HDB BTO and HDB resale prices have increased, are they still affordable?

For the past couple of years, we have been bombarded with news of climbing HDB prices as well as the increasing number of million-dollar flats. According to an article published on Straits Times in September 2022, HDB resale prices have been climbing for 26 straight months. For aspiring first-time home owners and low-income families, there is an increasing perception that HDB flats are getting expensive and out of their reach. This article looks past the headlines, breaks down the facts, and provides a few tips to help every Singaporean household to have a home to call their own.

BTO Flats, Resale Flats and Million Dollar Flats – What are they?

1) BTO flats

BTO flats stand for Build-To-Order flats which are new flats launched for sale and usually takes 4 to 5 years to complete. As at time of writing, BTO launches occur 4 times a year when aspiring home-owners ballot for their preferred HDB BTO flats. They are priced at a significant discount to prevailing market prices.

At the most recent BTO, 5-room flats at Central Weave were heavily subscribed and priced at a range of $720,000 to $877,000. This is hardly surprising given that the project is located at Ang Mo Kio Town Centre which is a mature estate bustling with amenities. For instance, residents can look forward to amenities such as market and hawker centre, Ang Mo Kio Polyclinic, Ang Mo Kio Hub, Ang Mo Kio MRT and bus interchange etc. If we compare to prevailing market transactions, 5-room flats in Ang Mo Kio that recently achieved their Minimum Occupation Period (‘MOP’) transacted at average prices of $0.9 million to $1.0 million. Even then, only 3% of flats on offer at the Aug 2022 BTO exercise are priced $800,000 or higher.

Alongside the launch of Central Weave, aspiring homeowners could also ballot for houses in non-mature estates such as Choa Chu Kang, Jurong and Woodlands. Starting prices for flats there ranged from $220,000 for a 3-room flat to $320,000 for a 4-room unit. In fact, over 9 in 10 4-bedroom BTO flats in non-mature estates cost less than $400,000 and over 9 in 10 5-bedroom BTO flats in non-mature estates cost below $500,000. Let’s also not forget that eligible first-time homebuyers can receive up to $80,000 in the Enhanced CPF Housing Grant to help with the flat purchase. More details on that in the article later on.

2) Resale flats

Resale flats are HDB flats owned by other homeowners and eligible for immediate sale to other homeowners. It caters for those who prefer to move in quickly without the longer wait times associated with HDB BTO flats. Moreover, those who have specific preferences on location would prefer resale flats since there is a limited number of projects on offer in each BTO launch.

Resale flats are also where million-dollar flats are made. In 2021, there are 259 million-dollar HDB flats. However, these attention-grabbing headlines should be put in perspective. As Diagram 1 shows, million-dollar HDB flats represented less than 1% of the total HDB resale volume transacted (29,181) in 2021. They are usually purchased by private residential property owners who are able to pay higher prices and COV compared to first-timer buyers.

Furthermore, over 90% of million-dollar flats were 5-room or larger flats located in mature estates and towns close to city centre. Beyond large floor area, they also possess unique traits and premium features. Therefore, contrary to popular belief, majority of HDB resale flats are still transacted well below the million-dollar mark. Besides, these prices also do not factor in the CPF housing grants which can go up to $160,000 for resale flats.

I think HDB can still be affordable and here are 3 tips to help first-timer families buy their first homes.

1) Tap on the housing grants available

Housing grants are available for eligible flat buyers. After factoring in housing grants on top of the subsidised BTO prices, the ticket price of HDB flats can be substantially lower. For instance, eligible first-timer homebuyers of BTO and resale flats can receive up to $80,000 and $160,000 respectively in housing grants to help offset the cost of their home purchase. Let’s take a look at the housing grants available to help aspiring home-owners.

a) Enhanced CPF Housing Grant (‘EHG’): EHG is applicable for both new and resale HDB flat purchases. Some of the key qualifying criteria include applicant(s) working continuously for at least 12 months prior to and be working at the time of flat application. (Refer to HDB’s website to check your eligibility) The amount of subsidies doled out is tiered to one’s average monthly household income as shown in Diagram 2.

b) CPF Housing Grants For Resale Flats (Families): This is to assist couples or families who are first-timer applicants buying a HDB resale flat. Depending on the type of resale flat and the nationality of the household members, the grants available range from $30,000 to $50,000 as shown in Diagram 3.

Note that average gross monthly household income must not exceed $14,000 for couples and $21,000 for those purchasing with an extended or multi-generation family. All other eligibility conditions can be found on HDB’s website.

c) Proximity Housing Grant (‘PHG’): This is to assist couples or families to live near or with their parents/child. Interestingly, PHG can be taken up by couples or families regardless of their status as first-timers or second-timers. As shown in Diagram 4, grants range from $20,000 to $30,000.

Therefore, first-time home owners who meet all the qualifying conditions can apply for the a) Enhanced CPF Housing Grant, b) CPF Housing Grant for Resale Flats (Families) and c) Proximity Housing Grant to receive up to $160,000 in subsidies when buying HDB resale flats.

d) Step-Up CPF Housing Grant: This is to assist 2^nd timer applicants who are in the lower-income group and wish to upgrade from a public rental flat to a 2-room, 2-room Flexi or 3-room flat in a non-mature estate, or from a 2-room flat in a non-mature estate to a 3-room flat in a non-mature estate. Successful applicants can receive $15,000 to help with their new or resale flat purchase.

As the Enhanced CPF Housing Grant and Step-Up CPF Housing Grant have demonstrated, the housing grants are tilted to provide more support for lower-income households. This ensures that help is given to groups which need them the most.

2) Buy within your budget

After understanding the amount of grants that one might be eligible for and adding it to the pre-determined budget, the family will be able to start shopping for HDB flats with a price range in mind. It is very important to be disciplined and stick within the price range.

For instance, if the budget only allows for a 3-bedroom HDB flat in a mature location, it is not advisable to strain financial resources by plonking for a 4-bedroom in the same location then. If the family desires a bigger flat, perhaps a non-mature estate may still fit the budget. Other attributes such as high-storey, amenities, accessibility may also need to be traded off to work within the budget. The reality is that size, convenience, comfort and location all come with its own premium.

For the case of young couples, it might be financially prudent to consider smaller HDB flats as their first home since they may not need so much space initially. When the need arises subsequently, the young couple might find that they have more savings to afford a bigger unit at the later stage of their lives. This is exactly what I did for my first BTO purchase.

Of course, expectations need to be managed but we managed to make it work and find a unit in a location we desire and within our budget.

3) Non-mature estates might be more appealing compared to the past

The initial inconveniences associated with non-mature estates might be less of an issue these days due to the following phenomenon:

• Remote working– With remote working increasingly common, the future of work arrangement could mean less commuting which means living in a non-mature estate may not be so daunting anymore. Compared to the past, instead of making hour-long commute to the workplace on a daily basis, a hybrid working model may only require the home-owner to make 2 to 3 of such trips per work week.
• Improved Transport Accessibility– The government is committed to build more MRT lines such that 8 in 10 households will be within a 10-minute walk to a MRT station by 2030. New MRT lines in the pipeline include Cross Island Line and Jurong Region Line will massively improve accessibility, especially for those living in non-mature areas.
• Suburban shopping mall –Waterway Point, Seletar Mall and Hillion Mall are examples of suburban shopping malls which cater to the needs of residents living within their vicinities. This means that residents staying in non-mature estates no longer need to travel downtown to Orchard Road to fulfil their shopping needs.

In conclusion, a combination of housing grants, making trade-offs and buying in non-mature estates may still allow first-timers and lower-income families to affordably buy a HDB flat to call their home. It is important to look past the sensational headlines and avoid jumping to conclusions too quickly.

Disclaimer: This article is written in collaboration with the Ministry of National Development and all views expressed here are the independent opinion of Heartland Boy.