Should you apply for the next BTO or SBF launch? : Advice for the second timer.

HDB BTO Launch Picture

Credits : HDB Website

Buying a flat directly from HDB is usually a more direct and affordable way to afford a flat. 

The amount of cash that you need in the process is usually a fraction of that compared to a resale transaction. This makes it a very attractive choice for Singaporeans who choose to save their cash for other needs like renovations and furniture.  

This article is for second timers  (i.e. those who already or previously own a HDB flat) who need help deciding if your next purchase should be BTO, SBF i.e. a flat purchased directly from HDB.  For first timers who need more information about your upcoming purchase, you should read A first timer's dilemma - Resale Vs BTO instead. 

There are 3 types of sales exercises for flats directly from HDB.  We have written about the different types of exercises in the above article as well. 

  • BTO : Brand new launches. 
  • SBF : Unsold flats from the previous launches + Flats that have returned to HDB
  • ROF : Open Booking available throughout the year. 

Every year HDB releases a number of new flats in their BTO and SBF exercises. This is a 2-week period where applications would be open for flats in different locations around Singapore, previously identified by HDB.  If you are keen to be alerted about the launches, we recommend that you sign up for SMS alerts on the HDB website.

As a second timer, the price of new flats are certainly very tempting compared to your existing one, but before you submit an application for a unit, here are a few factors you need to consider as a second timer. 

1. Resale Levy

A lot of second timers  are not aware that they would need to pay a resale levy for their second subsidized HDB Flat.  But what exactly is a subsidized HDB flat? 

What is a su​bsidized HDB flat?

Simply put, 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?

There are two resale levy policies that might affect you. 

  1. For those who sold their subsidized flats before  3rd March 2006

  2. For those who sold their flats on and after 3rd March 2006.

Please note that even if you have bought and sold resale flats after this first purchase you would still need to pay the resale levy upon buying your next subsidized flat.  Buying and selling resale flats do not require the resale levy to be paid.  The amount of resale levy you need to pay depends on the size of your first subsidized flat.

Resale Levy Table

To find out the exact amount that is applicable to your situation, you should contact HDB directly.  For example, downsizing to a 2-room flexi flat for elderly might command a revised resale levy. 

You can read more about it on this link here.

2) Second HDB Loan and the MSR

If you are planning to take a second HDB loan to fund your new flat, you should be aware of 2 issues. 

  1.  the compulsory clawback amount 

  2.  and the revised loan calculation method (i.e. the MSR).

Clawback for the Second HDB Loan

The 'clawback' is a compulsory amount taken out of your CASH sales proceeds, that you have to put back into the purchase of your next house, IF you are planning to take a second HDB loan.  

The exact amount varies because it depends on the profits you get from the sale of your subsidized flat. If you are planning to cash out from your current flat, i.e. use the cash proceeds for other things like paying off loans, renovations etc, you better do proper financial planning because HDB would require that you use 50% of your cash proceeds to pay for your next flat. 

 There are exceptions for those with cash proceeds below $50k.

  •  If your cash proceeds are lesser than $25 000,  you don't get to keep the entire amount. 
  • For those whose cash proceeds is between $25 000 - $50 000, you get to keep $25 000 and you have to use the rest to pay off your next flat. 

Read more about overborrowing on HDB's Page :

Mortgage Servicing 
Ratio (MSR)

The method of calculating the HDB loan amount you will receive, or now known as 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 you received previously.

  • 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 number of years left that you are eligible to take a HDB loan as that would drastically affect the amount.

Read more about the MSR on HDB's page.

4) Nearing Retirement age and Minimum Sum

Retirement Sum HDB

If the purchase of your 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). 

 To avoid this situation, 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.

5) 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 check what is included in the package before you commit. 

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

6) 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 through the injection of supply.

However, this injection of supply also means that the price of your current flat might fall and you may not profit as much. 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.

If you are set on purchasing a second subsidized flat, you might want to read our article on how to pick  a million dollar HDB Flat. 

Good Luck! 

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Zubz Kadir is the founder of PropertyRocking.SG She believes that real estate is the biggest purchase one can make and such a decision should not be taken lightly. Knowledge can make or break a purchase. Zubz graduated from National University of Singapore (NUS) Bachelors with a Degree in Informations Communications and Sociology from the and a Masters of Mass Communications from Nanyang Technological University (NTU).