Does Your HDB BTO Flat Price Appreciate While Waiting For It To Be Built?

Many of us buy an HDB BTO flat as our first home. BTOs, or Built-to-Order flats, are heavily subsidised by the government to provide affordable housing for Singaporeans – beyond just the grants that are given. We can see this in HDB’s August 2022 BTO launch, where “Transacted Prices of Resale Flats Nearby” are all higher than the BTO’s “Selling Price (Excluding Grants)“.

For example, in the Woodlands South Plains project in the table below, 3-room BTO Flats were priced from $188,000, which is almost half of what nearby HDB flats are selling for at the lower end ($374,000). Meanwhile, 4-room flats at Central Weave@AMK were selling from $535,000. This is 29% lower than what nearby HDB flats are selling for at the lower end ($690,000). For context, these two BTO projects provided the highest and lowest discount rates compared to nearby resale HDB flats.

Source: HDB

Even though BTOs typically give us an attractive purchase price, there are always pros and cons to any decision we make. The biggest disadvantage in buying a BTO is stated upfront in its name – that it is built to order. This usually translates into a waiting time of between 3 and up to 6 years for the flat to be built, depending on the exact location we choose. There may also be unexpected delays with BTOs, such as the recent COVID-19 pandemic causing delays to as many as 80% of BTO projects at one point. Buying a resale flat, on the other hand, means that we can shift in immediately.

HDB Prices Have Been Rising (Unevenly Over The Last 3 Decades)

For those considering a BTO flat today, we would surely have heard how our parents were able to buy their HDB for a very modest amount in the 70s, 80s and 90s. The prices today look like they are a world apart from those days. This should not be a big surprise, as Singapore is a different world today compared to those decades.

While there are no statistics for how much HDB used to sell its newly built homes in past decades, we can look at how HDB resale prices have been increasing since 1990. The Department of Statistics Singapore only provide information from this starting point.

Source: Singapore Department of Statistics (DOS)

The first thing we can observe in the chart above is that HDB prices have risen over 650% since 1990. This basically means that a home worth $100,000 in 1990 would be equivalent to a similar home worth about $650,000 today. If we were to go even further back, there’s no reason to believe the increases would not be even steeper.

Another thing we can see is that HDB resale prices are currently at their peak, breaching the previous high in 2013. Again, this isn’t surprising since we have been reading about how home prices have risen strongly in the aftermath of COVID-19.

In fact, there have been two rounds of cooling measures, in December 2021 and September 2022, aimed at slowing down the price rise. The latest September 2022 cooling measures was also more targeted to curb rising HDB prices.

Read Also: New Property Cooling Measures In 2022 And The HDB Buyers, Downgraders & Upgraders Who Could Be Affected By The Latest Changes

But Does Your HDB Flat Price Appreciate While Waiting For It To Be Built?

As a function of market forces, HDB resale prices fluctuate – even as it tends to go in an upward trajectory. One question for some of us who have purchased our BTO flats is whether its price goes up even while we’re waiting for it to be built.

The short answer is that it does look like it.

Even though the BTO flats are outside of the market while its being built, and will continue to be outside of the market for the duration of our 5-year Minimum Occupation Period (MOP), its price should follow the general market direction. A simple way to think about it is that even though we cannot sell our BTO flats until we hit the MOP, its value should track what’s happening in the HDB resale market.

It’s not just an unknown amount either. Apart from HDB resale prices, we can view how much HDB prices unsold BTO flats on the Open Booking of Flats – where buyers can purchase HDB flats as early as the next working day. This is where we can learn whether our unbuilt BTO flats prices have actually appreciated – by studying whether the prices listed are higher than the initial launch price.

Read Also: Complete Guide To Understanding And Applying Under HDB’s Open Booking Of Flats Option

How Much Do HDB BTO Flat Prices Increase While They Are Being Built?

Locations for the October 2022 Open Booking of Flats have been published on the HDB website. While they are meant for those who want to purchase their HDB flats, it can also provide useful information for those who bought units in the same projects as the available flats.

Personally, I was checked whether there were any flats being offered from the new estate that I had applied for my BTO flat. For the purpose of this article, I will use examples from my BTO flat purchase (while trying to refrain from mentioning the estate – although, readers may be able to guess it).

I purchased my BTO flat in the second half of 2017. While I cannot find a comparable unit to the one I purchased in the October 2022 Open Booking of Flats, I can use price points from my BTO launch to compare against the units that are listed.

One example is the unit in the table below – a 4-room flat, on the 2nd floor listed that is available for the Open Booking of Flats. We can see that the price starts from $601,000.

I can look at how much a similar unit was priced during the BTO launch in 2017 (in the table below). During the BTO launch, units on the same floor and in the same block all cost $532,200. This translates to a 13% price increase for these units at the Open Booking of Flats in October 2022.

We can also relook the earlier chart on HDB resale prices, to see how much resale HDB prices have specifically increased in the past 5 years. From the chart, the HDB resale price index has risen more than 23% from the 2nd half of 2017 to today (the 2nd half of 2022).

Source: HDB

That just means, in the 5 years since I booked my HDB flat, the HDB resale price index has gone up more than 23%. This is higher than the 13% price increase of comparable BTO units from my estate 5 years ago. While this calculation is only for one BTO unit in one estate (which is my personal BTO application in 2017), I believe it is quite realistic to consider that flats offered in the Open Booking of Flat are priced attractively.

As someone who booked a BTO flat 5 years ago, it also tells me that my BTO unit has very realistically also increased at least 13% just waiting for it to be built. Of course, we can also expect the price of our BTO flats to be in line with market movements if we want to sell it after our 5-year MOP period in the future.

Read Also: Why It Doesn’t Make Financial Sense To Give Up Your HDB BTO Flat Due To Construction Delays

This article was first published on 6 December 2021 and updated with the latest information.

Top photo by Moo Kar Ming, DollarsAndSense

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