estates. The singles want to have more choice.
As seen above, Government has been improving accessibility of housing options to singles since the early years. When the new framework is implemented, singles will be allowed to buy 2-room Flexi flats across all types of BTO projects – Standard, Plus, and Prime. In resale market, singles can buy any Standard or Plus flats, except 3Gen flats. Singles can only by 2-room Prime flats. They will be subjected to income ceiling for Plus and Prime flats.
Our Outlook
The locations of HDB Estates will be referred to by the five (5) regions names as shown below. The Central region will consist of mostly Plus and Prime flats, with the other (4) regions will be made up of mostly Standard and some Plus flats. The changes are able to capture the fact that the popularity of HDB projects are highly dependent on where they are located. It is a good move.
In this period before the Plus flats are introduced in the second half of 2024, some aspiring BTO applicants will be trying to guess the locations of Plus flats, and Prime flats. The Sale of Balance flats of previously launched BTO may gain traction as some of these are near to the choicer areas, but the restrictions are not applied to them. There are a few locations that we think potentially to have Plus flats introduced there. These include: Mount Pleasant where Old Police Academy was located is near to town centre, Bedok South as there is an integrated development zone shown in the Master Plan and it is near to East Coast Park, plus the two MRT stations nearby, Tanjong Rhu as there are recent rezoning of some plots there to be residential and they are near CBD (a small portion may even be Prime), and Bukit Timah Turf Club as it is cluster with many good schools.
The new controls and regulations may lead to a stabler HDB market in the long run. Government’s message is clear that HDB flat is a place to stay, not to be looked at as a lucrative object to be monetized profitably in a short time. While this is ideal, it also introduces a higher difficulty in moving up the housing ladder, because now it takes longer for owners of Plus and Prime HDB flats to resell them to realize substantial capital gains to fund a purchase of private property as usually practiced. More HDB upgraders are relying on multigenerational wealth transfer to do so.
In the arena of single homebuyers, there will be initially high demand for the Plus/Prime flats as these are pent-up demands over the years, but it will stabilize over time. There is unlikely to be an impact on the resale market because most singles are usually looking for larger flats in the resale market, and this has been ongoing before the above introduction.
Frequently Asked Questions (FAQs)
Will the new classification of HDB affect the old or existing HDB flats?
There is no change to the classification of the existing flats. The new classification and Plus model will not be retroactively applied to existing flat owners and the current resale market, as well as for homebuyers who have successfully booked the recently launched BTO’s.
Is there a difference between PLH (Prime Location Housing) model and Prime model?
The Prime Location Public Housing (PLH) model and the new HDB Prime model refer to the same housing model. This model was first introduced by HDB and MND (Ministry of National Development) in October 2021 to ensure that new public housing built in prime, central locations like the city centre and the Greater Southern Waterfront remain affordable and accessible for Singaporeans from different walks of life. The first project under the PLH model then was at Rochor, along Kelantan Road and Weld Road, launched in November 2021.
Can one rent out a Plus model flat?
The homeowners of Standard HDB flats are allowed to rent out the entire of such flat after the MOP.
For Plus and Prime HDB flats, the owners are NOT allowed to rent out the entire flat even after the MOP.
Can PR get HDB Grant?
A Singapore Permanent Resident (PR) can get a housing grant for HDB flats, but it must be under certain conditions. The household of the PR must comprise at least one Singapore Citizen (SC) to be considered for eligibility for housing grants. From 9 May 2023, eligible housing grants will be shared among applicants and occupiers in the core nucleus, regardless of whether they are Singapore Citizens or Singapore Permanent Residents.
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