SINGAPORE – Bold policy moves to keep public housing in prime locations affordable have triggered buzz over where other prime sites could be, and the additional subsidy amount that sellers of such flats will have to return to the Government, regardless of whether they make a profit or loss at the point of sale.
At least one mystery will be cleared when details of the additional subsidy clawback, among other things, are revealed at the upcoming launch next month of the first such prime location public housing (PLH) project in Rochor.
While the additional subsidy clawback is aimed at curbing the investment potential of such flats, it is not tantamount to a wealth tax.
Many observers feel it is only fair that buyers of PLH flats return the subsidy. Otherwise, they will enjoy disproportionate windfall gains that normal Build-to-Order (BTO) flat buyers do not get – just because they are lucky enough to be balloted such flats in prime areas. Indeed, some feel the clawback should be more than the subsidy, as the computation should take inflation into account.
Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, noted that these flats are “likely be sold at a premium because of their prime location. Therefore, a certain amount of sale proceeds should be added to the clawback”.
But some analysts cautioned that windfall gains are not assured. “The subsidy is based on a percentage of the resale price. This means that there is a possibility of loss for the seller if market conditions are not favourable,” said Cushman & Wakefield head of research Wong Xian Yang, adding that the subsidy clawback amount could vary across different PLH projects.
Asked about this on Friday (Oct 29), HDB and MND said the recovery rate is “pegged to the quantum of additional subsidies provided as a percentage of the original assessed market value of the flat”. They said: “The subsidy recovery will therefore apply to the resale price that is a reflection of the prevailing market value, whether the flat is sold at a gain or at a loss.”
Mr Wong expects that many sellers, depending on prevailing market conditions, will try to bump up their asking prices to make up for the amount they will have to return to the Government.
The attractiveness of these flats will depend on the clawback amount and also their launch prices, Mr Ismail Gafoor, chief executive of PropNex Realty, said. “For example, a four-room BTO flat at Tampines is about $400,000 currently, while a same-size unit in Dawson is about $600,000 because of its more central location. Now that the Government is going to give more subsidy to PLH flats, if the next PLH project happens to be in Dawson, will the flat be launched at $400,000 or $600,000?
Meanwhile, newer resale flats in the prime areas that are not subject to the PLH restrictions could become “limited edition” flats and continue to hold their value until lease decay starts to set in when the flat reaches 50 years of age, Mr Gafoor said.
“Demand for non-PLH flats in prime areas will continue to come from Singaporeans and PRs who want to downgrade from private property, and also those who are not eligible to buy PLH flats because of the $14,000 income ceiling,” he added.
Mr Wong believes there could be a slight uplift for newer non-PLH flats in prime areas, especially if a PLH project is going to be near them. Mr Nicholas Mak, ERA’s head of research and consultancy, said: “It’s not the Government’s intention to bring down the value of all flats in prime locations. That’s why they didn’t apply the PLH model retrospectively.”
For the private residential market, the impact on demand from PLH flat upgraders is expected to be minimal, said Ms Tricia Song, head of research, South-east Asia, CBRE. “These flats, given the tough restrictions, will make owners think about upgrading only after 10 years or more. These PLH projects also pose no resale competition for the private residential market while in their 10-year minimum occupation period.”
Where the PLH projects will be sited is also the subject of much speculation. Land costs, areas that are close to the CBD and Orchard Road and have a low proportion of HDB flats, could be among criteria considered, analysts say.
Ms Sun said: “Ideally, there should be sufficient space to house a big plot of new flats, and it should be near MRT stations and amenities. Most of the resale flats near such areas should already be commanding high resale prices.”
Potential PLH sites could include the Marina Bay area and near River Valley, she said.
“If the city centre grows, the prime area may also evolve with urban growth,” said Professor Sing Tien Foo, director of the National University of Singapore’s Institute of Real Estate and Urban Studies. He believes parts of mature estates abutting the city centre, like Bukit Merah and Queenstown, may be candidates for PLH projects.
Mr Mak said the definition of prime area can change. “Possible future prime areas could include Telok Blangah, Outram, the Chin Swee area and Bukit Purmei. More than 10 years ago, Bidadari was a cemetery. Now, the BTO projects there are sought after,” he said.
“Source: [How the subsidy recovery may impact resale prime area HDB flat prices] © Singapore Press Holdings Limited. Permission required for reproduction”
