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Discussion – 


Discussion – 


Do the new Prime Location Housing (PLH) model flats help with property equality?

new launch vs resale singapore

What is Prime Location Housing (PLH)?

Property ownership is one of the factors that contributes to the wealth gap in Singapore. If previous generations in your family invested in property – such as in the 1960s when Singapore real estate was cheap – there would be several million-dollar assets in your household today. At the same time, new home buyers are confronted with rising costs; and central area flats are a pipe dream to those who aspire to climb the property ladder. The new PLH model flats addresses these issues, to some extent:

The Prime Location Housing (PLH) model applies to flats in certain areas of Singapore. At present, these are flats in the central area, as well as some areas that will benefit from the upcoming Greater Southern Waterfront (GSW).

PLH flats clearly have a superior location to most other flats: they are closer to the CBD and Orchard, they may command better views along the GSW, and they would – if they were normal flats – almost certainly guarantee a windfall.

Simply put, PLH flats have an unfair advantage over regular flats in, say, Sengkang or Yishun. If they were subject to normal HDB rules, they would most definitely end up being million-dollar flats, to rival Pinnacle @ Duxton, Queenstown, Bishan, etc.

This made it difficult for HDB to launch new flats in such locations. Anyone balloting for the flat, and getting one, would be securing a winning “lottery ticket”. This could exacerbate the wealth divide.

Furthermore, there is a risk of “entrenching the rich”. This is because even BTO flats, when built in prime areas, would reach sky high prices. For example, the first batch of PLH flats (River Peaks I & II in November 2021) has 4-room flats that start from $537,000, after subsidies. The 3-room flats start from $349,000.

As a point of comparison, most 4-room flats in Singapore are $340,000, before subsidies.

This risks a situation where only richer Singaporeans could afford prime flats, which in turn, will make them even richer.

The PLH model adds restrictions, to mitigate this effect

Some of the main highlights include:

  • 10-year MOP
  • No rental of full units
  • Subsidy Recovery for first batch of buyers
  • Income ceiling applies even for resale
  • Tighter eligibility, fewer units for MCPS

1. 10-year MOP

The Minimum Occupancy Period (MOP) is how long you must reside in the flat before you can sell it in the open market. For regular flats, this is five years; but for PLH flats, it’s 10 years.

Note that the MOP applies to both the initial as well as subsequent buyers. It is especially tough on the first batch of buyers, as the MOP only starts from key collection. So if you wait 4 years for the flat to be completed, you will have to wait 10 more years after that (total of 14 years) before you can sell.

The long MOP will definitely dissuade investors, such as those buying for asset progression. In general, the longer you wait, the greater the risk that you could be priced out of the private property market (as private property prices tend to rise faster than flat prices, over the long term).

2. No rental of full units

For regular flats, you can rent out the full unit after the MOP. However, PLH model flats can never be rented out; not even after the 10-year MOP. You can still rent out rooms though, just not the entire flat.

Pure home owners don’t really care about this (most home owners never rent out their flat anyway); but it is unattractive to those who want rental income; such as those who intend to eventually move in with parents and rent out their flat.

3. Subsidy Recovery for first batch of buyers

As you can see from the prices I mentioned above, the subsidy for PLH flats has to be quite high; otherwise most Singaporeans will be priced out.

For the first batch of buyers, they must pay back a Subsidiy Recovery (SR) upon resale. For the pilot batch of PLH flats at Rochor, the SR is 6 per cent of the sale proceeds. For subsequent PLH flats, the SR will vary based on the project.

4. Income ceiling applies even for resale

There is an income ceiling of $14,000 for HDB flats. For regular flats, this only applies to BTO and not resale units. For PLH flats, however, the income ceiling applies even to resale buyers.

This “locks out” a portion of high-income earners, from ever owning one of these flats.

5. Tighter eligibility, fewer units for MCPS

For PLH flats, at least one owner must be a Singapore Citizen. It’s not possible for pure Permanent Resident (PR) families to own these units. In addition, singles cannot purchase PLH flats.

I also notice that fewer units are set aside for the Married Child Priority Scheme (MCPS). This is a scheme that sets aside a portion of units, for parents and married children living within four kilometres of each other. I will explain more on why this may help below.

Do these restrictions “level the playing field”?

HDB flat rebound

The best answer is “No, but it is a good start”.

Wealth inequality can indeed stem from property ownership – and those who own better located flats, inherit condos, etc. have a real head start in life. Having a small group of flats, with tighter restrictions, is not going to change the situation overnight. However, it’s a clear sign that HDB is taking steps to prevent the wealth gap from becoming too huge.

It’s a fact that, were it not for PLH restrictions, anyone who ballots and obtains a prime area flat will have the proverbial “overflowing rice bin” when they sell.

It’s also commendable that, in the initial launch, HDB set aside some 2-room rental flats. This helps to ensure there’s a mix of different socio-economic classes, and that prime estates don’t just become entrenched communities of wealthier Singaporeans.

However, there are some areas where the PLH restrictions could be taken further:

First, the MCPS for PLH flats might still be quite unfair

The MCPS has a four-kilometre range, and covers both public and private properties. Given that PLH zones are very close to town, this could mean giving priority to someone whose parents have a Core Central Region (CCR) condo, or even a landed property.

While the MCPS quota is reduced, it seems odd to me that we would still give priority, to children whose parents might be living in Singapore’s most expensive properties.

Perhaps the income ceiling restrictions will rein this in a bit; and some might argue that children of the very wealthy won’t buy HDB flats (even prime ones). Nonetheless, it would be a greater equaliser if we could somehow exclude those whose parents already own high-end properties. I’m sure most Singaporeans will feel it’s unfair, if someone whose parents live in a Nassim Road bungalow also end up with priority for a top-end flat.

Second, there are still non-PLH areas where getting a flat is a windfall

Some key areas, such as Bishan, are still a windfall for anyone who secured a flat there. These are not under the PLH scheme; and in fact, it’s foreseeable that these areas are going to see higher demand. This is because they have as much convenience and demand as PLH flats, but don’t have drawbacks like the 10-year MOP.

Nonetheless, it’s still early years – and I wouldn’t be surprised to see that, over time, more PLH areas crop up. It would be interesting to see if some day, any high demand area – even if it’s not within the Core Central Region – might fall under the PLH model.

In the meantime, I think the PLH model has, in a very targeted way, eliminated the some of the unfairness of landing a central area BTO flat. It can be seen as one part of an overall solution, to narrowing the wealth gap. However, time will tell if the new restrictions are tight enough, that property values don’t rise inordinately for the owners of these flats.

As the PLH model is unprecedented, we don’t yet understand how it will impact future demand or pricing.

For more on this topic, or issues regarding private or HDB owernship, feel free to reach out to me directly. You can also follow me on RonChongProperty.sg, to get updates and insights on the Singapore private property market.




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