To illustrate how Plus flats will help with affordability, Mr Lee gave the example of two couples looking for a four-room flat in the central region that is near transport nodes.
In today’s market, such choice BTO flats are priced around $650,000 before grants if offered as ordinary flats in mature estates, he said.
Couple A, who together earn $9,000 a month, are eligible for an Enhanced Central Provident Fund (CPF) Housing Grant (EHG) of $5,000, and will not need to top up an additional amount using CPF or cash to buy this flat.
They will use about a quarter of their monthly income for the mortgage, and pay about $250 in cash. Couple B earn $7,000 as a household and are eligible for an EHG of $25,000.
Mr Lee said this flat would be out of reach for Couple B, who would need to use almost one-third of their monthly income – above the mortgage servicing ratio of 30 per cent of a borrower’s gross monthly income. They would also need to top up $52,000 in cash or CPF, and pay around $400 in cash a month.
When this same flat is offered under the Plus model, the tighter resale restrictions and additional subsidies will bring its price down to around $550,000 before grants, Mr Lee noted.
Couple A would now pay less than a quarter of their monthly income and zero cash to service their mortgage.
For Couple B, the flat is now within their reach as the $52,000 additional top-up is reduced to zero, and they would pay slightly more than a quarter of their monthly income and $250 in cash a month