SINGAPORE — When the new Plus flats under the public housing authority’s new classification scheme hit the resale market, there may be some “disparities” because of different resale restrictions for similar flats, property analysts said. However, this is a necessary bump to cross in order to achieve fairer housing allocation in the long term, they added.

The first Plus flats, to be launched in the second half of next year, will take at least 15 years to hit the resale market — with five to six years to build the flats and another 10 years to hit the minimum occupation period before owners can resell. 

The analysts also foresee that housing units that would have been classified as Plus flats but were launched before the new system takes effect could fetch even higher resale prices, since they are free from tighter restrictions such as an income ceiling for buyers. 

These flats and the Plus flats may even be located in the same neighbourhood or beside each other, which could further highlight this disparity. 

However, they pointed out that such a potential disparity in resale value in the above example is not an unfair one, since owners of Plus flats are granted higher subsidies in the first place “in return” for tighter resale conditions.

The analysts were commenting on Monday (Aug 21) after Prime Minister Lee Hsien Loong’s National Day Rally speech the night before, where he announced a new Plus category to classify public housing projects that will be introduced from the second half of next year.

The Housing and Development Board (HDB) will no longer use the current mature and non-mature estate classification after that.

Build-to-Order (BTO) public housing projects under this new Plus category will be found in “choice” locations across the island, such as near MRT stations or town centres. 

The new flats under the system will be divided into three categories:

• Standard flats that will be the majority of the BTO supply
• Plus flats
• Prime Location Public Housing flats, which will be renamed to Prime flats. 

In his speech, Mr Lee pointed out that the Central Weave project in Ang Mo Kio, launched in August last year, would have been classified as a Plus flat under this new framework.

WHAT WILL HAPPEN IN THE MEDIUM TERM

Property analysts said that the new Plus flats and existing flats that would otherwise have been classified as Plus flats, such as those at Central Weave, a BTO project in Ang Mo Kio central that was launched last year, would command different resale values. 

Dr Leong Chan-Hoong said that this is in part due to the income ceiling restriction for buyers of resale Plus flats, which would not apply to buyers of resale flats in choice locations launched before the new classification system.

Dr Leong, who is head of policy development, evaluation and data analytics at research agency Kantar Public, said that moving forward, higher-income households may have a “greater impetus” to get a flat at a convenient location, which is where Plus flats will be typically found. 

This is because they may not qualify to buy resale flats under the Plus model with the income ceiling being too low, and this may therefore push up resale demand for existing projects in the “Plus” areas, such as Central Weave.

Agreeing, Mr Nicholas Mak, chief research officer of property website Mogul.sg, said that putting restrictions on the resale of Plus flats “doesn’t keep the lid” on the price growth of HDB flats. 

“In keeping (flat prices) from boiling over, they can cover one part, which is the price of new BTO Plus flats, but the other part will boil over, which is the resale of existing flats that do not have extra restrictions, as they will get scarcer.”

Mr Lee said in his speech on Sunday that increasingly, new HDB flats will have to be built within or near to existing estates. 

Dr Leong said that with there being more of such projects, there will be many instances in future where new Plus flats are built within the same estate as Standard flats that would otherwise have been classified as Plus flats, and both having different resale restrictions. 

“Some of the existing flats near an MRT station, they already command a higher premium, so if a Plus (flat) is built next to it, there will be disparity — one flat will be classified as Plus and another Standard,” he added. 

While there could be some disparities in the resale value of the older and newer flats, some of the analysts believe that the differences may not be as large as expected. 

Ms Christine Sun said that this is because some households within the resale income ceiling for Plus flats may hold off resale purchases on Standard flats to wait for more affordable resale options once Plus flats are available for resale. 

The senior vice-president of research and analytics at real estate agency Orange Tee & Tie said: “The Government will push out more of these (Plus) flats from next year, so if it continues to ramp up the supply of these flats that are cheaper but have a longer minimum occupation period, there will be a diversion in demand.

“People will know that they have a cheaper option… but it doesn’t mean that they will all flock to buy flats that are not Plus and come with the usual five-year minimum occupation period.”

Ms Sun added that having Plus flats in estates where there are many other existing projects, while possibly drawing comparisons due to the disparity, is an intentional part of the HDB’s design to create more diversity in the neighbourhood.

“So you have a good mix of different-tiered projects that are Standard and Plus, some with longer minimum occupation periods, some with shorter ones,” she said. 

She also said that the staggering of the minimum occupation period within the same neighbourhood of Plus and Standard flats will help to manage the supply of resale flats entering the market in a resale location and thus moderate prices. 

She added that the disparity in resale prices is not an unfair one since Plus flat owners receive more subsidies for the added restrictions they have to abide by when getting the flats. 

“They already know they are committing to a longer minimum occupation period (but) are enjoying higher subsidies.

“Without the subsidies, they would have paid more for a Standard flat anyway.” 

WHAT WILL HAPPEN IN THE LONG RUN

Although these bumpy scenarios may play out at the start, the experts said that these teething issues will even out in the long run.

They believe that this new classification system would have had to be introduced sooner rather than later. 

Dr Leong said that the potential uneven resale prices are but “short-term operational disparities”. 

In the longer run, about 30 to 50 years from now, the disparities will be “less of a concern” as more Plus flats hit the resale market and crowd out the Standard flats in attractive areas. 

“The transition from the mature and non-mature classification to a proximity-based classification is the longer-term objective,” he added. 

Agreeing, Ms Sun said that the move had to be made with the longer-term housing projects in mind, where future projects such those on land occupied by the Paya Lebar Air Base and the Singapore Turf Club, and a proposed “Long Island” along East Coast will be attractive but be increasingly harder to classify as mature or non-mature. 

“There are so many new plots that are coming up, and some are so big that they will straddle different districts and planning areas, so they have to look into this new categorisation,” she added.