SINGAPORE, May 28 — The launch of new public housing projects under the Prime Location Housing Model (PLH) in Bukit Merah and Queenstown is unlikely to have a direct, near-term impact on resale prices in the vicinity, said analysts.
They added that while the longer Minimum Occupancy Period (MOP) imposed on these flats would delay a supply of fresh flats entering the resale market in the future, it does not mean resale flat sellers can set higher prices as this would turn away most buyers. The five analysts interviewed by TODAY further noted that even though the PLH flats is expected to be heavily oversubscribed, unsuccessful applicants would not jump into the resale market immediately — due to the latter’s higher prices, and also because of differing housing needs.
This view was echoed by some applicants to the two PHL developments whom TODAY spoke to.
The Housing and Development Board yesterday (May 27) launched the sale of more than 2,500 PLH Built-to-Order (BTO) units in Bukit Merah and Queenstown.
These, along with three other BTO projects in Jurong West, Yishun and Toa Payoh, will add about 4,600 new flats into the housing market. The PLH model was introduced last year to ensure all HDB flats, including those in prime and central locations, remain affordable and accessible over time.
The first two projects under the new model, located in the Rochor area, were launched in November last year and were more than 10 times oversubscribed.
Signalling of higher prices ahead?
A new flat under the PHL model is subjected to an MOP of 10 years, double that of the five-year period for a typical BTO. Owners of flats sold under this model are also restricted to selling them to buyers with an income ceiling of S$14,000 (RM44,675).
These conditions would effectively delay a supply of resale flats in mature estates by an additional five years, on top of limiting the pool of prospective buyers.
When asked if these would be factored in by a current resale flat seller when setting his asking price, Lee Sze Teck from Huttons Asia said: “Some existing flat owners might have this view that ‘My flat now is not subject to these restrictions, so I should be pricing it more than those which are (restricted by them)’”.
Nonetheless, the senior director for research at the real estate firm said that not many sellers would think in this manner as sellers are well aware that prices will be moderated by market forces.
Nicholas Mak, head of research and consultancy at ERA Realty Network, echoed this sentiment, adding that the resale market is generally a buyer’s market.
He said that the future supply of flats in the estate generally would not weigh on the decision of current buyers or sellers.
“Sellers usually want to let go of their property within months. So whether a BTO enters the resale market in five years or 10 years down the road, it will not matter,” he said. Similarly, he added, buyers of such flats tend to have a more urgent housing need too.
Prices of recently transacted flats in the vicinity would be the main determinant of resale unit asking prices.
Said Christine Sun, senior vice president of research and analytics at OrangeTee & Tie: “If a current resale flat in Bukit Merah is already selling at around S$750,000, a seller probably will not raise it to ask for S$900,000 just because the PLH model flats were announced.” Lee pointed to a five-room HDB flat at City Vue @ Henderson, located just opposite the Bukit Merah PLH site, which recently sold for a record S$1.4 million, and said that such sales would have a greater bearing on resale transactions than the development of a PLH project.
Different price and timeline considerations
The predominantly different profiles and priorities of a BTO unit applicant compared to a potential resale flat buyer would also prevent a direct spillover from the former market into the latter, the analysts noted.
One main consideration would be the price disparity between the two types of flats.
Mohan Sandrasegeran, a research and content analyst at real estate firm Ohmyhome, noted that there are already about 15 million-dollar deals in the Queenstown area and 12 in Bukit Merah within the first five months this year.
“Buyers of such flats are generally unfazed by the high prices and have ample liquidity, as they place heavy emphasis on locational attributes and in having a spacious home,” he said.
In contrast, prices of the newly launched four-room BTO flats at the same two estates, while more costly than at other locations, begin from S$466,000 and S$495,000 after subsidies.
A BTO flat applicant also generally has a less urgent need for a flat compared to a resale flat buyer, said analysts.
“If you are ready to wait five years, that means you're not in urgent need of a flat. Then why would you suddenly need to rush and buy a resale flat so quickly after an unsuccessful BTO application?” said Mak of ERA.
Analysts also pointed out that there will be two more BTO exercises this year in August and November, including flats in Queenstown and Bukit Merah.
“We suspect that the spill-over demand (if any) is not likely to be excessive to the extent that it results in substantial price increase of existing resale flats nearby,” said Ismail Gafoor, chief executive of PropNex Realty.
What applicants say
A 26-year-old communications professional who only wants to be known as Crystal, was among those who applied for the Bukit Merah project yesterday.
Speaking to TODAY, she said the project was the closest out of the five in this BTO exercise to her parent's home in the eastern part of Singapore.
“Bukit Merah is also a really good location, and compared to resale prices, the price of a BTO is still more affordable,” she said.
If her bid turns out to be unsuccessful, she would not rush into purchasing a resale flat in the area but will instead take time to consider other options, as both she and her boyfriend are “early in our careers”. Nigel Sim, an applicant of the Queenstown PLH project, said that he and his wife picked it due to its location.
“We have also shortlisted some resale flats that are about S$500,000 to S$600,000 in other locations, but those locations are not as convenient to go to work from compared to this,” said the 32-year old entrepreneur, who had unsuccessfully applied for three other BTO projects before this with his partner.
Despite Queenstown's attractiveness as a location, the couple decided that they would look elsewhere for a resale flat should they fail to secure a BTO in the area by the end of the year.
“Resale (flats) there are too expensive. We have to lower our expectations, look elsewhere for a home that better fits our budget,” he said. ― TODAY
