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Analysis: BTO applications set to fall 'significantly' under new rules favouring genuine applicants, but some homebuyers are concerned

SINGAPORE — Property analysts expect a significant drop in Build-to-Order (BTO) applications when new rules kick in from August that are designed to bring down the rate of buyers rejecting BTO flats offered to them.

Analysts expect a drop-off in BTO applications when new rules kick in in August 2023 designed to  reduce the rejection rate by those offered flats.

Analysts expect a drop-off in BTO applications when new rules kick in in August 2023 designed to reduce the rejection rate by those offered flats.

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  • Property analysts said the tightening of rules for first-timers failing to book flats offered to them will cut down the number of applicants for the August BTO exercise
  • This will give buyers with genuine needs a higher chance of securing a flat, while those who are just trying to secure a spot early are likely to drop out
  • Some prospective homeowners said that they had mixed feelings about the changes
  • One camp agreed that the changes will benefit those with genuine housing needs
  • Another camp said that the rules will force people to choose a less-than-ideal flat to prevent getting penalised

SINGAPORE — Property analysts expect a significant drop in Build-to-Order (BTO) applications when new rules kick in from August that are designed to bring down the rate of buyers rejecting BTO flats offered to them.

The changes are likely to cause first-time buyers of public housing units to be more cautious and take time to mull over their options or risk losing a chance to secure a flat under the new rules, the analysts told TODAY on Thursday (March 2).

The number of BTO applications could fall as much as 20 per cent in August, giving genuine buyers with urgent housing needs a better chance of success, the analysts said.

The authorities announced on Thursday that starting from the August BTO exercise, first-time applicants who turn down an offer from the Housing and Development Board (HDB) to book a flat will be considered second-time applicants for a year, thereby reducing their ballot chances from two to one.

Under current rules, first-time applicants face such a restriction if they reject HDB's offer twice.

However, the changes have raised other concerns for at least one prospective buyer who told TODAY that the new rules would make her feel pressured to choose a less-than-ideal flat type rather than turning it down if it is offered to her.

Ms Nurul Hanan Zailani, a 24-year-old manager, said: “If I don’t select a flat, it will affect my chances of getting a home next time.” 

Under the revised rules, HDB will waive the reduced ballot count for certain applicants if there are limited flats left to choose from, or if a particular applicant is facing extenuating life circumstances.

The move came after National Development Minister Desmond Lee said last month that the Government is looking to reduce the high rejection rate for BTO flat applications so that new flats are prioritised for those with “genuine and urgent housing needs”.

HDB said last June that over the past few years, about 40 per cent of applicants who were invited to book a BTO flat ended up declining the offer.

Aside from announcing the new penalty for non-acceptance, the authorities also announced the introduction of a new priority category of first-timer applicants who are families with children, as well as married couples aged 40 and below.

HIGHER CHANCES FOR GENUINE BUYERS

Commenting on the changes, Mr Lee Sze Teck, senior director for research at real estate firm Huttons Asia, estimated that the number of applicants for the upcoming August BTO exercise may fall by as much as 20 per cent.

Two other property analysts broadly agreed with Mr Lee’s prognosis, but they were unable to give specific estimates.

From August, the number of BTO applications may temporarily decrease because only the more serious BTO flat buyers will apply.
Mr Nicholas Mak, head of research and consultancy at ERA Realty Network

Mr Nicholas Mak, head of research and consultancy at ERA Realty Network, said that he expects more applications for the BTO exercises in February and May before the new rules come into effect.

“From August, the number of BTO applications may temporarily decrease because only the more serious BTO flat buyers will apply,” he added.

Ms Christine Sun, senior vice-president of research and analytics at real estate agency OrangeTee & Tie, also expects the chances of getting a flat to be higher for genuine applicants when the rules come into effect.

She reasoned that many buyers who do not have urgent housing needs will likely hold back their applications until they are ready for marriage or when they have carefully weighed the housing options.

“Buyers will be more selective and take time to select and apply for the most suitable projects since they may risk not securing a unit on the second attempt,” she said.

Of the applicants who may drop out, Ms Sun said that they are likely to include those who have applied many times because they were targeting popular mature estates or certain flat types, which are deemed to yield better investment returns.

Others, she said, could be undergraduates or courting couples who may not be ready to get married, but have applied to secure flats earlier.

On why applicants may not book a flat, despite having the option to do so, Mr Lee from Huttons Asia said that it could be due to choice units not being available, limited units left or an applicant's sudden change in employment status.

“Since they intend to live in the flat for many years, they would want to choose the best unit in their view. To those with a genuine reason, they will feel aggrieved at this change,” he added.

In terms of the impact the penalty for non-acceptance of offers will have on the property market, both Ms Sun and PropertyGuru’s country manager, Dr Tan Tee Khoon, said that it could lead to more demand or viewings for flats in the resale HDB market.

On the new first-timer (parents and married couples) category, the analysts were generally of the view that it will increase the probability that this group of buyers will be given the chance to select their BTO flats.

MIXED REACTIONS

Prospective buyers who spoke to TODAY had mixed views about the announcements.

Mr Kailer Gan, a 27-year-old systems engineer, said that the new rules would be a good deterrence against the “kiasu” (fear of losing out) attitudes some applicants have towards booking, whereby the applicants ballot for BTO flats without first considering the costs or accounting for a limited selection.

Mr Gan, who has applied for a flat in the current BTO exercise with his partner, was also satisfied knowing that the rules would likely increase the rate of flat issuance to those who need them, while ensuring that those who have undergone a change in life circumstances are not wrongfully penalised.

“Getting a house is no simple decision... The assumption of 'best-case scenario' — such as low price, high availability of flat selection — shouldn't be taken as a likely outcome,” he added.

“So a couple must consider if they can afford a flat, or can live in a non-ideal portion of the estate before balloting for it."

Ms Namirah Awang, a 27-year-old preschool teacher, said that the reasons given for the rule changes “make sense” and she will likely be taking more time to research an area where she is applying for a flat before making a decision.

However, Ms Nurual Hanan, the 24-year-old manager, said that she was “not satisfied” with the penalty for failing to book a flat that is offered.

She and her fiance had made a mistake when they applied for a flat at a BTO project in Bukit Batok, despite having done their research, and they had not accounted for how remote it would be in terms of transportation.

The new rules will not affect her this time round, but if she rejects an invitation to view a flat, she worries that it will not be the first time that she has made a mistake.

“I might not know if I will have to reject other flats if I don’t get the right kind of unit I want,” she said.

Related topics

HDB BTO Property

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