The current October 2024 BTO exercise sees the debut of the new flat classification system; gone are the days of the old “mature” and “non-mature” estates, replaced with the new Standard, Plus, and Prime bands.
That said, the principle behind the classification system is more or less unchanged. HDB projects are grouped according to their perceived market value based on key factors such as their estate’s location in Singapore and, even within estates, a further division based on the project’s location. For example, in this October 2024 BTO exercise, the Kallang/Whampoa estate has three projects for sale, and even though they all belong to the same estate, only one project is classified Prime, while the other two fall under Plus.
As part of the new flat classification system, the HDB has just announced further details on the few distinguishing factors between the three categories of flats, including the introduction of a subsidy clawback scheme for Plus and Prime flats. What is it, and what do you need to know?
Difference between Standard, Plus, and Prime flats
Here’s a quick overview of what sets Standard, Plus, and Prime flats apart.
In a nutshell, Prime flats are in top locations in Singapore—central areas, close to the city, the CBD, and near MRT stations. Plus flats are located slightly further out from central Singapore, on the city fringes, but may still have key benefits (pun intended), such as proximity to an MRT station. As the name suggests, Standard flats are the ‘baseline’ and make up the rest of the BTO market.
There are also specific benefits and trade-offs for each band. For example, Standard BTOs come with the usual 5-year MOP, while Plus and Prime flats require a 10-year MOP.
For the October 2024 BTO exercise, Crawford Heights in Kallang/Whampoa is the only project classified as a Prime flat, with 6 others classified as Plus:
- Central Trio @ Ang Mo Kio
- Bayshore Vista and Bayshore Palms
- Kembangan Wave @ Bedok
- Merpati Alcove @ Geylang
- Kallang View and Towner Breeze @ Kallang/Whampoa
In order to keep Plus and Prime BTOs affordable for buyers, additional subsidies will be available for both categories, as these flats are expected to be more expensive due to their desirable locations.
New 6-9% subsidy clawback scheme
Speaking of subsidies, the HDB has just announced that for the new Plus and Prime flats, they will come with a subsidy clawback clause of between 6-9%. According to the HDB, the subsidy recovery clause is necessary to curb the “lottery effect” of owning flats in prime and central location.
Under this clause, homeowners who sell their flats after meeting the 10-year MOP will pay HDB a percentage of the resale price or valuation price—whichever is higher. Subsidy recovery is not applicable to 2-room Flexi flats sold on short lease, Community Care Apartments, and resale Plus or Prime flats.
The percentage of subsidies varies across the Plus and Prime BTO projects:
| Classification | Project | Subsidy Recovery |
| Plus | Central Trio @ AMK | 6% |
| Kembangan Wave | ||
| Bayshore Vista | 7% | |
| Bayshore Palms | ||
| Merpati Alcove | 8% | |
| Kallang View | ||
| Towner Breeze | ||
| Prime | Crawford heights | 9% |
As expected, Crawford Heights, the only Prime BTO project in Kallang/Whampoa, will have the highest subsidy recovery rate, owing to its fantastic location and new ‘white flat’ open-concept layout.
Within the 7 other Plus projects, the subsidy recovery rates vary from 6-8%, with Ang Mo Kio and one of the 3 Bedok projects incurring 6%, while the 2 other Kallang/Whampoa Projects and Geylang incurring 8%. Our take is that the variance is certainly indicative of the locations they are in, given that the more central locations command a greater value in the resale market.
Will these rates be the same for future BTO projects? We’re not quite sure – according to the HDB, the subsidy recovery rates will vary at each launch, corresponding with the amount of additional subsidies needed to bring the prices of Plus and Prime projects down to more affordable levels. As seen above, the rates are also not tied to estates per se, and they can certainly vary from project to project within the same estate, as well as vary within classifications.
How will this affect the market eventually?
Naturally, one question that needs to be addressed is how will this subsidy recovery scheme affect the resale market, when these first batch of Plus and Prime flats eventually hit the resale market.
One good news is that the HDB has clarified that the subsidy recovery rates are commensurate with the additional subsidies granted for these Plus and Prime flats, meaning that technically homeowners will not be ‘worse off’ when they do eventually sell their flats.
However, it is a possibility that when it comes to selling time, the additional 6-9% would be factored into the asking price of flats as sort of a “premium”, resulting in marked up prices higher than what the original market value would have been. This is because the subsidy recovery might be perceived as “profit” out of the homeowners pocket, sort of like a “cost” that will likely be passed on to the buyer.
We’ve seen examples of such dynamics before: for instance, over the past few years when interest rates rose resulting in higher mortgages, the additional cost incurred by homeowners was transferred to those renting a flat, resulting in higher monthly rental rates. It may or may not happen, depending on how the market dynamics evolve after the project waits out its 10 years.
Another factor to consider is the profile of the original homebuyer (i.e. current applicants). It seems that regardless of whether they are eligible for any grants when they first purchase the BTO, the subsidy recovery rate would be applied upon resale. This would likely also contribute to the likelihood that such Plus and Prime flats will have a slight markup, since it will be perceived as reduced profits.
Nevertheless, our take is that this subsidy recovery scheme is unlikely to have a profound impact on the market. Given that these are Plus and Prime flats, the potential for appreciation is considerably high, and it is almost certain that homeowners will enjoy a decent profit when the flats eventually are eligible for sale. Even with a 6-9% clawback, the quantum of profit is likely to still be fairly high.
Cover image adapted from: Wikipedia – Terence Ong
Drop us your email so you won't miss the latest news.
