According to Minister Lee, the government will continue to review and refine the rules to ensure an equitable distribution of the limited housing supply.

The tightened rules for non-selection of flats by the HDB, set to take effect from the August 2023 BTO launch, are aimed at directing housing units towards those with pressing needs. This was stated by National Development Minister Desmond Lee in the Committee of Supply debate on Mar 2.

Under the new rules, first-timers who fail to book a BTO flat when selected to do so will be redesignated second-timers for a year in the computer ballot, while second-timers who decline to choose a unit must wait a year before they can reapply.

Mohan Sandrasegeran, senior analyst, research & content creation at One Global Group, explains that the rules target those who fail to attend their flat selection appointments or opt not to book a flat despite being offered one.

Lee Sze Teck, senior director of research at Huttons Asia, further explains that if 20,000 BTO flats are launched for sale in a year, up to 60,000 queue tickets are allocated to applicants, and 24,000 applicants decide not to select a unit (~40%). “With this change, it should reduce the number of non-selection and thus allow more applicants to book a flat,” he says.

There are various reasons for applicants not selecting a flat, he adds, such as non-availability of choice units, limited units left or sudden change in employment status. “Since they intend to stay there for many years, they would want to choose the best unit in their view. To those with a genuine reason, they will feel aggrieved by this change,” says Lee.

The change is projected to reduce the number of applicants for the August 2023 BTO launch by as much as 20%, but not eliminate the non-selection of flats. Huttons predicts that there will be “a rush to apply for flats” in the February 2023 and May 2023 BTO launches before the penalty JCube Residence kicks in.

Nicholas Mak, head of research & consultancy at ERA Singapore remarks that the aim is to reduce the pool of first-time homebuyers, especially among those who have failed to select a BTO flat in multiple attempts, and to satisfy housing demand.

To this end, the government is giving increased priority to specific first-timers and more options for seniors, as well as low-income singles. Ismail Gafoor, CEO of PropNex Realty, notes that first-timer family applicants aged 40 and below (which form around 10% of all 1st-timers) will get priority in BTO and sale of balance flats, as well as more ballot chances for flats in non-mature estates.

Christine Sun, senior vice president of research and analytics at OrangeTee & Tie, suggests that the penalty may cause more buyers to turn to the HDB resale market, and take advantage of the increased Central Provident Fund (CPF) housing grants to apply for a four-room or smaller resale flat should they still need to get an HDB BTO flat on the first attempt.

Not all first-timers may want a BTO flat for multiple reasons, points out Mak. “Some may only want to buy flats in certain locations, such as mature estates where there are rarely any new BTO projects,” he says, adding that the extended waiting period for BTO flats has resulted in some first-time homebuyers turning to the HDB resale market.

Minister Lee notes that the government will continue to review and refine the rules to ensure an equitable distribution of limited housing supply. “By enforcing stricter regulations, HDB hopes to discourage individuals who do not have genuine reasons for selecting a flat from taking up available housing units,” says Sandrasegeran. “This way, more flats will be available for individuals with pressing housing needs, who may not have the luxury of waiting for another flat to become available.”