should you buy the new plus and prime BTO Housing in 2024?

From the second half of 2024, BTO projects within each town will be classified under the new Prime, Plus and Standard categories based on their locational attributes.

Source: HDB

You might be familiar about the Prime category as it has already been launched under the model Prime Location Housing (PLH) since 2021 with its first project at Rochor. It will be renamed as Prime category from second half of 2024 onwards.

Prime categories refer to flats in prime and central locations like the city centre and surrounding areas, including the Greater Southern Waterfront.

The new Plus category will refer to flats that are in choicer locations within each town. This would mean that BTO launches in this category will likely be located near transport nodes, i.e. within walking distance of MRTs or bus interchanges, or near town centres.

As they will command a higher market value due to its attractive location, there will be additional subsidies for these flats, just like the Prime category flats.

Here is a quick comparison from HDB for the 3 different categories

Source: HDB

When looking at this chart, it might seem like only downside is buyers will need to fulfil a 10 years Minimum Occupation Period (MOP) before you can resell the flat in the resale market.

But there are much stricter rules when it comes to reselling the Plus and Prime flat, which will greatly affect the resale price in the future.

Owners will also be subjected to a subsidy recovery when they sell their flats.

So what are the new restrictions for future buyers looking to purchase flats under the new categories?

Minimum Occupation Period ( MOP )

Instead of a 5 year MOP for standard and current HDB flats, a new 10 year MOP applies to Plus and Prime flats.

Owners will only be able to sell the flats or purchase a private property after the 10 year MOP period.

30 month wait out period for Private Property Owners

Similar to a BTO, private property owners who wish to purchase a Plus or Prime flat in the future has to fulfil a 30 month wait out period before they can qualify to buy.

This would mean that any private owners cannot immediately purchase one of these flats and have to rent for a period of 30 months after selling their private property.

Most of these owners will not be keen to sit off the market for 30 months if there are similar flats in the same vicinity that do not require this wait out period.

Income ceiling

An income ceiling of $14,000 will be imposed on the buyers, regardless of whether single or families, for Plus flats. An income ceiling of $14,000 and $7,000 for families and singles respectively, applies for Prime flats.

No Renting of whole unit after MOP

Even after the 10 year MOP period, owners cannot choose to rent out the entire flat for rental income.

At least one Singaporean in the household

Only households which consist of at least 1 Singaporean will be able to buy Plus/Prime flats in the resale market.

Source: Edge Prop

During the National Day Rally where the new BTO categories are announced, PM Lee said these measures are to reaffirm the key principles of public housing - to keep home ownership affordable, maintain a good social mix and keep the system fair.

These measures are in place to make sure that flats in these desirable locations will remain affordable for future generations who aspire to find an HDB in these location, and not be subjected to astronomical prices.

HDB flat prices in city locations like Pinnacle@Duxton and Dawson areas have already made news with multiple 4 room and 5 room units crossing the million dollar mark

Source: HDB

With the introduction of these new category of BTOs, I believe the price will stay the the same or even go higher as current owners of flats in these favourable locations are not subjected to the Plus and Prime housing model rules.

Making them very desirable for buyers who want a flat in those locations that would not be bounded by the new rules under the new housing model.

The earliest any of the Prime and Plus flats will hit the resale market will be in the year 2035, taking into consideration the construction time needed for these flats.

It is still quite long before we can see how much these flats will affect the prices in the same area. But I suspect when these Plus and Prime flats hit the resale market, It will begin to wane down the interest of the standard resale flats in the same locations thus moderating the prices.

To emphasise, all of the criteria as mentioned is meant to keep the prices of these Prime and Plus flats affordable.

Each serving a different purpose.

10 Year MOP

Buyers who are looking to purchase these flats as a stepping stone to the next one will think twice as they will need to commit 10 years to the flat before they can sell and move on. 10 years is a significant period of time in terms real estate ownership as compared to the 3 year holding period for private properties due to the seller’s stamp duty.

If you were to purchase a standard flat with 5 years MOP and move onto private properties, the same timeframe would allow you to transact another 2 rounds of private properties.

Time is money in real estate as your age will affect your loan tenure and your loan eligibility. It might also mean that you will miss some opportunities along the way if you are strapped to the 10 year MOP.

30 month wait out period

This move is to prevent cash rich property owners from competing with home seekers looking for a home in the area. It will motivate this group of buyers go into either standard flats with no restrictions, thus shrinking the potential buyer pool who has the funds to pay a higher price than the usual buyers.

Income Ceiling

This is also to prevent the higher income earners from competing with average home seekers. Having the income ceiling will shrink the buyer pool further.

Buyers who fall into the income bracket will have a limited loan quantum and if the resale price is too high, they would have to come out with an additional amount of down payment, which is going to be a heavy burden for buyers.

No renting out of whole unit after MOP

As Plus and Prime flats will be in desirable locations, they will naturally command a higher rental price.

Some buyers who are thinking of holding on to a HDB as a rental property after MOP, they will not be able to rent out the whole unit. This will deter owners who intend to purchase a private property after MOP and keeping the unit for their high rental yields.

All these measures will either shrink the buyer pool or have an effect to soften the eventual resale prices.

Should you buy a Plus or Prime Flat?

Now for the golden question. Should you buy a Plus or Prime flat?

Take the following example of a couple, first time home buyers aged 30.

They apply for their Plus or Prime flat in 2024, adding on the construction time and MOP, they will be around 44 before they can sell their unit.

If their income increases and they could afford to buy a private property for investment, they can’t.

If they need to apply for a primary school that is out of the range of their current house, they can’t sell and move.

When they are 44, their loan tenure when purchasing the next property will be shorter, thus making the monthly mortgage payments higher.

And because of the measures that will apply to the next resale buyer, their capital upside and buyer pool will be much more limited than those of standard flats in the same area.

If you have already plan out 15 years ahead and can foresee yourself staying in the same location throughout the different stages of your life, then these flats are suitable for you.

But you will also need to understand that you will need to sit on the sidelines of the property market, even if you are more than capable of making use of properties to build your wealth portfolio, which a lot of people actually do due to the great characteristics of Singapore’s real estate market.

If you are not sure about whether these flats are right for you, reach out to us and let us help you figure it out.