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Analysts mixed on effect of tighter rules for Rochor flats

Analysts mixed on effect of tighter rules for Rochor flats

Source: Straits Times
Article Date: 18 Nov 2021
Author: Michelle Ng

Property analysts are split over the effectiveness of the subsidy recovery clause, with some saying it is difficult to tell as there is no precedent or a direct comparison of such a clawback in Singapore's housing market.

The jury is still out on whether the 6 per cent subsidy clawback upon resale of units in the Rochor Build-To-Order (BTO) project will deter speculative buyers looking for a windfall gain.

Property analysts are split over the effectiveness of the subsidy recovery clause, with some saying it is difficult to tell as there is no precedent or a direct comparison in Singapore's housing market.

Yesterday, 960 three-room and four-room flats were launched for sale by the Housing Board in a highly anticipated Rochor BTO project called River Peaks I and II.

The project is the first to come under a new prime location public housing model, which aims to keep new public housing in prime, central locations affordable and inclusive through stricter buying and selling conditions.

Owners of these flats will pay 6 per cent of the resale price or valuation, whichever is higher, to HDB when they resell their home on the open market for the first time.

They will also be subject to a 10-year minimum occupation period (MOP), up from five years for other flats, and can sell only to a limited pool of resale buyers whose combined household income does not exceed $14,000 a month.

The conditions are aimed at encouraging home ownership and reducing speculative buying by those who hope to sell prime area HDB flats for a huge profit soon after reaching the MOP.

PropNex chief executive Ismail Gafoor said the 6 per cent amount is a "modest sum" considering the central location and "potential capital appreciation" of these flats.

"There is a high possibility the flat owners will price the recovery amount into the overall resale price when the flat is put up for sale in the future," he said.

Mr Nicholas Mak, ERA Realty's head of research and consultancy, noted that the closest comparable subsidy recovery clause is the seller's stamp duty (SSD) in the private market, as both are designed to deter speculative buying.

Under the SSD, sellers pay a tax ranging between 4 per cent and 12 per cent if they sell a private property within three years of owning it.

"The 6 per cent subsidy clawback for the Rochor BTO flats does partly deflate the lottery effect. But the buyer can still stand to make a significant profit from the sale of the flat in the future," he said.

Administrative executive Xiao Jinan, 37, is a potential buyer who considers property, including HDB flats, as an investment and describes a BTO flat as one's "first pot of gold".

"The location in Rochor is good for investment, just that the profit will be lower because of the longer time horizon. But the clawback doesn't deter me. If you want to change my mind about investing, make it 10 per cent," he said.

Despite being attracted to the project's central location, others like administrative executive Lim Shi Hui, 27, are on the fence.

"We need to take the six-year completion time, plus the 10-year MOP, into careful consideration. Plus, there are other locations like Bishan and Toa Payoh that are just as prime but don't have these restrictions," she said.

Some, like life science researcher Joanne Chan, 26, and her husband have set their sights on a unit in the Rochor BTO project in the hope of making it their "forever home".

"But I think our chances of getting one are insanely low because many people will apply for the same reasons as us, to live there for the long haul," she said.

Source: Straits Times © Singapore Press Holdings Ltd. Permission required for reproduction.

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