Government to offer more BTO flats in 2020, with demand expected to pick up
SINGAPORE — In a reversal after reducing its supply of new public housing flats for three consecutive years, the Housing & Development Board (HDB) will launch 10 to 16 per cent more Build-To-Order (BTO) units next year, National Development Minister Lawrence Wong said.
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SINGAPORE — In a reversal after reducing its supply of new public housing flats for three consecutive years, the Housing & Development Board (HDB) will launch 10 to 16 per cent more Build-To-Order (BTO) units next year, National Development Minister Lawrence Wong said.
This is an increase from 14,600 flats this year to about 16,000 to 17,000 next year, he said in a blog post on Monday (Dec 16). The supply is a return to the levels seen in 2016 and 2017, when more than 17,000 flats were launched in both years.
Mr Wong said that this increase in the number of BTO flats offered would help to meet an expected higher demand following two recent policy moves.
In September, the Ministry of National Development (MND) allowed households earning up to S$14,000 monthly to apply for a BTO flat. The limit used to be a monthly household income of S$12,000 or less.
At the same time, MND also introduced a new Enhanced CPF Housing Grant, so that first-time buyers with household incomes of up to S$9,000 can get up to S$80,000 in grants when they buy a new flat.
Although the maximum grant amount did not change, it used to be that half of the S$80,000 could be unlocked only if household income was S$5,000 or below, and the other half was applicable only to households earning S$8,500 or less and buying a four-room or smaller flat in a non-mature estate.
Mr Nicholas Mak, head of research and consultancy of ERA Realty, said that these policy changes are expected to drive up demand for BTO flats by 10 to 15 per cent.
Even if the higher income ceiling and more accessible grants do not do enough to bump up demand, the cautious outlook for Singapore’s job market would give it a push, he added.
Noting that a bad job market at the height of the Asian financial crisis in 1998 and a full-scale recession in 2001 had even delayed marriages and put off young couples from buying a flat, Mr Mak said that while the situation is not as dire now, some young couples might opt for the “safer choice” of buying a BTO flat.
It is seen as the more sensible choice as opposed to getting an older resale unit that is more expensive and might not fetch a better price if it changes hands again, he pointed out.
Ms Christine Sun, head of research and consultancy at property firm OrangeTee & Tie, said that the response from the latest BTO exercise in November indicates that the demand of BTO flats is “still strong”.
Mature estates such as Tampines and Ang Mo Kio saw 11 to 13 first-time property hunters vie for each of the 646 four- or five-room flats being offered. In Tengah, a non-mature estate, three first-time applicants had to vie for every two of the 1,977 four- or five-room flats or three-generation flats being offered.
By increasing the supply of BTO flats, it can help to improve the chances of first-timers getting a unit at their desired locations, Ms Sun added.
Giving a broader picture, Ms Sun said that up to 17,000 flats might be launched next year, but this number is still going to be less than the average of about 19,700 flats launched yearly between 2010 and 2019.
She also foresees that with the bigger supply of BTO flats in the housing market, the increased competition is likely to drive down the prices of newer resale flats, such as those that had just reached their minimum occupancy periods of five years.
Mr Lee Sze Teck, director of research for real estate agency Huttons Asia, observed that the up to 16 per cent increase in the BTO supply corresponds to the increase in monthly household income cap of around 16 per cent, from S$12,000 to S$14,000.
“(The BTO supply of 16,000 to 17,000 flats) is within expectations, as the higher income ceiling will allow more families to qualify for a BTO flat,” he said.
However, Mr Lee is of the view that the Government should not be building new flats without “urban renewal”, that is, clearing out the more blighted areas in the city to create opportunities for better housing or more efficient land uses.
He noted that past Selective En-bloc Redevelopment Scheme (Sers) exercises by HDB have shown that the pace of Sers is slower than the pace of new BTO supply. Under the Sers scheme, older housing estates are redeveloped and residents would be relocated and offered new flats near their former homes at subsidised prices.
Mr Lee said: “More urgency must be placed on urban renewal, otherwise it will lead to trade-off in terms of land use for other purposes.”
For a more accurate sensing in gauging first-timer demand, Mr Alan Cheong, executive director of research and consultancy at property firm Savills Singapore, prefers to consider the birth rates 25 to 30 years ago and the likelihood of marriage for this group.
“The 16,000 to 17,000 (units to be launched in 2020 is) not far off from what is expected from that (population) baseline,” he said, adding that there should be more or less enough demand to meet the upcoming supply.
IMPACT ON DEMAND FOR PRIVATE HOUSING
Analysts are divided as to whether the demand for private condominiums will ease with the increased demand for BTO flats and the policy changes.
Property analyst Ong Kah Seng contended that the private housing market might ease slightly as the revised housing grants will help buyers rethink their housing aspirations and make optimal use of the grants available to them to get themselves a choice flat.
However, Mr Cheong of Savills said that the Enhanced CPF Housing Grant benefits the lower tiers of household income the most. He would thus expect it to have a negligible impact on private housing demand since the two income groups subscribe to housing types “that are in different orbits”.
“The higher household income limit would have some negative impact (on the private housing market) but it wouldn’t be that great,” he said.
The higher the household income, the more inclined a person is to achieve “higher-order needs”, so the higher-income group is likelier to prefer private housing to public housing, he added.
Worries of oversupply are moot, Mr Cheong said, because unlike developers of private residential property who are bound by a five-year Additional Buyer’s Stamp Duty (ABSD) remission rule, HDB is not bound by that and can hold out supply for a much longer time.
Private property developers must build and sell all housing units within five years to qualify for upfront remission of the 25 per cent ABSD on the land purchase price.
For HDB, if demand is overestimated, it can launch fewer flats in another year until the inventory of unsold stock falls back to acceptable levels, Mr Cheong said.