Thursday, 16 January 2025
Written by Nicholas Mak
Summary
Few BTO flats in 2026 & 2027 Could Accelerate HDB Resale Price Growth
(1) The government plans to launch 19,600 new BTO flats this year, which is close to the 19,637 BTO flats launched in 2024. However, the number of newly MOP flats in 2025 is lower than that in 2024. Hence, the combined supply of BTO flats and newly MOP flats in 2025 will be lower than that in 2024, which could result in a higher growth of HDB resale prices assuming demand remains at about the same level.
(2) Based on the Singapore population demographics, the annual average demand from first-time buyers of HDB flats is about 19,000 flats. A average of about 13,800 to 15,200 flats are planned to be release annually in 2026 and 2027, which could be insufficient to meet the housing demand from HDB flat buyers.
(3) This could result in the HDB resale prices expanding by double-digit percent annually from 2025 to 2027.
Introduction
The Singapore government announced today that it plans to release 19,600 Build-To-Order (BTO) flats and more than 5,500 Sale of Balance Flats (SBF) in 2025. It also announced that it would adjust part of the BTO application process.
Fewer MOP flats could lead to faster HDB resale price growth
The HDB launched 19,637 BTO flats in 2024. In addition, about 13,000 to 14,000 HDB flats reached the end of the Minimum Occupation Period (MOP) in 2024 and are eligible to be sold in the resale market. Due to strong housing demand, the HDB resale prices increased by 9.6% in 2024, based on the latest HDB flash estimates. By comparison, the private housing price index only increased by 3.9% in 2024, less than half of the growth rate of HDB resale flat prices.
The government plans to release 19,600 new BTO flats in 2025, which is very close to the 19,637 BTO flats launched in 2024. However, the number of newly MOP flats in 2025 at about 8,000 to 9,000 flats is fewer than that in 2024. Hence, the combined supply of BTO flats and MOP flats in 2025 will be lower than those in 2024, which could result in upward pressure on the HDB resale prices.
Housing demand from young families
In the past 10 years, the average annual first-time marriages in Singapore is about 21,000. A large majority of the eligible young couples could only afford to buy public housing flats as their first homes. Assuming about 90% of the newly married couples were to buy HDB flats as their first homes, the average annual demand from first-time buyers of HDB flats is about 19,000 flats.
Lower supply of BTO flats planned for 2026 and 2027
The government said today that it plans to release a total of about 130,000 flats from 2021 to 2027. With the planned 19,600 BTO flats to be launched in 2025, the government would have launched a total of 102,300 BTO flats in the 5-year period from 2021 to 2025.
This would mean that about 27,700 BTO flats are planned to be release for 2026 and 2027, amounting to an average of 13,850 flats annually, which could be insufficient to meet the housing demand from HDB flat buyers.
In the same government statement dated 16 January 2025, it also stated that the HDB will release “more than 50,000” BTO flats in the 3 years from 2025 to 2027. With the planned 19,600 BTO flats to be launched in 2025, the government would be left with about 30,400 flats to be launched in 2026 and 2027, leading to an annual average of 15,200 new flats for the two years.
In other words, the government could release an average of between 13,850 and 15,200 new flats annually in 2026 and 2027.
Even with the supply of 19,600 BTO flats in 2024, the HDB resale price index increased by 9.6% year-on-year last year. If the government were to reduce the supply of BTO flats in the coming years, it would risk the possibility that the HDB resale prices could increase at the pace that is higher than 9% annually.
Improving efficiency in the BTO exercise
“From the Feb 2025 sales exercise onwards, HDB will shortlist applicants up to 200% of the total flat supply, instead of up to 300%. This change will improve system efficiency, enabling HDB to serve shortlisted applicants faster,” explained Minister Desmond Lee.
The HDB BTO queue number is given to BTO applicant by balloting. The HDB BTO applicants at the front of the queue, (in other words, those fortunate enough to get small queue numbers) would usually select the more desirable flats, such as those with better orientation and on higher floors.
We believe that BTO applicants will welcome this new change to the policy as it would free up those at the back of the queue (i.e. with very big queue numbers) to look for alternative housing options or to apply for the next BTO exercise.
This could encourage more eligible people to apply for BTO exercises without undue concern about the risk of being near the back of the queue and being penalised for rejecting the less desirable flats.
This adjustment of the regulation would also improve the efficiency matching supply of BTO flats with the demand from BTO applicants.
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