HDB’s PLH Measures & How It May Affect You [TFC 114]

So yeah, it is a sign of some new things coming. A lot of things will be changing going forward and I just want to take this time today to update you. What is the situation like and what are some things that I feel we should all recognize going forward? The game has changed, right? The playing field has changed and there are some things that I hope we can internalize as soon as possible. Welcome back! 

Good morning, everyone! I welcome you to another day with The Financial Coconut. In our podcasts, we will be debunking financial myths, discovering best financial practices and discussing financial strategies that fits our unique life. You get it, ultimately empowering us to create a life we love while managing our finances well.

My name is Reggie, your host and today, we’re going to spend some time to get ourselves updated on the new PLH (Prime Location Housing) HDB rules. How does it affect you? What does it mean for us?

Okay, so new rules are out. Ministry of National Development has updated this whole new initiative… or should I say initiative? Initiative a bit light… this whole new rule in the HDB ecosystem where they will start to segregate what is considered prime location and every other location. 

Essentially, all of you that don’t live in prime location, you’re considered not prime. Just kidding, just kidding. But yes, prime location will probably like Rochor, maybe Queenstown. We will get a little bit more clarity as to what’s considered prime location going forward, but Rochor is definitely in the name, also the Great Southern Waterfront which is essentially the whole Vivocity area, Harbourfront area because the port is shifting. The whole port is going to shift to Tuas if you don’t yet know. So yes, the whole Marina Bay, Harbourfront area.. the whole port all the way… I think all the way until Pasir Panjang Food Centre. The whole area is going to shift. 

After they shift, what are they going to do? It’s not just going to be there, right? After they shift, they’re going to be building a lot of property development in that part of town. With that, clearly it is showing a sign that the HDB will be participating also in some of those developments. Once again, anchoring itself as this idea of “we don’t just want private property in the Great Southern Waterfront.” We want to allow Singaporeans affordable access, blah, blah, blah. 

In other words, the government still wants to build some of the development, maybe more along the lines of Duxton Hill, not like Tengah or Tampines or something like that, so more along the lines of Duxton Hill, which is a huge development in Tanjong Pagar. HDB will probably lead some of this development in the Great Southern Waterfront. So in other words, with all these new places in town… the “prime location”, HDB is going to build some of these things and the government wants to have a discriminated policy for prime location and non-prime. 

What is the discriminated policy for all the flats going forward? It does not affect the old flats. If you already own it, heng (lucky) on you. You already got it. It’s not going to affect your situation, but for all the BTOs going forward. All the new flats that are coming out, you need to occupy for 10 years. For all the current flats out there, all the BTOs, actually there’s a 5-year occupancy, Minimum Occupancy Period. I know Singapore, a lot of acronyms… so MOP, 5 years before you can sell it out in the open market and then you can encash whatever you want to encash or you can shift to another place or what have you. I know some people have strategies to do this thing. 

That is that but for prime location housing going forward… Rochor, the Southern Waterfront, Queenstown, I don’t know where else, it will be 10 years so when you buy that BTO, you have to wait a few years for the BTO to come out, maybe 4 or 5 years, and then you got to wait another 10 years before you can sell the property. Think about it. It’s going to be a 15 year wait before you can sell your first property and we’re going to talk about this slightly later. We got to expand. What does it mean for all of us? 

Also, for all the new flats in this area, you cannot rent out the whole flat. You can only rent out extra rooms. The current practice out there for all the flats… after 5 years, after MOP of 5 years, you can actually rent out the whole flat. You can rent out a whole flat and you collect your rental. You are a landlord if that’s what you want. But for all the new flats coming in in the prime location housing area, even after the 10 years of MOP, the extended MOP, you still cannot rent out the whole thing. You can only rent out rooms. 

Also… wah a lot of things. Also, for all of you new buyers, we all get some sort of subsidies. You get extra subsidie whether is it close to your parents, you get certain subsidies. First time flat, you get subsidies, blah, blah, blah… all sorts of different subsidies. I will not go into them today. It’s not the focus, but all your prime location housing flats, if you sell it, you have to give back the subsidies. 

Finally, for a long time, people say “sell already also have to give back”. Actually no. Before that, when you sell your flat, you don’t need to give back your subsidies. It’s just that most of the subsidies end up in your CPF account because a lot of people buy with the CPF money but you actually didn’t need to give back the money. The money is still yours. It’s just in your CPF account. I know a bit iffy, but that is the reality. The money is yours technically, it’s just not in cash in your hands if you use CPF to buy the flats. 

That’s a story for another day, but for all these PLH houses, Prime Location Housing houses, you have to pay back the extra subsidies if you’re a first-time buyer. So when you sell it, you have to claw it back. Government will take back your subsidies. Important to know. 

And also, once again, single people are being discriminated. Hai, very sian (sick and tired). You cannot buy all these flats going forward, regardless. Because by right, under the Single Scheme, you can actually own whatever flat you want in the resale market. But with this discriminated situation, all the new flats… so all the old ones you still can buy, okay? 

Let’s get it clear. You can still buy Telok Blangah. You can still buy Rochor. You can buy Queenstown, whatever. All the old flats all the single people, you still can buy. But going forward, all the new flats that are coming out under this PLH scheme, singles can never get it. Very sad lah. Once again, it’s a tax on the single, trying to get you to settle down, marry and have kids and… same idea. Always getting discriminated in the HDB ecosystem. 

That pretty much sums up the latest information of what is out there. I’m sure as we go along, HDB will come out with more clarity as to what is actually happening, which areas are considered prime and which areas are not prime and what are the kind of suite of flats coming out?

That is that. I think what is important is to rethink how all these things are fundamentally changing our game plan. Now that I have updated you all the features, I want to make it clear that I will be speaking to our predominant audience, which is the millennials. You may have recently gotten a flat, you may have finally gotten your BTO or you may be on the crux of getting your own flat. You’re teetering on the side… finally, maybe I can get my own flat now, all that jazz. 

80% of Singaporeans live in flats so I wouldn’t be surprised if most of you guys got your own flat or planning to get your own flat recently or recently got your own flat. I’m only speaking to this bunch of people. For everyone else, whether you’re close (to) retiring or you have multiple properties, some of these things that I’m going to share may not affect you altogether, okay?

What I think… all these measures come together, what are some of the things… what does it mean for us with all these new measures and the changing landscape in what HDB has? I think the first thing that a lot of us need to recognize is HDB no longer will be your share of progress. This is important. For a very, very long time, Kuan Yew and all his people in his legacy have talked about HDB as a share of progress. In other words, if you’re a home owner, as Singapore progress, you get to get a piece of the pie through capital appreciation in the property market, in the housing market. 

After that, there was a whole redevelopment promise where they will refurbish all flats and all that. That one already came down. Lawrence Wong came out saying 99 years, we will take it back. Not every flat will get refurbished. That’s one thing. Because of that, the market has vividly recognized that this 99 years is real one, not just say say. I think that is extremely important.

WIth that, you start to see that HDB will no longer be your share of progress. I think this is important and if you ask me: is this a good thing or not so much a good thing? It’s hard. Honestly, it’s very hard because what’s the situation? The situation is a lot of old people have their wealth tied up in their flats so if you have very drastic price mechanisms that try to dampen the prices too much, a lot of them will lose a lot of their retirement money. So all their $300 000 tied up in their flats will essentially get wiped out. So then, there will be social problems for a lot of retirees.

For the younger people, if prices continue to stay very high, then we are going to continue to be priced out of the market because our wages are not flying up as high. At least, it has not changed as much. The old story of “share of progress” worked in the past. I think for a lot of the older generation, they have definitely benefited from the share of progress. I will say even my parents’ generation… my parents are about 50 so they’re not that old. They got a flat in the 1990s. I would even say they too were priced in to a lot of this whole share of progress idea. Flats back then were a hundred over thousand and you could sell it at 4, 5 hundred thousand after 10, 20 years.

I would say even some of the younger people that have gotten some of the more prime location flats… before they were called prime location like the Tanjong Pagar area, some of them did make money even all the way up to the 2000s, but going forward, HDB is showing very clear sign.

I stand corrected. I’m not speaking on behalf of HDB. I’ve been trying to tell them to come on the podcast. I’m going to use my platform to pressure them further so if you listen to today’s episode, please go and tag them on Instagram. Tag them somewhere, tell them to come on the show to tell us what is the future of HDB. I think that’s important and I’ve been trying to get them on. I know they are going through a little bit of an issue. It’s a bit hard for them. It’s not unique to us. They don’t go on many platforms to talk but I hope they can talk more and share with us what is our future, what is their plan for all of us?

I stand corrected but my view of things is HDB internally has decided that yeah, we are not going to allow these kind of crazy prices from moving up and up. With that, they will continue to have new dampening measures to try to suppress the price growth over the years. I am pretty sure about this. You can tell whether is it this Prime Location Housing, ABSD (Additional Buyer’s Stamp Duty), all the additional policies and what have you, are all aimed at dampening HDB prices, also private property, of course. But definitely, the focus is on dampening HDB prices so that you can continue to stay affordable for everybody that’s trying to enter the market or the new home owners that I’m talking to and also not depress the market so much that it affects the retirees with a lot of wealth tied up in HDB flats. 

I think that is the limbo situation that they have but you can tell heavy measures are coming in and they will continue to have more and more targeted measures to make sure prices do not grow as much.

HDB will no longer be our share of progress. We need to go somewhere else to look at other ways to make money essentially, if you want to ride on the growth of the country, you want to ride on the growth of our future and all that then we cannot think of HDB like how our parents look at HDB, like buy HDB and then you can grow and become very wealthy… try to get your flat asap, that kind of things, right? 

With this realization, I think for a lot of us, we need to move away from this idea of owning a flat to become extremely vested in the country’s growth and as a means of accumulating wealth and all that. To me, I think it’s something to be updated. I’m not definitely saying you cannot own a flat blah, blah, blah. I think you should own it as a form of housing, as a place to live and stay and what have you, but it’s quite hard, right? 

Really, if property prices go up to like $1 million or $800 000 or what have you for a 4- or 5-room flat, there will be riots on the ground. It’s just too expensive for a lot of people. People will be very unhappy, especially when wages are not growing as fast. With that, I do think that there’s something to be updated. Our parents will teach us a lot of things and sometimes they do teach us based on their experience. But I would say it’s hard… I stand corrected because we’re predicting the future. I’m not sure exactly what’s going to happen, but I do think HDB could be a home, but no longer a share of progress. 

Point number two: what does it mean for all of us… is that the property market, the demand for the property is actually quite strong. I think this is a realization that we should have, realizing that the property market, the demand is strong, actually REITs is quite a good exposure. We’ll talk a little bit more after a word from our sponsor. 

Okay, Coconuts. Let’s be real. If the property demand is not strong, there will be no need for dampening measures. I think this is something important that a lot of us need to recognize. The property demand is huge, is strong and supply is probably not catching up, that’s why prices will keep moving upward. Of course, supply and demand is very basic in trying to understand this but we cannot deny the demand is strong or of some level, demand is strong which is why it’s you cannot use… 

Okay I tangent a bit… which is why it’s very cute when the US pundits keep saying China’s property market is dying. But if you look at what the Chinese legislators have executed… they have tried dampening measures. They have built in dampening measures with all the kind of control on mortgages, control on leverage and the demand is too hot. In other words, the underlying demand is very strong that even market measures that they have executed has not successfully dampened their market situation. That’s a whole different discussion for another time. 

But if you bring it back to Singapore, remember that if a government need to set dampening measures, that means the underlying demand is strong. We cannot lie to ourselves. For whatever reason, it’s very strong. I do think… I predict that or at least I hypothesize that why the market demand is very strong is because we’re bringing a lot of foreigner wealth. 

Over the past 5 years, there has been a whole growth of the family office. Hundreds of family offices have opened. Family offices essentially are all the wealthy people. Your Hai Di Lao boss… I think Mark Zuckerberg has family office here, [indiscernible] has family office here. A lot of the wealthiest people have set up family offices in Singapore. They brought their wealth here and when they bring their wealth here, it needs to go somewhere, so inevitably I think it will be in the property market.

With some wealth in the property market, it will push up property price so the underlying demand is strong, but you ask me how does… because these guys cannot buy HDB, how does that affect HDB prices? You need to understand how HDB is being priced. In the past, HDB was priced at cost price plus a premium. That was very long ago, like your great-grandparents’ generation or your grandparents’ generation. When HDB first started, it was cost price to build plus a premium. That was how flat prices were being priced. 

But after that, it changed. It changed to land value plus discount. You hear that? In other words, based on the land value that is… underneath this land, that is the basis of pricing then you add a discount. So if a lot of all these foreign wealth are coming in to beat up the property prices, all the new development will become more expensive because the land prices will become higher.

If I’m a developer, I develop plot A and the demands are very high, prices are going up. I can build… I can develop plot B which is next to plot A and I wouldn’t mind paying higher for the land price because I know the demand is strong. I can charge more for plot B’s development and everybody thinks like that so they got to beat up the land sale. The land prices comes up and with that last transacted land price, everybody around the area, all the land value goes up because it’s a reference point. 

In other words, if this land now becomes more expensive because of property prices, the private property prices come up, land value come up, it affects the HDB prices because HDB’s pricing mechanism now is land value plus a discount. 

I think that is something that we need to recognize. That’s why HDB’s prices will keep moving up from an economics point of view, a mathematical point of view, but also from an experiential point of view. If around you, all the condos around you are at this price, the HDB… naturally people will transact a little bit higher, especially with the locals, right?

That’s a whole long story that we can keep expanding or if you could check out our other podcast called Coconut Avenue. I’m planning season two. We are producing it currently so you can get a lot of information about the property market and we are thinking of making it a weekly podcast so if you love property, you want to become a good property investor, not just in Singapore, but around the world, let us know and I’ll be more incentivized to develop Coconut Avenue into a weekly podcast, okay? 

Like I said, demand for property is high. In Singapore, it’s strong, it stays strong so REITs is a great exposure in my view. If you want to get some sort of exposure in the property market, I think REITs is something that we should all really look at because as land value moves up, what happens is all these big properties… REITs, their property value move up also and then they can circulate the capital. 

They can sell out the property. They can recircle the capital and buy new property. The whole REIT will get elevated. The net asset value of this REIT will move up into. Interestingly, it moves up just because there’s capital appreciation of the underlying property. Although I vividly did talk about how when a property developer sells their property to REIT, let’s say CapitaLand REIT or Ascendas REIT or Mapletree REIT, that property has limited upside potential in terms of capital appreciation already. 

Please go and check out the earlier episodes where we talk about REITs, three things you need to learn when it comes to REIT investing or to level up your REIT investing game. I remember I did it many episodes ago, so please go check that out and yeah, go and learn a little bit more about capital recycling. What really happens in the REIT market? What are the REITS really trying to do for the business? What is their interest? 

But with that being said, because property demand is strong, the whole activity will be very powerful. I do think REITs is a great place to get some sort of exposure in the property market, which is why I say HDB may no longer be our share of progress, but we can always look to other places to get that progress and probably more in the REIT space and more in the equity space… will probably be a little better for our generation. 

I know some people are looking at crypto and… okay, maybe not some. I think I’m probably the most boomer one around. We are planning a crypto show but yeah, I do think a lot of people are looking at crypto. I am still a bit iffy. I will share with you my views down the road.

But yeah, I would say maybe you look at REITs as your share of the property progress in Singapore, which brings me to point number three and that is this PLH situation or scheme, Prime Location Housing scheme may end up disrupting non-prime location property prices too. 

This is important. I think for a lot of us that are not full-time investors, we are still learning. We always think this only affect other people, it does not affect us because I’m not living in prime. Actually, this is what we call a market disruptor. Based on the market, the market has an equilibrium in terms of the pricing that it wants to reach. But there are policies, there are all these new things that will come in to disrupt the market mechanism to limit its pricing abilities and all that. 

When you put in something like that into the property market, it will shake up everybody, not just people in the prime location housing. It may be that along the prime location housing border… let’s say they circle Queenstown as the prime location housing, then maybe Commonwealth which is not part of prime location, the prices over that area may move up because they are just on the edge of prime location housing. 

A lot of these things can happen. I’m not here to try to predict, but I want to bring up this specific point for all of us to be aware that there may be “desired” or “undesired” consequences in other parts of the property market also. This is open for us to keep understanding and keep observing. 

For a lot of you that are thinking about your property plan, I personally will feel that all these being said, we should recognize that HDB is a social housing scheme and you should focus on trying to find a property that fits your style, fits your thing and it’s affordable for you rather than trying to play the whole property investment lottery game which Desmond Lee specifically said it. The minister said “we want to avoid lotteries”, blah, blah, blah so I think it’s important, right? 

That is a clear sign of what the government is wanting to do… the government of the day, they want to do that which I actually support. I don’t think social housing should become a lottery situation where people just beat up and it causes more and more inequality and the younger people get priced out of the public housing structure.

But I will say… Desmond, if you’re listening, I hope you stop discriminating singles. There’ll be a lot of singles going forward. People are getting married later and later. You really need to revisit this idea of single discrimination. You can tag him also, tag him. I hope he listens to this, but generally the idea will be intact where instead of trying to find the next big property boom in the HDB space, focus on finding what is affordable to you, what is a space that you can enjoy staying? 

I would say Tengah looks like a nice place, just saying. Tengah looks like a nice place. I know HDB is struggling to sell Tengah flats, so HDB can look for us. I can get sponsored. But Tengah looks like a nice place because the development is interesting. It’s going to be low carbon. It’s going to be… the way they build is for walking, for cycling and it’s near the “forest”, and it’s quite near Woodlands, quite near the checkpoint so I think it’s a good place to be around, especially when in the future, more and more people can work from home and continue to be digital, even though you may or may not live on the island but I do think the kind of proximity to town is not as important anymore going forward.

So HDB… shout out. You need a sponsor, you need an ambassador, you can look for us. For all of you listening, please tag them. You listen until here already, you must tag them so that they can come on our interview and Desmond can address this whole single problem. 

I hope you learnt something interesting today about the latest updates of PLH, HDB’s latest scheme, but also at the same time how a lot of us, the millennial generation, how should we look at HDB and how can we play this whole HDB game? 

I’m going to sum up with the three points. Number one is HDB will no longer be our “share of progress”, not like our parents, not like our grandparents. You will not see HDB prices move up in the kind of the drastic fashion. The government has shown their determination to depress HDB prices and let us not forget about the accrued interests into your CPF, the kind of interest rates on your HDB mortgages and all that. 

That’s a long story for another time, but generally the idea is what I’m trying to push here is HDB will not be your pot of goal for you to make a lot of money out of it. It will continue to be a housing policy where a lot of us will be housed in the HDB ecosystem but maybe not our shot to wealth, our pot of gold.

Number two is the property market is still very strong in terms of the demand, that’s why they need a lot of dampening measures. Instead of being part of it… if let’s say you feel like it’s not your thing, I think we could always get great exposure through the REITs market, because fundamentally when you own the REITs, you’re owning the underlying properties. With that, it helps. It’s always a great place to be in, in my view. 

We have talked about REITS extensively. I don’t want to talk about it again, but because property demand is strong. I think the REITs will continue to do pretty well in Singapore. It’s an investment vehicle.

Point number three is that this Prime Location Housing may not just disrupt prime location, it may disrupt everywhere else so prices will fluctuate and you need to give the market time to internalize this dynamic situation. So don’t be in a rush to make your moves and also don’t… just try to find a place that you can afford, a place that you like. I would think that it’s more important. Focus on location, focus on affordability, less so about proximity to town and all that, okay? 

Life is changing. Life in Singapore is changing. Live in the world is changing so I hope for a lot of us young millennials, either getting a flat or recently got a flat or planning to get a flat, I hope you are updated and have a clearer game plan for your future so I hope I learnt something useful today. See ya!

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Wah, a lot of things are being updated recently. I planned a lot of episodes, but it keeps getting pushed back because of all these new updates so I think it’s interesting. I mean it, you should tag HDB on today’s episode, because I think they need to come on and share a little bit more. I know they have updated some of their development plans like the whole communal living situation. Some of the newer developments in Punggol looks very nice and all that. 

They are staying relevant in terms of how they build flat and all that but I hope that they can have a little bit more media presence to talk about what is the future of housing like in Singapore? What is the kind of life of Singaporeans going into the future rather than let just the property agent and the property sellers and all that dominate the discussion. It’s not about… they need to come and talk so that there are more voices and there’s more perspectives being thrown out there. I think that is extremely important so tag them, tell them “hey, come on our show” and push them a little bit. That’s good. Yeah, I hope you learnt something useful for HDB. 

For next week, I have succumbed to global pressure. I have succumbed to the Internet’s pressure. I have actually recorded an episode about the NOC saga. Not in a sense of trying to take my position or what’s happening, but I think there’s a lot of communication lessons that we can learn from the NOC saga. I have recorded it, but instead of pushing it out this week, I will be pushing out next week because I think this PLH situation is more important.

Hopefully by next week, people still want to listen to the NOC saga, hopefully. But yes, it’s not about the saga itself. It’s really about communication lessons that we all can learn from to become better communicators. Because a lot of people, when they talk about personal finance, they talk about it in a way where… “you need to communicate with your partner. You need to negotiate with your family” and all those things so how do you go about doing it, and some core ideas that it’s very underexplored in the idea market out there today. I hope you learn something useful and don’t just drown in saga. Okay. Take care guys.