PRs may switch to mass-market condos

PHOTO: PRs may switch to mass-market condos

SINGAPORE - New rules governing permanent residents (PRs) buying HDB resale flats could send ripple effects through the markets for private homes and executive condominiums (ECs), say analysts.

As the rules announced on Tuesday make it harder for PRs to buy resale flats, they may seek mass-market condos instead.

But with fewer potential buyers for their homes, HDB owners will have fewer opportunities to upgrade to their traditional next rung on the housing ladder - mass-market private flats or ECs.

"It will reduce the buying demand from HDB upgraders for both HDB flats and private properties ... (and) slow down the rate of price increase of private residential properties," said SLP International research head Nicholas Mak.

The rules state that PR households must wait three years after obtaining PR status before they can buy an HDB resale flat.

Some PRs might be forced to look for units in the private market but not everyone will be able to afford such a home as the gap in prices remains wide, noted Religare Capital Markets on Wednesday.

Mr Mak said PRs make up about a fifth of the households that buy HDB resale flats so transactions may fall by 15 per cent to 25 per cent due to the new rules.

He said he previously expected private home prices to rise by 2 per cent to 4 per cent this year from last year, but now expects the increase to be between 1 per cent and 3 per cent.

However, some developers of mass-market homes see a possible silver lining.

They hope the increase in PR demand for their units will outweigh a fall in demand from HDB upgraders.

"It could be beneficial for suburban projects that are still under construction," said EL Development managing director Lim Yew Soon.

"PRs who urgently need a home would probably have to rent and if they have to pay rent anyway some might instead go for developer sales."

The chief executive of UE E&C, a developer of ECs and condominiums, Mr Chua Hock Tong, said some potential HDB buyers may also turn to ECs.

"ECs are after all not subject to the application of HDB loans, and therefore home buyers may get to enjoy a longer loan tenure from financial institutions," Mr Chua said.

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