Tightened rules for non-selection of HDB BTO flats from August

For individuals with genuine reasons for not selecting a flat, the new rules provide exemptions such as extended final selection appointment duration, deferment of selection appointments and ordering units from multiple projects. HDB will also refund the application fee to unsuccessful flat applicants. These measures provide greater assurance to individuals who genuinely wish to book a flat.

The Singapore government has tightened the rules for first-time buyers who refuse to book a BTO flat when invited. These terms will come into effect from the August 2023 BTO launch.
National Development Minister Desmond Lee said at the Committee of Supply debate on Mar 2 that the new rules are in place to reduce the number of people who decline to take on a flat and to ensure a more efficient allocation, so those needing a flat can get it more quickly.

First-timers who fail to book a BTO flat when selected to do so will be redesignated as second-timers for a year in the computer ballot. Second-timers who choose not to pick a unit must wait until they can reapply for a BTO flat again.

Mohan Sandrasegeran, senior analyst at One Global Group, said that the modifications target people who don’t attend their flat selection appointments or opt not to book a flat despite getting one.

According to Huttons Asia, when 20,000 BTO flats are launched for sale in a year, around 60,000 queue tickets are allocated to applicants. The number of people who fail to select a unit is 24,000, or roughly 40%.

Lee Sze Teck, senior director of research for Huttons, said that this high figure should be reduced through the change. He added that it should lead to more applicants being able to book a flat and “further improve accessibility to a BTO flat which is a public good”.

Applicants may not select a flat for a range of reasons, including the limited availability of choice units and the possibility of abrupt changes in employment, according to Huttons’ Lee.

This change will still not eradicate the non-selection of flats among applicants, and Huttons estimates that the number of applicants for the August 2023 BTO launch may drop by as much as 20%.

Lee thinks that there could be a sudden increase in applications for BTO flats during the February 2023 and May 2023 launches before the penalty kicks in.

The reason for guidelines on selecting a BTO flat is to fulfill the housing demand and to decrease the pool of first-time buyers, especially those who disregarded their BTO flats after multiple tries in former BTO exercises. This was stated by Nicholas Mak, head of research & consultancy for ERA Singapore.

The government is also more likely to prioritize certain groups of first-time new flat buyers, and give seniors and low-income singles more options.

Ismail Gafoor, CEO of PropNex Realty, believes that the announced changes were targeted, focusing on population segments with a greater need for housing.

First-Timer (Parents & Married Couples) or FT(PMC) aged 40 and below make up approximately 10% of all first-timer family applicants and will be given priority in BTO and the sale of balance flats (SBF). For Gafoor, the BTO and SBF flats are likely the start of an important journey for many Singaporeans, providing them with a means to build wealth and capital in real estate and to support aspiring efforts to own a private home.

Starting from the August 2023 BTO exercise, FT(PMC) applicants will have three ballot chances for a BTO flat, raising their probabilities of securing a flat.

Furthermore, the government is also encouraging FT(PMC) to apply for BTO flats in non-mature estates by providing them more ballot chances as well as allocating more BTO flats and SBFs to them.

The non-selection penalty may possibly steer some buyers towards the HDB resale market, according Tengah Plantation EC to Christine Sun, senior vice president of research and analytics at OrangeTee & Tie. Affected buyers may take advantage of the high Central Provident Fund (CPF) housing grants and apply for a four-room or smaller resale flat.

Not all FT(PMC) want to apply for a BTO flat for varied reasons, observes ERA’s Mak. He believes that some people may only want to buy flats in certain areas, such as mature estates where there are rarely any new BTO projects. Also, due to the current long waiting period for BTO flats, some buyers may have to look for flats in the HDB resale market instead.

The stringent rules for non-selection of flats imposed by HDB is to address the limited housing for individuals with needs that cannot wait. Sandrasegeran of One Global believes that by enforcing more stringent regulations, more flats will be made available for individuals with urgent housing needs.

In addition, there are exemptions for individuals with genuine reasons for not choosing a flat, such as extended final selection appointment duration and ordering units from multiple projects. HDB will also reimburse the application fee to unsuccessful applicants. These solutions should provide assurance to people who are interested in booking a flat.