HDB Introduces 6-9% Subsidy Clawback for Prime and Plus Flat Resales

HDB Introduces 6-9% Subsidy Clawback for Prime and Plus Flat Resales

Analysts note “modest” recovery rates may not deter demand but warn of pricing disparities steering buyers toward Plus flats

October 16, 2024

CONDOsingapore.com

Buyers of newly launched Prime and Plus Build-To-Order (BTO) flats will face subsidy recovery rates of 6% to 9% upon resale, the Housing and Development Board (HDB) announced on Wednesday (Oct 16). The policy aims to balance affordability with fairness for buyers across all BTO categories, though analysts suggest it may unintentionally skew preferences toward Plus flats.

Prime Flats: Higher Clawback, Premium Locations

The inaugural Prime flats under HDB’s revised framework, such as the 312-unit Crawford Heights in Kallang-Whampoa, will incur a 9% subsidy recovery. Priced from S$390,000 (three−room) to S$568,000 (four-room), these units are discounted by approximately 36% compared to current resale four-room flats in the area (S$890,000 – S$938,000).

Plus Flats: Lower Recovery, Broader Availability

Plus flats, available across seven projects in Ang Mo Kio, Bedok, Geylang, and Kallang-Whampoa, will see clawbacks of 6–8%. Among the 3,273 Plus units offered, prices range from S$187,000 for a two−room flexi flat in Ang Mo Kio to S$530,000 for a four-room unit in Geylang. Discounts against resale markets reach up to 40% in areas like Kallang-Whampoa, where four-room resales hit S$1.2 million.

Balancing Subsidies and Resale Restrictions

To curb speculative gains and the “lottery effect,” Prime and Plus flats require a 10-year minimum occupation period (MOP)—double the five-year MOP for Standard flats. HDB emphasized that the clawback ensures equity with buyers of non-subsidized BTOs. Analysts, however, argue the structure may create market distortions.

PropNex CEO Ismail Gafoor highlighted that even with a 9% recovery, sellers could retain significant profits. For example, a S$650,000 Prime flat resold for S$1.2 million would yield a S$108,000 clawback but leave over S$400,000 in gains. He added that future adjustments to income ceilings—unchanged since 2019—could expand buyer pools.

Price Anomalies and Buyer Incentives

Huttons Asia’s Lee Sze Teck noted a “price anomaly” between Plus and Standard flats. In Ang Mo Kio, a four-room Plus flat at Central Trio @ AMK (S$481,000) is S$54,000 cheaper than a comparable Standard flat at Central Weave @ AMK (S$535,000). This gap mirrors the 6% clawback, potentially making Plus flats more attractive due to higher subsidies and fewer restrictions than Prime flats.

Subsidy Adjustments Reflect Market Shifts

Mogul.sg’s Nicholas Mak observed that rising resale prices and construction costs have pushed recovery rates up from 6% in 2021 to 9% today. He anticipates further increases if market discounts widen to maintain affordability.

October 2024 BTO Launch Details

The latest exercise offers 8,573 flats, including 265 Community Care Apartments for seniors in Geylang. Two-room flexi units start at S$109,000 (Jurong West), while 3Gen flats in Pasir Ris peak at S$644,000. Prime project Crawford Heights introduces “white flats” with open layouts, priced S$6,000 – S$8,600 lower than standard units. First-time singles can now apply for nearly 2,000 two-room flexi flats across all estates, a shift from prior restrictions to non-mature areas.

Analysts conclude that while subsidy recoveries and MOP extensions add complexity, demand for well-located flats will likely persist, driven by long-term value and accessibility.

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