SINGAPORE: Prospective home buyer Alfred Lau plans to apply for a Build-to-Order (BTO) flat in the upcoming May 2018 sales exercise together with his girlfriend and hopes to get a flat near his parents in Hougang.
With the revised proximity condition announced by Finance Minister Heng Swee Keat in Monday’s Budget speech, Mr Lau and his girlfriend are now able to cast their net wider in search of a suitable place.
Previously, living “near” a married child or parent was defined as being in the same town, or within 2km. But this was revised to within 4km with effect from Monday afternoon (Feb 19).
This revised proximity condition also applies to the Married Child Priority Scheme and Senior Priority Scheme for new flats, with effect from HDB’s May 2018 BTO and Sale of Balance Flats (SBF) exercise.
“This opens up more choices for me,” said 28-year-old Mr Lau, who is looking for a three-room flat in Sengkang or Punggol. “Some parts of Sengkang don’t fall within a 2km radius, but now that it’s 4km, I can go almost as far as Serangoon North.”
WHO WILL BENEFIT MOST?
AdvertisementAdvertisementAnalysts and industry experts noted that those looking to buy in mature estates and new towns are likely to benefit most from the enhanced Proximity Housing Grant (PHG) and revised proximity condition.
“The grant would also especially be beneficial for those who have parents living in matured estates as the prices are usually higher in those areas and the grant would help to ease their costs,” said PropNex Realty’s key executive officer Lim Yong Hock.
Mature estates like Marine Parade and Serangoon are the most searched districts on the PropertyGuru portal, added PropertyGuru CEO Hari V Krishnan.
Co-founder of HugProperty, Mr Ku Swee Yong, pointed out that those looking to live in new or upcoming towns like Bidadari, Tampines North and Tengah could also benefit.
“Take Bidadari, for example,” he explained. “Keys will be handed out next year, the owners live there for five years, and then after that it becomes a resale flat. In Bidadari, there aren’t many HDB flats within 2km, and some of these other new towns are in areas that are quite isolated.
“So if you want more families to live closer to each other, the radius has to be expanded,” he explained.
Mr Ku added that generally, the enhancements to the PHG and revised proximity condition are the Government’s way of trying to address future challenges in the ageing population by helping families support each other.
“So when an elderly person has an emergency, he or she doesn’t immediately pick up the phone to call government services,” he said. “Your first line of support is your family, who lives nearby.”
OVERSUPPLY OF FLATS LEADING TO "MUSICAL CHAIRS" SITUATION
But is the enhanced grant enough to convince potential flat buyers that buying resale is a better choice than going the BTO route? For Mr Lau, the answer is no.
“The increase is only S$10,000 in my case, and that doesn’t offset the price difference between a resale and BTO too much,” he said, explaining that from his observations, a three-room BTO flat would cost about S$140,000, while a comparable resale flat could cost between S$260,000 to S$300,000.
“So before all the subsidies, it’s almost double,” he said. “Even with the S$10,000 it’s less than 10 per cent of the difference.”
Nonetheless, analysts believe there will still be more demand for resale homes in the future.
“With HDB resale prices remaining stable since 2015, the enhanced PHG will further increase the affordability for those looking at resale homes,” said PropertyGuru’s Mr Hari.
“With the supply of new housing in mature estates being limited, the enhanced PHG could lead to more demand for resale homes in these older districts, especially for younger families who need their parents’ support for childcare.”
Singles will benefit as well, Mr Hari added, explaining that those looking at BTOs are currently only able to buy two-room flexi flats. “These options are often located in suburban areas like Woodlands and Choa Chu Kang.
“Those looking to live closer to their elderly parents, especially if they are the primary caregiver, will find their affordability and options increase under these revisions.”
PropNex’s Mr Lim added that the enhancements would also ease the strong demand for BTO flats by singles. “In February’s BTO launch, the total application by singles was at 6.6, and this might be lower once resale flats become more attractive to them,” he said.
Overall, he noted that HDB resale volume for 2018 might possibly increase with close to 24,000 units in 2018, from the 22,077 units transacted in 2017. “We expect three-room resale flats to be in particularly strong demand,” he said.
But Mr Lim added that the private property segment will likely not be affected, as resale flats attract a “different profile of buyers”.
Indeed, HugProperty’s Mr Ku noted that while demand for resale flats may increase, “additional new demand” will not be created, as some of it will come from those who are looking at BTO flats.
He also pointed out that there may be a situation where there is an oversupply of flats.
Mr Ku referred to a recent HDB announcement which showed that about 11,000 families had benefited from the PHG since it was introduced in August 2015, and about S$211 million in grants disbursed under the scheme.
“The number may look big, but since 2015, the resale index has been steadily falling,” he said despite generous additional grants for resale flats.
“This means that frankly, we are in a situation where there is oversupply,” he explained. “We only have a certain number of families.
“It’s like a game of musical chairs ... you can just keep pushing people around, and if you have 10 participants in your game and 12 chairs, it’s perpetually oversupply.”
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