7 Things You Should Know About The PLH Model

On the 27th of October 2021, The Ministry of National Development (MND) and the Housing & Development Board (HDB) have announced details of the Prime Location Public Housing (PLH) model. The objective was to ensure the new HDB built in prime location remains affordable and inclusive for Singaporeans. On further observation, the implementation of the PLH model is due to the recent uptrend of prices in HDB Resale Market, especially those located in the prime central area. Within 9 months of 2021, 174 flats transacted above S$ 1 million, compared to 82 flats in 2020.

More recently, another Bishan Resale flat smashed the record and sold For S$1.36 million. This trend will continue to push prices even further out of reach of those in the middle-income range.

The first project under the PLH model is launched in November 2021 Built-To-Order (BTO) exercise. This is a 960-units mixed-use apartment located at Rochor along Kelantan Road and Weld Road.

1. 10 Years Minimum Occupation Period (MOP)

The most distinctive feature will be the 10 years (MOP) imposed on future flats under the PLH Model. This is an additional 5 years from the standard MOP for HDB, and it is applicable for both BTO and Resale flats under PLH model. The likely effect of this measure is to further reduce speculation of HDB, especially prime locations.

This means applicants who bought their flats since BTO launch will have to wait about 15 years (5 years construction + 10 years MOP) before selling in the market.

And assuming owners attempt to sell their flats immediately once the 10 years MOP is up, the remaining lease of these flats will be 89 years. Possibly, this will affect the resale price in the future with the decaying lease.

2. Income Ceiling is Applicable

Grant aside, there are no income ceiling regulations for purchasing HDB in the resale market. However, future launches under PLH model will be subjected to a S$14,000 income ceiling (or S$21,000 if purchasing as multi-generation family). This applies to both BTO applicants and resale buyers. This will definitely affect future resale prices as resale buyers will be subjected to the income ceiling, reducing the market size of eligible buyers.

Furthermore, the income ceiling will cap future buyers' loan eligibility, limiting the resale prices from sky-rocketing. Based on a generic calculation for HDB loan* based on Mortgage Servicing Ratio (MSR), the max possible loan of buyers earning up to S$14,000 monthly income will be S$ 838,953. Any price above the loan amount will mean buyers will require to top up with cash or CPF.

*Please note that the scenario will differ if buyers take a private loan instead. ?

3. Applicants For PLH Model Must Have An Eligible Family Nucleus

Definition of Family Nucleus as follows:

• Applicant and their spouse and children (if any)
• Applicant (single) and their parents; and siblings (if any)
• Applicant (widowed or divorced) and children under their legal custody, care and control
• Applicant (single) and their siblings, if parents are deceased, and one of the deceased parents is a Singaporean or Permanent Resident (SPR)
• Applicant and fiance/ fiancee

This excludes singles (even if 35 years old and above) and families that are only SPR.

4.?Tighter Rental Conditions

Savvy investors hoping to purchase affordable HDB in prime areas to rent out the whole unit may have to think twice before applying for future flats under the PLH model. Unlike the current HDB regulation that allows Singaporeans to rent out the entire unit after MOP, owners of HDB under PLH model are not allowed to rent out the whole flat. However, renting of spare bedrooms will still be allowed.

5. Subsidy Recovery (Clawback)

According to HDB, flats in prime central locations have an additional initial subsidy to ensure affordability for applicants. As such, a Subsidy Recovery (SR) term will be implemented when flats under the PLH model is sold. SR will not be a fixed percentage and varies from projects. It will be made known before the PLH Project launch.

Latest update on 17th Nov 2021: Rochor BTO Launch will be subjected to 6% SR upon resale. No further SR for subsequent resale.

There are debates on this measure on whether it will help with price inflation. It may also be possible that owners will factor this SR percentage into the resale price for the next buyer to bear. Therefore the real effects of this measure are yet to be seen and observed further.

6. Reduced Priority Allocation Quota for Married Child Priority Scheme (MCPS)

As defined by HDB, applicants under the Married Child Priority Scheme will be given priority in the balloting of applications if the BTO flats are:

(a) within 4 km of an HDB flat which your parents/married child physically occupy; or

(b) within 4 km of a private property owned by your parents/ married child or their immediate family member, where they physically occupy

In the usual BTO context for first-timer families, allocation is up to 30% of BTO/ Sale of Balance Flats (SBF) units.

However, under the PLH model, the priority quotas for flat allocation for MCPS will be reviewed and adjusted depending on the site launched locations. This is to allow applicants whose family members are not within 4 km the chance to live in these prime central location neighbourhoods.

7. New prime areas may emerge

Coming Greater Southern Waterfront Development | Source: URA

At the moment, the PLH model will apply to areas in the city centre and the upcoming waterfront developments. However, there are talks of this applying to other areas where the majority would consider a prime area.

Since PLH model is only applicable for upcoming launches, we are starting to see spillover effects on nearby neighbourhoods that are not subjected to PLH regulation. There is a possibility this will apply to these areas in the future - as long as it supports the government objective.