SINGAPORE - Fewer home seekers are expected to apply for Build-To-Order (BTO) flats when stricter rules to reduce the rejection rate take effect in August, said property analysts.

But until then, application rates for new flats could remain high as some potential buyers may view the ongoing February BTO launch and the next one in May – which do not come under the stricter rules – as their last consequence-free chances at the ballot, they added.

From the August BTO sales exercise, first-time applicants who do not select a BTO flat when invited to do so will be considered second-timers in subsequent flat applications for a year.

Currently, first-timers will be moved to the second-timer category for a year only if they do not book a unit twice. Far fewer flats are set aside for second-timers – 5 per cent of four-room and larger flats, versus at least 95 per cent for first-timer families.

The suspension of first-timer privileges for a year is to reduce the number of people who decline to select a flat and ensure more efficient allocation of new Housing Board flats, said National Development Minister Desmond Lee on Thursday when announcing the stricter rules.

ERA Realty’s head of research and consultancy Nicholas Mak said potential buyers will be forced to think carefully before they apply for any BTO projects from August as there is now a penalty to consider, unlike before.

As a result, some may try to apply for the February and May BTO projects before the rules take effect while the number of applicants in the August BTO launch may “temporarily decrease”, as only genuine BTO flat buyers will apply, he said.

There are typically four BTO sales exercises in a year – in February, May, August and November.

OrangeTee & Tie senior vice-president of research and analytics Christine Sun said while it is possible for the February and May launches to attract more applicants, she does not expect a huge jump in numbers compared with previous launches.

This is because buyers who fall under the new First-timer (Parents and Married Couples) priority category may wait for the August launch as they will have higher chances of securing a flat then, she said.

From August, up to 40 per cent of the BTO flat supply will be reserved for this group of applicants, up from 30 per cent now.

BTO applicants under this category will also get an additional ballot chance, for a total of three ballot chances.

In the ongoing February BTO sales exercise, a total of 4,428 BTO flats in Queenstown, Kallang/Whampoa, Jurong West and Tengah are up for sale.

As at 5pm on Friday – around the halfway point of the week-long sales exercise – most three-room and larger BTO flats across the four estates have attracted more first-timer applicants than there are available units.

The only exception is the three-room flats in Ulu Pandan Glades BTO project in Queenstown, which was still undersubscribed.

Applications will close at 11.59pm on March 6 on the HDB flat portal.

PropNex Realty chief executive Ismail Gafoor said the fine-tuning of BTO rules sends a clear message to home seekers that they should take their BTO or Sale of Balance Flats (SBF) applications more seriously, rather than taking an opportunistic shot to get a flat in good locations.

But he also noted that the new rules could come across as “rather strict” as the HDB will waive the suspension of first-timer privileges only if an applicant has 10 or fewer BTO flats, or five or fewer SBF units, to choose from.

“We feel that perhaps a proportion of 5 per cent of the units available, especially for larger BTO projects, or raising it to 30 or fewer BTO units could be fairer to applicants who may not be keen on taking up certain flats, for example if the unit has an undesirable facing,” said Mr Ismail, noting that applicants may be more selective given that a home is a big financial commitment.

The analysts were split on how the new rules might impact the HDB resale market, but most agreed that those who have their first-timer privileges suspended or are unsure about the BTO offerings would likely opt for a resale flat.

Huttons Asia senior director of research Lee Sze Teck said the increased CPF Housing Grant, announced in Budget 2023, would be an added bonus should home seekers look to the HDB resale market.

In May 2023, about 5,400 BTO flats in towns such as Tengah, Bedok, Kallang/Whampoa and Serangoon will be launched.

Between 5,200 and 6,200 flats in Choa Chu Kang, Tengah, Bukit Merah, Kallang/Whampoa and Queenstown will be offered in August.

Research assistant Amanda Tan, 26, who plans to apply for a four-room flat in Serangoon in May, said she is on the fence about the effect of the stricter rules.

“I feel it is a double-edged sword as it will incentivise more people to apply because they want a BTO flat instead of just trying their luck. But it would not be ideal for those who end up with a lousy queue number and are left with bad units that people don’t want,” she said.

University student Xu Ruohan, 22, welcomed the new rules but said the additional BTO ballot chance for married couples is unlikely to entice her to get married before she submits her application.

“The rules are good because people cannot expect to keep getting priority, especially when they’re being selfish and do not pick flats when they have the chance to,” said Ms Xu, who hopes to apply for a BTO flat in the western or central area of Singapore in 2025.

• Additional reporting by Judd Siow