Introduction
To keep the prices of HDB BTO Plus and Prime flats in choice locations affordable, the government apply a larger market discount or subsidy to the price of the flats. To maintain parity or fairness with other BTO flat buyers, such as the buyers of Standard flats, who are not given the additional market discount or subsidies, the owners of the Plus and Prime flats will have to pay part of the resale price to the government if they sell the BTO flat in the resale market in the future.
The amount that the Plus and Prime flat owners would have to pay would depend on the subsidy recovery rate for the respective projects when they are launched.
PLH subsidy recovery rates over the years
Since the launch of the first Prime Location Public Housing (PLH) project in 2021 with the initial subsidy recovery rate of 6% of the future resale price or property valuation of the flat, (whichever is higher) the PLH subsidy recovery rates have gradually increased over the years.
Only the buyer of the BTO Plus or Prime flat would have to pay the subsidy recovery amount. The subsequent buyers of the Plus or Prime resale flat would not have to pay the subsidy recovery amount.
The PLH subsidy recovery rates of the three PLH projects launched in 2024 before the current October BTO launch, were 8% to 9%. In the February and June BTO exercises launched this year, the PLH subsidy recovery rates were 8% and 9% respectively.
In the current October 2024 BTO exercise, the subsidy recovery rates for Plus flats are 6% to 8%, while the rate for Prime flats is 9%. These rates are largely in line with the 8% to 9% recovery rates for the two earlier PLH projects launched this year.
HDB Housing Model | BTO Project | Subsidy Recovery Percentage |
| Central Trio @ AMK | 6% |
| Kembangan Wave |
|
| Bayshore Vista | 7% |
Plus | Bayshore Palms |
|
| Merpati Alcove |
|
| Kallang View | 8% |
| Towner Breeze |
|
Prime | Crawford Heights | 9% |
Source: HDB
Our assessment of the subsidy recovery rates
First, the increase in the subsidy recovery rates over the past three years could indicate that the initial 6% subsidy recovery rate was on the low side of the range and warrants an increase.
Table 1: Summary of annual supply of PLH flats & subsidy recovery rates
Year of BTO launch | No. of PLH projects | No. of PLH flats | Subsidy recovery rate |
2021 | 1 | 960 | 6% |
2022 | 8 | 7,383 | 6% |
2023 | 7 | 6,485 | 6% & 8% |
2024 | 3 | 2,656 | 8% to 9% |
Source: Mogul.sg Research, HDB
Second, as HDB resale prices in prime or popular locations increased over the past three years, the government needed to increase the market discount for BTO flats in those locations to keep prices affordable. As a result, there was a need to increase the subsidy recovery rates.
Going forward, the prices of HDB resale flats is expected to face continuous upwards pressure. In addition, the rising cost of land and construction would also increase the cost of developing new HDB flats. Therefore, if the government wants to keep the prices of BTO flats affordable in the future, it will have to apply an even larger discount on BTO flat prices.
As a result, to maintain parity or fairness with other BTO flat buyers who are not accorded the additional market discount or subsidies, the government would have to raise the subsidy recovery rates payable by Plus and Prime flat owners in the future.
Lottery effect of Plus and Prime flats
The lottery effect refers to the situation where the BTO flat buyer who is fortunate to acquire a BTO flat in a popular project at a subsidized price from the government, subsequently sells his BTO flat in the resale market after the Minimum Occupation Period (MOP) and earns a substantial capital gain.
The subsidy recovery rate alone could not reduce the lottery effect. This is because the BTO flat owner could raise his asking price to mitigate the amount that he has not pay back to the government after selling his flat.
However, when bundled together with other restrictions and requirements such as a 10-year MOP, income ceiling eligibility for Plus and Prime resale flat buyers, prohibition from renting out the entire flat, the restrictions would contribute to reduce the overall lottery effect.
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