New Prime and Plus flats will have greater fiscal impact as more subsidies are to be disbursed: Desmond Lee

Sep 19, 2023

SUBSIDIES for the Prime and Plus flats to be launched from the second half of 2024 are expected to have a higher fiscal impact than the status quo, Minister for National Development Desmond Lee said on Monday (Sep 18).

In FY2021/2022, the Housing and Development Board (HDB) had disbursed S$372 million in grants for flats purchased directly from HDB and S$849 million in grants for resale flats and executive condominiums, Lee said.

“As Prime and Plus flats will come with more subsidies, the total fiscal impact will be higher than if we kept to the status quo.”

During this period, HDB recorded a S$3.85 billion deficit in its Home Ownership Programme.

The actual anticipated fiscal impact will depend on a number of factors including market conditions at each launch, housing demand and the locational attributes of the sites, he said.

“In deciding which model to launch new flats under, we take into account various factors such as their specific locational attributes, affordability for buyers, and the need to provide a range of different options for Singaporeans.”

The minister was responding to several questions from MPs on how the new classification will affect the affordability and access of public housing for Singaporeans, as well as how much the government expects to spend on housing subsidies.

This comes after Prime Minister Lee Hsien Loong announced in August that all new Build-To-Order (BTO) projects launched from the second half of 2024 will be classified into three categories – Prime, Plus or Standard – based on their location.

The new framework is needed to keep flats affordable to all income groups, maintain a good social mix in every town and region, and keep the system fair for all, PM Lee said during his National Day Rally speech.

Plus flats – a new category – will be located near transport nodes and town centres.

They will come with more subsidies but with strict curbs on resale, such as a 10-year minimum occupation period (MOP) and a clawback of the subsidy at the first resale.

On Monday, Lee noted that MPs have asked about the potential impact of the new housing framework on the resale market.

Analysts and researchers have a range of views on the potential impact on resale prices in the wider market, and many agreed that the overall impact may not be so straightforward.

Lee said: “Prime and Plus flats will only come on to the resale market in about 15 years’ time. In the longer term we expect that the tighter restrictions will moderate the resale prices to some extent, so that the flats are kept affordable for a wider group of Singaporeans.

“We will monitor the impact of the new housing framework on the broader resale market closely, and review them where necessary.”

MP Xie Yao Quan (Jurong GRC) had also asked whether the government will consider lowering the MOP of Plus flats to shorter than 10 years.

Lee said that an MOP of 10 years seeks to strike a balance between strengthening the intent for owner occupation on the one hand, and giving homeowners the flexibility of moving home for genuine reasons.

He noted that most Singaporean households live in their HDB flat for 10 years or more before selling it.

“For those who genuinely need to move out before the end of their MOP, HDB will assess their appeal on a case-by-case basis.”

In Parliament on Monday, Lee also expanded on issues raised on singles’ access to BTO flats.

From the second half of next year, singles will be able to apply for two-room flexi BTO flats in any category.

Lee said that from 2024 to 2026, the government will launch up to 14,000 such flats, an increase of about 30 per cent over the past three years from 2021 to 2023.

Lim Biow Chuan (Mountbatten SMC) asked whether the age limit for singles to buy BTO flats can be reduced. Currently, singles have to be aged at least 35 years and above to be eligible.

Lee said building enough flats over the next few years to address pent-up demand from singles is the current priority before the government decides whether to make any further moves.

“Having said that, we have been engaging singles on their housing aspirations and heard many suggestions on new housing typologies – such as co-living and inter-generation housing, and we are actively studying them.”