SINGAPORE (EDGEPROP) - HDB has tightened the rules for buyers who refuse to book a Build-to-Order (BTO) flat when invited. They will take effect from the August 2023 BTO launch.

According to National Development Minister Desmond Lee, the rules will reduce the number of people who decline to pick a flat and ensure a more efficient allocation so those needing a flat can secure it more quickly. Lee was speaking at the Committee of Supply debate on Mar 2.

Under the tightened rules, first-timers who fail to book a BTO flat when selected to do so will be redesignated second-timers for a year in the computer ballot. Second-timers who decline to choose a unit must wait a year before they can reapply for a BTO flat.

These rules target individuals who fail to attend their flat selection appointments or choose not to book a flat despite being offered one, says Mohan Sandrasegeran, senior analyst, research & content creation, One Global Group.

According to Huttons Asia, if 20,000 BTO flats are launched for sale in a year, up to 60,000 queue tickets are allocated to applicants. The number who fail to select a unit is 24,000, or about 40%. "This is a very high number," says Lee Sze Teck, senior director of research, Huttons. "With this change, it should reduce the number of non-selection and thus allow more applicants to book a flat. The new rules are "a good step towards improving accessibility to a BTO flat which is a public good", says Huttons.

Applicants do not select a flat for various reasons, says Huttons' Lee. "It could be due to non-availability of choice units, limited units left or sudden change in employment status," he adds. "Since they intend to stay there for many years, they would want to choose the best unit in their view. To those with a genuine reason, they will feel aggrieved by this change."

The change will reduce but not remove the non-selection of flats among applicants. Huttons estimate that the number of applicants for the August 2023 BTO launch may fall by as much as 20%. Le reckons there may be "a rush to apply for flats" in the February 2023 and May 2023 BTO launches before the penalty kicks in.

"A key objective of the tightened rules is also to satisfy housing demand and to reduce the pool of first-time homebuyers, especially those who failed to select their BTO flats after multiple attempts in previous BTO exercises," says Nicholas Mak, head of research & consultancy, ERA Singapore.

The government is also giving greater priority to specific groups of first-time new flat buyers and more options for seniors, as well as low-income singles. "The government is fine-tuning the public housing policy to help Singaporeans own their first homes," says Ismail Gafoor, CEO of PropNex Realty. "We think the changes unveiled today are very targeted, zeroing in on specific population segments with greater housing needs."

First-Timer (Parents & Married Couples) or FT(PMC) aged 40 and below make up about 10% of all first-timer family applicants, and will get priority in BTO and the sale of balance flats (SBF), says Gafoor.

"For most Singaporeans, the BTO and SBF flats are their first home, and it could very well mark the start of their journey to build wealth and capital via real estate and support their future aspirations to own a private home," adds Gafoor.

From the August 2023 BTO exercise, FT(PMC) will get three ballot chances for a BTO flat. "This will increase the probability of this group of buyers securing their BTO flats," notes Mak.

The government is also encouraging FT(PMC) to apply for BTO flats in non-mature estates by giving them more ballot chances and allocating a higher proportion of BTO flats and SBFs to them, continues Mak.

The penalty for non-selection may cause more buyers to turn to the HDB resale market, says Christine Sun, senior vice president of research and analytics, OrangeTee & Tie. Affected buyers may use the increased Central Provident Fund (CPF) housing grants to apply for a four-room or smaller resale flat should they still need to get an HDB BTO flat on the first attempt, she adds. (Find HDB flats for rent or sale with our Singapore HDB directory)

Not all FT(PMC) want to apply for a BTO flat for various reasons, reckons ERA's Mak. "Some may only want to buy flats in certain locations, such as mature estates where there are rarely any new BTO projects," he says. Mak adds that the current waiting period for BTO flats is more extended than the 3 to 3.5 years in the pre-pandemic years, resulting in some first-time homebuyers turning to the HDB resale market.

The tightened rules for the non-selection of flats by HDB aim to address the limited housing available for individuals with urgent needs. "By enforcing stricter regulations, HDB hopes to discourage individuals who do not have genuine reasons for selecting a flat from taking up available housing units," says One Global's Sandrasegeran. "This way, more flats will be available for individuals with pressing housing needs, who may not have the luxury of waiting for another flat to become available."