Community Care Apartments have a popularity problem.

Harmony Village @ Bukit Batok, the first Community Care Apartments (CCA) project, received 706 applications for its 169 units. That’s an oversubscription rate of 4.2 applicants per unit. Nice start.

The next CCA project in Queenstown was still oversubscribed, but by then the application rate fell to 1.6, and we have to consider that it’s Queenstown — the appeal location did a lot of the work to drum up the application interest. 

Three subsequent CCA projects were all undersubscribed, with the last project at Fernvale Plains receiving only 152 applications for its 207 units (or 0.7 applicants per unit).

Now to be fair, location does play a pivotal role here: we don’t know the exact demographics by age, so towns with a lower population of seniors may see less demand and so forth. But one increasingly obvious issue behind the lacklustre demand for CCA units is cost.

I’m not referring to the price of the CCAs, but of the compulsory Basic Service Package. 

A recent Straits Times article has numbers that reveal the problem:

When Harmony Village was launched in February 2021, buyers taking a 15-year lease were given two payment options: they could pay $22,000 upfront, or pay $13,000 upfront followed by an estimated $50 a month.

At the time, it had also been stated that, while the $50 monthly fee could be reviewed, increases would be capped at 5 per cent every five years. 

So why then, in the linked article, do the two residents interviewed by The Straits Times say they pay about $180 a month? 

For those who were considering CCAs, the realisation that the amount is three times above the initially mentioned “$50” is bound to be alarming. 

From $50 to $180

Let’s start by explaining how $50 became $180. 

The original $50 monthly payment assumed an upfront payment between $13,000 and $42,000 upfront. However, the payment model subsequently changed. 

By the time Queensway Canopy — the second CCA — was announced in October 2022, new buyers were no longer offered the original payment method. Instead of the bigger upfront payment, they could make a refundable deposit of just one year in fees and subsequently pay it on a monthly basis.

This option started at $164 per month. So it was cheaper upfront, but involved bigger monthly repayments. As an alternative, residents could also choose to pay $6,200 for every three-year period.

However this substantial change occurred between the first and second CCA offerings, with seemingly little public awareness of the switch. 

Most buyers are not going to retrieve the terms from different BTO launches, calculate which amounts were paid upfront, which could be revised later, etc. This is why, to a large number of buyers who may have considered a CCA, all they see is this:

The first CCA mentioned $50 a month, the second mentioned $164, and there are people reportedly paying about $180. 

Unless they’ve closely tracked what’s happening, that just looks frightening.

Basic Service Package prices steadily increasing

That misconception is just part of the problem, because the Basic Service Package genuinely is becoming more expensive.

Misapprehensions aside, they’re not at fault for worrying about the cost.

The original 15-year package at Harmony Village could be paid off for $22,000 upfront. Under the revised service model from Q2 2027, the estimated total cash requirement has risen to $31,000. 

The difference is bigger for a 35-year lease: the original package could be paid off for $59,000 upfront, whereas the estimated cash requirement under the revised model will be $106,000. 

At the newer Merpati Alcove and Fernvale Plains projects, the estimated requirement for a 35-year lease will be around $94,000 under the revised model. (You can see the pricing here). 

Granted, this is because the revised figures are projected cash requirements over the full lease; they also need to account for factors like inflation. But I think this difference is also part of the concern.

I feel that under the original arrangement, buyers had the option to pay upfront and lock in the cost to some degree. 

Under the newer model, residents must budget for recurring payments, all while being uncertain how much those may change over the course of time.

CCA buyers should be given a choice 

I don’t think the answer is to demand that the monthly fee return to $50. 

That figure depended on buyers making a substantial upfront payment, and I would say it’s unrealistic to expect an operator to predict manpower and care costs accurately for the next 35 years.

But every CCA launch should present its costs in the same format. Buyers should be shown the initial payment or deposit, starting monthly fee, projected cash requirement over the full lease, and the maximum permitted rate of increase. 

CCA buyers could also be given a choice between payment structures. 

Those who prefer certainty could make a larger upfront or partial payment to lock in more of the cost. Those who prefer a lower initial outlay could pay monthly, but future increases should follow a transparent formula with a clear cap.

For now, better explaining why the original $50 figure appears to have become $180, or thereabouts, is a good place to start. 

It may not solve every reason for the declining demand, but it removes one source of alarm. 

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This article was first published in Stackedhomes.