facebookHDB Plus Flats: New Housing Classification And How It Affects You

HDB Plus Flats: New Housing Classification And How It Affects You

profileHui Juan Neo

Unless you live under a rock, you would’ve read or heard about the latest classification framework of Singapore’s public housing.

On 20 August, Singapore’s Prime Minister Lee Hsien Loong announced at the National Day Rally that housing estates will no longer be classified into Mature and Non-mature estates by the Housing Development Board (HDB).

Instead, the governing body will adopt a new flat classification model – Standard, Plus, and Plus – to differentiate HDB flats in Singapore.

What’s the impact of this overhaul on Singaporeans?

Let’s find out!


TL;DR: HDB Plus Flats, How Would This Affect The Housing Landscape in Singapore?

HDB will replace the current Mature vs. Non-mature estate classification of HDB flats with a Standard-Plus-Prime flat category model.

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HDB Mature And Non-mature Estate Classification

Let’s delve into some historical context…

In 1992, the Housing Development Board (HDB) established a straightforward method for classifying HDB estates into mature and non-mature categories.

This classification aimed to prioritise first-time buyers and individuals who had faced unsuccessful flat application outcomes, particularly in the non-mature estates.

The classification process was based on the availability of land for development. Mature estates are areas with high demand but limited land space for further development.

In contrast, non-mature estates referred to locations where a more incredible expanse of land was accessible for public housing development.

Are You Living in a Mature or Non-Mature Estate?

Among the 27 HDB estates and towns, 15 were designated as mature, while the remaining 12 were categorised as non-mature.

Now, let’s take a closer look at how you can determine whether you reside in a mature or non-mature estate:

Mature EstateNon-mature Estate
Ang Mo Kio, Bedok, Bishan, Bukit Merah, Bukit Timah, Central Area, Clementi, Geylang, Kallang/Whampoa, Marine Parade, Pasir Ris, Queenstown, Serangoon, Tampines and Toa PayohBukit Batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sembawang, Sengkang, Tengah, Woodlands and Yishun

How Has This Classification Worked Over The Years?

Source: Giphy

More than 10 priority schemes apply to the balloting of BTO flats. For instance, first-timer families now have 95 per cent of new flats reserved for them.

HDB prioritises first-time applicants over those who have applied before and prefers married couples over singles, among other criteria.

This is achieved by categorising new flats into mature and non-mature areas and adjusting the weighting of application success chances differently.

It’s also worth noting that HDB consistently recommends selecting non-mature areas as it enhances the likelihood of securing a flat.

How The Balloting System Changed Overtime

In Budget 2023, Deputy Prime Minister and Finance Minister Mr Lawrence Wong announced an added ballot chance for first-timer families in non-mature estates if their initial two applications (also in non-mature estates) were unsuccessful.

However, this does not apply to applicants with unsuccessful Build-to-Order (BTO) applications in mature estates.

Singles seeking BTO flats are exclusively eligible for two-room homes in non-mature estates.

What About The Prime Location Housing Model?

In Nov 2021, the government announced the launch of the Prime Location Public Housing (PLH) model for public housing in prime locations to remain affordable, accessible and inclusive for all Singaporeans.

Only four neighbourhoods are considered Prime under the PLH model: Central Area, Queenstown, Kallang/Whampoa, and Bukit Merah. HDB has launched 12 BTO projects under the PLH model to date.

This strategy was to reduce the infamous “BTO lottery effect” of balloting for a home perceived to sell high.

That said, here’s a deep dive into what the PLH model is about:

Are the Mature and Non-mature Classification Still Relevant?

Housing demand has piled up during the COVID-19 pandemic, partly due to delayed construction of BTO flats.

And we know that housing prices have remained high, including rental.

While mature estates are often perceived as having more established amenities and transport networks than non-mature estates, property prices in these places are always higher, often within the $600,000 – $800,000 range.

However, this distinction has blurred over the years as more and more HDB flats in non-mature estates are increasingly sold at the $1 million mark.

Source: The Straits Times

The valuation of an HDB flat no longer hinges on whether it’s in a mature or non-mature estate.

Instead, key considerations are on facilities, food establishments, connectivity and accessibility of the area chosen.

And we know what’s in everyone’s mind – the sizes of flats.

With all these in mind, it may be the opportune moment for a shift, considering that the valuation of HDB flats extends beyond a simple differentiation between mature and non-mature estates.

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Standard, Plus & Prime HDB Flats

You will see projects classified as Standard, Plus and Prime flats from H2 2024.

This change will not affect existing homeowners or those who have already booked their flats.

Here’s a summary of the three types of flats from H2 2024, regardless of whether they are BTO or resale.

HDB Flat Classification From H2 2024 Standard Plus (NEW) Prime
Locations Islandwide Choicer locations (e.g. near MRT, near the City Centre) Choicest and most central locations (e.g. City centre)
Subsidies Standard More subsidies on top of standard subsidies Most subsidies on top of standard subsidies
Minimum Occupation Period (MOP) 5 years 10 years 10 years
Wait Out Period For Private Property Owners 30 months 30 months
Subsidy Recover Yes (lower than Prime) 6% subsidy recovery of the resale price or valuation (whichever is higher)
Investment in private property After MOP
Renting out the whole flat Allowed after MOP Not allowed Not allowed
Renting out spare rooms Allowed

We can also expect flats in these areas to be classified as follows:

Source: Channel NewsAsia

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How Will This Classification Affect Housing in the Years to Come in Short, Medium & Long-term

Although these efforts aimed to make things ‘fairer’ for Singaporeans who did not manage to ballot for a house in a choice or choicer location, the effectiveness of this change cannot be measured until 10 years later when Plus flats reached their MOP.

Still, there are a few scenarios that may pan out.

Resale Demand of Existing Flats in Plus Areas May Increase

Given that the restrictions will only be put in place starting in H2 2024, it’s possible that this can create a demand for existing flats in the “Plus” areas in the immediate term.

Longer MOPs could mean a greater demand for BTO Standard flats or more interest in sure resale flats due to their attractive locations and a reduction of resale flats in Plus areas due to longer MOP.

Both of which might drive up prices.

The counter-argument here is that compared to a standard 5-year MOP, a 10-year MOP could reduce the resale demand and limit capital appreciation of these flats. If demand is maintained, these restrictions may slow down future price appreciation of the apartments, which is a desired outcome.

Resale Prices Might Be More Robust

Prime Minister Lee said these HDB flats will be built within or near existing estates. We can imagine having many Plus flats near Standard flats for this reason.

When the policy comes into play, there might be price disparity due to the difference in classification, whereby Plus flats and the different resale restrictions are different.

Then again, it’s also possible that owners of Plus flats may pass the burden of the clawback to subsequent buyers.

Plus, Flats Owners May Take Longer to Climb The Housing Ladder

Time is of the essence as we talk about climbing the housing ladder.

We mentioned earlier that a longer MOP may limit the capital appreciation of flats, and in turn, these flat owners will have to wait about 15 years (5 years waiting time + 10-year MOP). This may restrict couples with higher incomes as they will take longer to upgrade to private property, thereby restricting future planning and the possibility of shrinking the pool of upgraders in the private market.

How About The Rental Market?

Even if you get a private property, you can’t rent the whole unit out, even after MOP, for both Plus and Prime flats.

Similarly, we might see Plus flats fetching a higher rental price than Standard flats due to their more desirable locations. This would restrict homeowners’ options in renting out to fund your upgrading.

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Still, Benefit Married Couples And Singles Overall

The change may be off-putting for some, but in times of housing needs, it will provide more options for Singaporeans, particularly Singles.

Currently, Singles can only apply for a two-room flexi BTO flat in the non-mature estate. In the resale market, they can also not purchase a Prime flat.

With the change in the housing model, singles can now:

  • Apply for a two-room flexi BTO flat in any locations
  • Buy a 2-room Prime resale flat
  • Buy a Standard or Plus resale flat of any size, except 3Gen flat

On a similar note, first-timer parents and married couples will also get first priority for all Standard flats islandwide as the new model gives them more options under priority schemes.

They no longer have to choose four-room or smaller flats in non-mature estates to stand a chance.


Afterthoughts

This new model clearly shows that HDB has finally decided to deter those using the housing system to reap windfall gains solely rather than for their genuine housing needs.

It’s also clear that with more subsidies on Plus flats, the aim is to keep choice flats affordable.

But in return for that, one would need to commit longer and manage his expectations of climbing the housing ladder.

What are your thoughts on this? Share with us in the community!

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About Hui Juan Neo
A savvy shopper and foodie at heart, I'm always on a lookout for discounts and deals to snag the best bargains.
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