Introduction
The Singapore government releases more details about the new classification for HDB flats
that will replace the existing classification of mature and non-mature estates from this October onwards. The new BTO flats will be classified as Standard, Plus and Prime flats. The new classification will apply to the October BTO exercise when about 8,570 new flats will be launched, possibly in mid-October.
Plus and Prime flats: More similarities than differences in sales and resale conditions There are more similarities than differences in the sales and resale conditions of Plus and Prime flats. Most of the sales and resale conditions of these two types of flats, such as the Minimum Occupation Period (MOP) and the restrictions against renting out the entire flat after MOP, are similar.
Two main differences in the sales conditions of Plus and Prime flats are first, the subsidy
recovery rate of Prime flats will be higher than that of Plus flats. Second, the income ceiling of singles buying resale Plus flats is $14,000, while the income ceiling of singles buying Prime resale flats is only $7,000.
Result of similarities in sales conditions of Plus and Prime flats
From the homebuyer’s perspective, there are basically only two main groups of BTO flats from this month onwards. They can place Plus and Prime flats together as one classification of flats, and Standard flats as the second classification.
If the homebuyer wants to apply for a BTO flat in a town with only Plus and Prime flats, such as Kallang/Whampoa in the October BTO exercise, the key determinants of which project to select will be the price of the flats and locational attributes of each project in that town.
In the upcoming BTO exercise, there will be three projects in Kallang/Whampoa. Two of them will be Plus flats and the remaining one, Crawford Heights, will be Prime flats.
Effect on resale prices of Plus and Prime flats
When the Plus and Prime flats are eventually sold on the resale market in the future, the prices of Prime flats are expected to be higher than that of Plus flats mainly because the location of Prime flats are more attractive than that of Plus flats.
A second reason could be that as the subsidy recovery rate of Prime flats is higher, the sellers of Prime flats will ask for higher resale prices to cover the higher subsidy recovery sum that they would have to pay back to the government.
Table 2: Criteria and conditions of buying resale Plus and Prime flats
Source: HDB. Compiled by Mogul.sg Research
However, changes in homebuyers’ preferences and urban redevelopment between the time that the HDB flat owners bought the flats from the government and the time that they sell the flats on the resale market would affect the differences in the prices of the Prime, Plus and Standard flats.
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