The government recently introduced a new scheme for Singapore citizens applying for HDB flats. Known as the Re-offer of Balance Flats (‘ROF’), it pools all unsold flats after a Sale of Balance Flats (‘SBF’) exercise. Heartland Boy thought this was a very interesting scheme. The public seemed to agree too as more than 5,500 applications were received for the 1,394 flats that were available. Here is Heartland Boy’s review of the ROF scheme and how aspiring home-owners can benefit from HDB Re-Offer Of Balance Flats.
What Is The Re-offer Of Balance Flats?
According to HDB, the Re-offer of Balance Flats is a sales exercise conducted twice yearly, in February and August. The ROF sales exercise will pool all flats that remain unsold after a Sales of Balance exercise. Since the SBF exercise is also conducted twice yearly in May and November, the upcoming February 2018 ROF exercise shall absorb all the balance flats available from the last SBF exercise in May 2017. This was exactly what happened whereby the inaugural ROF exercise in August 2017 took in all the unsold flats arising from the November 2016 SBF exercise.
Applicants simply need to apply for the ROF exercise by registering their particulars and paying the administration fee. Unlike the SBF exercise, applicants need not indicate the estate location and type of apartment size that they are interested in. Instead, all successful applicants will be shortlisted using a computer ballot and get a chance to select a HDB flat, subject to their allocated queue number and availability of the unit. HDB indicates that ballot results will be made known to applicants 1 week after the close of the ROF exercise.
The following advantages offered by the ROF scheme allow aspiring home-owners to benefit in the following ways:
1. Meeting Urgent Housing Needs
In the maiden ROF exercise conducted in August 2017, HDB revealed that 71% of the flats offered were already completed. This implies that applicants who have urgent housing needs would be ready to move into their selected HDB flat in approximately 6 months from the application exercise. This is in great contrast to a HDB Build-To-Order (BTO) flat, whereby the average wait time from application to collection of keys could be between 4 to 5 years. Heartland Boy knows this very well, as he is still waiting for the keys to his BTO unit after successfully applying for it in a September 2014 BTO exercise.
The short waiting time is a great advantage as young couples would not have to delay marriage or even parenting aspirations owing to a lack of a permanent roof over their heads. In addition, money would not be unnecessarily wasted on paying rent as a short-term solution to immediate housing needs. The ROF exercise is specifically designed to benefit first-timers as at least 95% of the ROF supply will be set aside for first-timer families.
2. Flexibility of location and unit type
One of the greatest advantages of the ROF scheme is that aspiring home owners need not list down the estate location and the apartment type at the point of application. This implies that applicants need not have to make a “fixed choice” at the beginning. For instance, in a SBF exercise, one may be deterred from choosing a mature estate such as Toa Payoh due to the limited number of flats available. Wanting to satisfy an urgent housing need, the applicant may instead be forced by circumstances to opt for a non-mature estate whereby there are several hundreds of HDB flats available for sale. For the record, in the recent ROF exercise, the unit types made available range from two-room flats under the Flexi Scheme for elderly Singaporeans to three-room, four-room, five-room as well as 3G (generation) and executive flats. In addition, they were well spread out across housing estates, which include both mature and non-mature neighbourhoods. Therefore, the beauty of the ROF exercise is that applicants need not make a decision at the point of application, and simply leave their fate to the luck of the draw.
3. A Game Of Chance
Heartland Boy is well-aware of many second-timers who would gladly pay the $10 administration fee and hope to get a favorable number in order to obtain a prized unit. Yes, even when the odds of getting the unit are 100:1. Afterall, they reasoned that this is better odds than 4D! Well, to those who religiously participate in SBF exercises for such purposes, the ROF scheme should be music to their ears. Here is an example of a prized unit. A 5-room HDB unit with a gross floor area of 110sm located in Kallang and completed in 2006 is offered at $594,200 in the August 2017 ROF exercise.
A quick search for comparable units on Property Guru revealed that they are listed at asking prices ranging from $838,000 to $850,000. Heartland Boy took care to choose resale units with the same existing lease.
Applying a 15% discount to account for the bid-ask spread, renovations, difference in floor level, a similar unit would therefore be sold on the secondary market by a private owner at around $714,000. Therefore, a successful buyer of the 5-room HDB unit from the HDB ROF sales exercise would immediately be in the money by $120,000 compared to the resale unit. As a result of generous subsidies from the government, the buyer is able to pocket a handsome profit margin of 20% over his purchase price.
What Heartland Boy would like to illustrate is that the removal of the need to indicate the choice of location and unit type could imply that the odds of getting prized units could be enhanced especially if many such prized units are identified. Well, not all applicants are opportunists as Heartland Boy has described. The ROF scheme would appeal to those couples who are undecided on the estate location and unit type, and would simply let fate decide where they would stay!
Ironically, the flexibility offered in a HDB ROF exercise could also turn out to be a double-edged sword.
Unimaginable Amount of Scenarios To Plan For
If Heartland Boy ever participates in the ROF exercise, he would be spending way too much time to plan for all the “what-if scenarios”. As someone who is methodological, he would have to list down all the pros and cons of each estate, development, and unit type. Throw in Heartland Girl into the equation and the marriage would potentially be on the rocks!
In addition, if an applicant finds himself being allocated a less than desirable queue number, it will be an emotional dilemma having to grapple between shorter waiting time and negative property attributes. They would have to consider factors such far-flung locations, low floors etc. Not to forget that forgoing an opportunity to select a flat when there are still available units would constitute as an opportunity passed. First timers and second timer families only have 2 bites of the cherry before being forced to wait out a 1-year moratorium to regain their first-timer status and eligibility to participate in a HDB sales exercise respectively.
In conclusion, the new Re-Offer Of Balance Flats scheme by HDB can indeed benefit aspiring home owners. Not only is there an expanded range of options, more aspiring home-owners should be able to find a home that best suits their needs simply from an increase in the frequency of sales exercises. This is especially true if the applicants already know what is most important to them when buying a house so that they are prepared for all types of scenarios depending on the ballot result. Remember to also consider your housing mortgage concurrently. You can obtain the most competitive package via PropertyGuru’s free software, Smart Refi.