by OrangeTee & Tie Pte Ltd.

OrangeTee's comments on MND COS Housing Budget 2024

Government Policies

During the COS budget debate in 2024, the government announced some new initiatives. 

1. Comments on PPHS voucher

The government has announced a new rental subsidy scheme, where eligible Singaporeans will receive S$300 vouchers every month that can be used to rent HDB flats in the open market. 

The vouchers can help defray part of the rental cost for cash-strapped Singaporeans and young couples with limited rental budgets. Eligible applicants are likely to opt for smaller HDB flats (whole units) or room rentals, as the subsidy will cover a higher percentage of the rental cost for such units.

Based on rental rates published on property listing platform PropertyGuru, in Punggol, where the asking rent could be around S$900 to $1,200 a month for a bedroom, the voucher would cover about 25 to 33 per cent of the rental cost. 

If the applicant decides to rent an entire unit, the $300 rental subsidy can cover approximately 9 to 13 per cent of the rental cost. According to HDB's rental data in Q4 2023, this subsidy can cover approximately 13 percent of the median monthly rent for 2-room flats which is around S$2,300 (Table 2). If the couple wishes to rent a 4-room flat, the S$300 rental subsidy will cover approximately 9.1 per cent of the median monthly rent of S$3,300. It is unlikely that many applicants will rent bigger units such as 5-room or executive flats due to their higher rental costs.

The $300 rental subsidy is unlikely to have a significant impact on the rental market. This is because most eligible applicants will probably choose to rent smaller units, such as 2 to 3-room flats or individual rooms, which do not usually make up the majority of rental transactions in the market. Additionally, the rental subsidy is not substantial enough to push up rental prices across the entire market. Rental prices have started to decline since the end of 2023 and are expected to remain subdued or even decrease this year.

2. Comments on the increased BTO supply in Yishun and Gillman Barracks

It has been announced that there will be an increase in housing supply in Yishun, with the construction of approximately 10,000 new public and private homes in Chencaru. There will also be more housing in which is located in the Bukit Merah planning area.

The demand for BTO flats in Gillman Barracks is expected to be high as only about 4,400 new flats have been launched for sale in Bukit Merah from 2016 until February 2024 (Table 3). This indicates that supply is relatively low compared to many other towns. Moreover, Gillman Barracks is a place that holds sentimental value to many Singaporeans as it was formerly an army camp but transformed into a hub for lifestyle restaurants and visual arts. The area is also known for its peaceful environment as it is located off Alexandra Road. Therefore, individuals who prefer a serene environment with nostalgic value and a preference for heritage assets are likely to be interested in the new housing available in Gillman Barracks. 

In contrast, Yishun had about 10,747 flats released for sale during the same period. Nonetheless, the supply in Yishun is still lower than the 22,521 flats launched for sale in Tengah and the 15,443 flats in Tampines over the same period. Demand for the future BTO flats in Yishun may still be healthy since some of the homes may enjoy reservoir views.

The new flats in Gillman Barracks may be PLH model flats. The current take-up rate of PLH model flats in Bukit Merah with an average application rate of around 4.8. Although the application rate has dropped for Alexandra Peaks in December 2023, application rate as also dopped for PLH model flats in Queenstown as well.  

3. Comments on the increased private land supply in Yishun and Gillman Barracks

It has been announced that there will be more private home supply in both Yishun and Gillman Barracks.  This positive development will introduce more housing options, particularly private homes, in the suburbs. It has been some time since a new condo (non-EC) was launched in Yishun. It is estimated that around 20 per cent of the land or approximately 2000 units will be designated for private housing, which could be subdivided into three to four mid-sized private land sites. One or more sites could be designated for executive condominiums (EC). 

The increase in housing supply could potentially stabilize the prices of private homes in suburban areas in the long term. This could further slow down the price growth in the Outside of Central Region (OCR), giving more affordable private housing options for HDB upgraders. The average price of new condos has exceeded S$2,000 psf. The overall prices may be lower when more units are launched in other suburban regions like Yishun, especially since the resale price of condos in Yishun is still at a low of around S$1,226 psf (Table 6). 

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