Plan to mitigate 'lottery effect' of downtown flats

Mr Wong (above, left) cited the experience at the Pinnacle@Duxton (above) in Cantonment Road. Flats there are regarded as a goldmine, as many owners have reaped hefty windfalls - some close to $500,000 - when they sold their units.
Mr Wong (above) cited the experience at the Pinnacle@Duxton in Cantonment Road. Flats there are regarded as a goldmine, as many owners have reaped hefty windfalls - some close to $500,000 - when they sold their units.ST PHOTOS: ONG WEE JIN, SEAH KWANG PENG
Mr Wong (above, left) cited the experience at the Pinnacle@Duxton (above) in Cantonment Road. Flats there are regarded as a goldmine, as many owners have reaped hefty windfalls - some close to $500,000 - when they sold their units.
Mr Wong (above) cited the experience at the Pinnacle@Duxton (above) in Cantonment Road. Flats there are regarded as a goldmine, as many owners have reaped hefty windfalls - some close to $500,000 - when they sold their units.ST PHOTOS: ONG WEE JIN, SEAH KWANG PENG

Future HDB flats in city area may have a longer minimum occupation period, shorter lease or higher resale levy

Prospective home buyers hoping to cash in on future public housing flats in prized downtown locations may be disappointed, as the Government mulls over ways to tighten resale conditions for such units.

Possible measures could include a longer minimum occupation period (MOP), a shorter lease or higher resale levy, said National Development Minister and Second Finance Minister Lawrence Wong.

The review comes as the Government looks at introducing HDB flats into choice locations such as the Greater Southern Waterfront, to be developed in the Pasir Panjang area after port activities move to Tuas South.

"I think to do more (public) housing in the city under the same regime would not be plausible and we shouldn't do it... I have to sell it potentially with different parameters," Mr Wong said last week, citing the experience at the Pinnacle @Duxton in Cantonment Road.

Flats there are regarded as a goldmine, as many owners have reaped hefty windfalls - some close to $500,000 - when they sold units after having met the five-year MOP in December 2014.

The Housing Board launched the project in 2004 at prices ranging from $289,200 to $439,400. In 2008, 111 five-room flats were relaunched at prices ranging from $545,000 to $645,800.

HDB resale data shows 174 transactions at the Pinnacle@Duxton so far, of which 18 were sold for $1 million or more, property consultancy OrangeTee said.

The highest price fetched was for a five-room unit located somewhere from the 43rd to 45th floor, which was sold last month for $1.12 million or $982 per sq ft.

The high market value of such units has sparked questions about equity as they are heavily subsidised and securing a unit is largely down to chance from having to ballot for them.

"There will be a bit of a lottery effect because whoever gets it will be very lucky and there will be... more than a bit of a windfall effect for that person too, because they will have a huge appreciation potentially," added Mr Wong.

To address this in a "fair and equitable" way, the Government will look at potentially selling future public housing within the city under a different model, be it implementing a longer MOP from the current five years, or a shortened lease from the 99 years now.

Another consideration is raising the resale levy payable when the owner sells the subsidised city flat and subsequently buys another subsidised unit from the HDB.

The resale levy depends on the size of the flat and ranges from $15,000 for a two-room unit to $50,000 for an executive flat.

One property seller who wanted to be known only as Mr Ng, sold his Pinnacle@Duxton unit for about $900,000 last year, and thinks there should not be too many restrictions. "No one knows how the market will be in the future. If you have too many rules based on the assumption that the price will appreciate, then it may put more risks on the buyers," he told The Straits Times.

However, resident Angeline Tay who lives in a five-room unit at Pinnacle@Duxton agrees that having different provisions for city flats is fair. Ms Tay said: "I'm lucky to get a flat here. The location is great, which helps to support pricing. The potential rules seem fair, in view of all the positive attributes."

Mr Wong added that the intention is to still have flats in the broader city area to avoid "social and physical stratification", but he noted that they are not likely to be in the very prime locations.

A version of this article appeared in the print edition of The Straits Times on October 10, 2016, with the headline 'Plan to mitigate 'lottery effect' of downtown flats'. Print Edition | Subscribe