Applying for the May 2015 BTO launch or SBF? Some things you may want to consider.

May 2015 BTO SBF

If you’re in the market for a new home, you’ve probably noticed that HDB has just released the sale of over 9000 Built – To –Order (BTO) Flats and Sale of Balance Flats (SBF May 2015).

9431 units all around Singapore to be exact. This is part of the Government’s drive to increase the supply and possibly to drive down prices to make HDB flats more affordable.

The price of new flats are certainly very tempting, but before you submit an application for a unit, here are a few factors you need to consider.

1. Resale Levy

A lot of prospective buyers of new flats are not aware that they would need to pay a resale levy if this is their Second Subsidized HDB Flat.

What is a subsidized HDB flat?

It is one of the following

A) A flat that you purchased directly from HDB either from a previous BTO or SBF or if you’ve purchased it a while ago, from the ‘Walk-In Selection’ scheme that HDB used to have. Flats bought directly from HDB are typically cheaper than those bought on the open market.

B)A resale flat purchased using a grant, typically the first timer grant of $30 k or a family grant of $40k.

According to HDB, the resale levy is “ meant to reduce the subsidy on the second subsidised flat so as to maintain a fair allocation of public housing subsidies between first- and second-timer citizen families.”

This ensures that owners of subsidized properties cannot or shouldn’t profit excessively from the sale of the first flat.

How much Resale Levy do I need to pay?

The amount of resale levy you pay depends on the size of your first flat.

Resale Levy Table

[Please take note that you might also be affected by the old resale levy policy that was in force before 3rd March 2006. ]

3)Loan amount you are entitled to.

The method of calculating the HDB loan amount you are entitled to or the MSR has changed as part of the Government cooling measures. Even if your income situation has not changed since your last Housing Loan Eligibility (HLE), you may not be eligible for the same loan amount.

As of 9 December 2013, based on the new MSR rule, your HDB or EC loan cannot be more than 30% of your salary. The loan tenure has also been reduced to 25 years.

You should also take note of the no of years left that you are eligible to take a HDB loan.

4) Nearing Retirement age and Minimum Sum

If the purchase of the second BTO takes place while you are nearing 55, you should be aware that you would need to set aside half of the minimum sum in your retirement account (RA), so you would need to plan your timeline properly to avoid being in a situation where you do not have sufficient funds to pay for the BTO/SBF.

4) Miscellaneous costs for renovation

Although getting a BTO may seem like a great deal, you should factor in miscellaneous costs like renovation, furniture etc . Certain developments may come with built in wardrobes, toilet accessories,  but you may want to also hire your own contractors.

You should also read our article on the comparison between BTOs and Resale Flats

5) The falling prices of flats

The introduction of new flats in the market is meant to stabilize the demand and supply. High Demand and insufficient supply led to sky high prices and the Government is working hard to stabilize prices though the injection of supply.

However, this also means that the price of your current flat might fall. Falling prices does not mean that you should not sell your flat. It just means that you should include a buffer amount when doing the calculations to determine your profit.

Good Luck! 

 

First Timers Dilemma : HDB BTO or Resale Flat?

Should first -timers buy a HDB Build to Order (BTO) Flat or Resale Flats?

In Singapore, HDB (Housing and Development Board) is the main developer of public homes. High rise apartments, or better known to those living in Singapore as HDB Flats, is home to more than eighty percent of Singaporeans.

Each Singapore Citizen married couple (or Singaporeans within accepted criteria) is given 2 chances to purchase apartments directly from HDB. These apartments or flats are subsidized and are better known as Build-To-Order (BTO) Flats.

Which is better BTO or resale

For newly married couples excited to begin their lives, there’s always the choice between buying a new HDB BTO or a resale flat. Until recently, resale flats in the open market have been too expensive for most first timers, with COVs ( Cash Over Valuations i.e. the cash premium above and beyond the flat’s valuation) going for an average of $30 000 to highs of $100 000. It is not likely that these young couples have that amount of spare cash, especially if you consider wedding and other expenses. COVs have been falling to the point that it is no longer a norm, however it may still exist if you purchase a flat above the valuation price.

(Confused? Don’t worry, we break it down in this article. Does $0 cov mean no cash upfront?  If you need more info regarding the steps to buying a resale flat, read this, " Buying a HDB resale flat ")

However, for new couples, settling into your own home as soon as possible can be one of the single most crucial steps in life. Unless you’ve been living together prior to marriage, a practice not very common to Asians, you would treasure the privacy that a new home provides, allowing you and your new spouse the opportunity to negotiate simple things in married life (like who cooks and does the dishes) and slowly work on constructing your lives.

If you are one of those still undecided about if you should be buying a HDB BTO or a HDB Resale Flat, these are some facts you can consider.

HDB BTO 

Resale Flats

Waiting Time

The waiting times have an average of 2-4 years depending on the developer’s schedule.

Once you decide on a house and exercise the option to purchase, it would take about 3 months to the point you receive keys to the flat.

Privacy

Living with either set of parents can result in a lack of privacy, having to meet the expectations of the In-laws etc.

The privacy that comes with your own space, having a room with an en suite is most ideal

Flat Sizes

New Flats are typically smaller in size.

Resale HDB flats are much larger in size

Settling on one with an Size and Ideal Position.

Buying a BTO is similar to buying an item virtually or online. You view it on a screen, put in you order and be patient until its delivered.


Unfortunately for HDB BTO, there is no return policy if you are not fully satisfied with it.

When buying a resale flat, you would put in an offer to purchase the flat if you are totally satisfied with it. This includes being satisfied with the size, the location and the position of the flat i.e. the direction it is facing, the view, etc.

Cost

The cost of a Build to Order flat is subsidized by HDB which means that it is cheaper.



This means that you will not be able to utilize your first timer grants. ( $40k - $70 k )



However if the total income of you and your spouse is less than $6500, (depending on the size and location of the flat you select), you will be eligible for the

Additional Housing Grant and the Special Housing Grant.

Also, if your order for the BTO is not put in at the initial launch, i.e. you buy it at the SBF (Sale of Balance Flat) Exercise, the price may have risen substantially to be similar to flats in the resale market.

Resale Flats prices are pegged to the market rate of houses in the area and the current Real estate prices at that point in time.

For first time buyers, HDB provides a grant of $40 000 - $50 000 or more depending on your household income.

This is not inclusive of the $20 000 Proximity grant that you can get if you pick a flat close to your parents/ parents-in-law

You may also qualify for the Additional Housing Grant  of up to $40 000 if your combined income is less than $5k.







Additional Housing Grant

Renovation Costs

New BTO flats come unfurnished and you have to factor in renovation costs.



However, as they do not have existing floorings, cabinets etc, you can save quite a lot on hacking costs. You basically have a blank canvas to create your ideal living space.



Another positive point for new couples is that buying a flat that would only be ready in the future enables you to save up for renovation costs instead of paying additional interest on loans

With regards to Renovation Costs, there 2 are scenarios which can happen.

A) You can select an apartment in good condition and save time and effort and money.

B) If you want to redo the flat, you would need to spend more on hacking and tearing down the current furnishings.

Old homes may also come with defects that form over time, for example leakage in pipes, crack in ceilings etc.

Amenities

New flats in new estates usually do not have established amenities in the neighbourhood.

Mature housing estates have amenities conveniently within the neighbourhood

If you are ready to purchase a resale flat but you are not sure where to start, you may find this article useful : Buying a resale flat.

HDB Resale Flat - Where to start