HDB Prime Location Housing (PLH) Model: Additional Subsidies, 10-Year MOP and More

The Government announced a new HDB Prime Location Housing model (PLH) and it is the talk of the town.

The HDB market is hotter than ever – prices are at record highs, with many buyers willing to pay above market value (Cash Over Valuation or CoV) for resale flats. The year is not yet over and 2021 has already seen more million-dollar HDB flat transactions than ever, which is really saying something.

The “lottery effect” of certain prime HDB flats have been a key point of discussion in recent years. In short, this happens when one is lucky enough to secure a new flat in a very prime location and manages to sell it for a sizeable profit after. A famous example is the Pinnacle @ Duxton.

This is problematic for a few reasons: firstly, public housing should primarily be for owner-occupation, not for investment. It should be used to help Singaporeans afford a roof over their heads, not give us a windfall. Secondly, without intervention, gentrification may occur when only the wealthy can afford to buy homes and live in these expensive areas.

That’s where the new Prime Location Housing model (PLH), which will apply to the upcoming Rochor BTO launch in November 2021, comes in. Here’s everything you need to know about it, plus your burning questions answered below.

HDB Prime Location Housing (PLH) Model Summary

Here’s a quick summary:

Source: HDB

1. Additional Subsidies for PLH Flats, with Subsidy Recovery Upon Resale

Currently, BTO buyers enjoy subsidised prices and CPF Enhanced Housing Grants or EHG (if eligible). For the new PLH flats in prime areas, prices will be further reduced with additional subsidies from the Government. It is not announced how much the additional subsidies will be, but it will likely be fixed for each project (i.e., unlike the EHG, it will not consider your income).

This will ensure that the PLH flats remain affordable for BTO applicants. The catch is that if you do intend to resell your home after the Minimum Occupation Period (MOP), then you will need to pay it back. How much you will need to repay will be a percentage of the flat’s resale price then.

2. MOP Extended to 10 Years

For PLH flats, the MOP is doubled to 10 years and will apply to both new flat and resale flat buyers.

10 years is really quite a long time, especially for new flat buyers – say you’ve successfully applied for a PLH BTO flat in November 2021 and the project takes four years to build, you can only sell the flat 14 years later.

This is intentional and meant to “strengthen the owner-occupation intent”. Buyers will be discouraged from buying these prime flats with speculative intent to ‘flip’ them shortly after.

3. Reduction of Married Child Priority Scheme (MCPS)

Currently, the Married Child Priority Scheme (MCPS) allocates up to 30% of BTO units for first-timer families, and 15% for second-timer families.  For PLH projects, HDB will review and adjust the quota depending on the location.

For example, the MCPS flats allocated may be kept more or less the same if there are many older HDB flats nearby. However, if the PLH project is surrounded by private properties, then the quota may be lowered to give others more opportunities to buy flats there.

4. Resale Buyers Subject to BTO Eligibility Criteria

This one’s big news: for PLH flats, the BTO criteria will apply even for resale buyers. This means that 10+ years down the road, if you are interested to buy a resale unit that was previously launched as a BTO under the PLH model, you must fulfil the BTO eligibility criteria.

This includes conditions around citizenship, family nucleus, income ceiling and private property ownership. In a nutshell:

A big change is that PLH resale flats are for primarily Singaporeans only. Also, singles are not eligible for now. The prevailing BTO income ceiling will apply (whatever it is 10+ years down the road). The rules around private property ownership are also tightened – while the disposal period for typical resale flats is only six months of purchase, for PLH flats it is in the past 30 months.

This seems one of the tighter conditions, and the Government said that they will wait until around half of the 99-year lease before considering a review.

5. Renting of Whole Flat Not Allowed

Finally, to further discourage investors, renting of the whole unit will not be allowed for PLH – even after you’ve completed the long MOP. You may rent out rooms as usual, but not the entire apartment.

HDB Prime Location Housing (PLH) Model: Yea or Nay?

As you can see, the main focus of the new PLH model is to reduce speculative activity and encourage inclusiveness. There is a strong social objective to ensure that these ‘atas’ areas don’t become wealthy enclaves.

So, since we can all agree that public housing should be kept affordable and accessible to all, the new PLH by and large makes sense.

The 10-year MOP will weed out those who just want to ‘flip’ the property for profit, and in case there are some who are willing to wait it out, there is the subsidy recovery to dampen the windfall.

Furthermore, the tightened rules disallowing rental of the whole unit will also stop people from treating HDB properties as pure investments. With this, owners will no longer be able to buy the prime BTO and then upgrade and move out to a private property, while keeping the HDB flat for rental income. They can buy a private property as an investment (after MOP), but must continue to stay in the HDB flat.

The only thing that may be tricky is the strict eligibility criteria for the resale of these flats. This heavily penalises many groups of buyers in the HDB resale market – e.g., PRs, singles, and those earning just slightly above the income ceiling.

Should You Still Buy a Prime HDB Flat under the PLH Model?

That’s up to you, but we say – if you’re eligible and intending to live there for the long-term, go for it! In terms of accessibility and convenience, these are the best HDB flats you can hope for. The additional subsidies to keep BTO prices down are a plus.

One thing to take note of is that depending on the land size, these projects may comprise mostly smaller units. For those who foresee having children or more family members, the 10-year MOP is a long time and should be considered when you’re making plans.

If you had your eye on prime-area HDB flats for the profits, then you can probably give it up. The PLH was designed to manage this intent, and most of the ground (if not all) is covered.

More FAQs on the HDB PLH Model

At this point, you probably have many questions. Let’s cover them:

1. Are the PLH BTO Eligibility Different from Typical BTOs?

No, in terms of eligibility, the same BTO rules apply. It is only the pricing (due to additional subsidy), longer MOP (10 years) and reduction in MCPS quota that’s affected.

2. Will the PLH Rules Apply to My Current Prime HDB Flat?

No. The PLH model will not apply retrospectively and will only be for new prime HDB flats launched from November 2021 onwards, starting with the Rochor BTO project. If you previously secured a prime HDB flat in say, an area like Queenstown, this will not apply to you – hurray!

3. How Will the Government Choose Which BTO Projects are “Prime”?

Prime projects include those around the city centre and surrounding areas, like the Greater Southern Waterfront.

The main selection criteria will be location, not price, so other “huat” areas like Bishan, for example, will not be part of this PLH model.

4. Can Second-timers Apply for PLH BTO Flats?

Yes, they can! There is no change to this BTO rule.

5. Does the HDB Resale Levy Apply to PLH Resale Flats?

Yes. If you are the first owner of the PLH flat and you resell the flat after your MOP, you must pay back the additional subsidy recovery as well as the resale levy (assuming you’re buying another subsidised HDB flat or EC).

6. Will This Affect SERS Projects Nearby?

Typically, when the Government buys back a project, they will offer a compensation or similar flat nearby, so there is a possibility that the many old flats in the central area may be affected. No official news has been released yet, so we don’t know what the new rules will be.

7. Isn’t the Subsidy Recovery Similar to Capital Gains Tax?

Yes, you can say that there are similarities, but it is not entirely the same. Capital gains tax would be levied on profits. The additional subsidy clawback will apply regardless of how much profit you’ve earned, if any at all.

8. How Will the PLH Affect Resale Flat Prices in General?

Since this is the first policy of its kind, it’s hard to say. There are many forces at play, and it is hard to predict exactly how the market will respond. It is possible that flats in the immediate vicinity of PLH projects, or those in other relatively good city fringe areas will see an uplift in demand.

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This article was written by Eugenia Liew, Content Marketing Manager, PropertyGuru Singapore. Eugenia has gone through the BTO rite of passage and continues navigating the property market, hoping to one day own a private property with a yard for her dogs to play in. Share your thoughts on this article or tell her more about what you want to read at eugenialiew@propertyguru.com.sg.