Due to the manpower crunch and construction delays caused by the impact of COVID-19 and the circuit breaker in 2020, more BTO projects are being deferred and new BTO projects have extended their timelines for the delivery possession date. This means that as a new BTO applicant, you can expect that you will have to wait longer before you can collect your keys to your new home. For instance, for the February 2021 BTO launch, the delivery possession dates range from 31 October 2025 to 31 December 2027, which is a period of 4 to 6 years.
Under the Marriage & Parenthood Package, the Parenthood Provisional Housing Scheme (PPHS) allows couples and families to rent from HDB while waiting for their BTO flats to be completed. Yet, is it realistic and financially sensible to do so?
In this article, we examine the Parenthood Provisional Housing Scheme (PPHS) and other alternative living arrangements that you can possibly make while waiting for your BTO flat and their costs.
For the purposes of this article, we assume that the living arrangements are for the couple (husband and wife) alone, there are no kids or babies which may necessitate a larger space and that the couple is flexible and able to live in various living conditions.
#1 Renting From HDB Under The Parenthood Provisional Housing Scheme (PPHS)
If you qualify for the PPHS and successfully applied for it, the cost of renting a flat from HDB ranges from $400 for a 2-room flat to $1,500 for a 4-room flat a month, depending on the location and flat type.
|Blks 1, 7 & 9 Tiong Bahru Road||–||1||3||$900 and $1,500|
|Blk 3 Upper Aljunied Lane||–||1||–||$700/ $800|
|Blk 223A Sumang Lane||5||–||–||$500|
|Blk 435A Bukit Batok West Ave 5||10||–||–||$500|
|Blk 785A Woodlands Rise||5||–||–||$400|
Rental rates for available flats under PPHS in Feb 2021. Source: HDB
As seen from the table above, the most available flat type is a 2-room flat and you would expect to pay about $500 monthly for rent. You will also have to pay a 1-month deposit, the first month’s rent and stamp fees when you sign the tenancy agreement.
In total, this would be $24,000 in rent for a 2-room rental flat over a 4-year period and increase to $36,000 if your BTO completion takes 6 years. If you end up renting a larger rental flat, this amount could increase to $38,400 if you pay $800 for a 3-room flat and $72,000 for the same 4-year period.
#2 Renting From The Resale Market
Besides renting from HDB, you can also rent from the resale market. The smallest whole HDB unit you can rent from the resale market is a 3-room flat. According to HDB’s resale statistics, the median rental rates range from $1,550 in Woodlands to $2,150 in Central, with many estates hovering around the $1,800 mark.
Assuming you rent a 3-room flat for $1,800, this will cost you $86,400 over 4 years.
However, you can lower your costs by renting a room instead of the entire flat if you can live with the space constraints. Depending on location, you would expect to pay around $600 to 700 for a bedroom and $800 to $1000 for a master bedroom with an attached bathroom. If you are intending to live with your spouse and not live apart while you wait for your BTO flat, you will most likely need the added space and privacy of renting a master bedroom, even if you chose not to rent an entire flat.
Assuming you rent a master bedroom for $900, this will cost you $43,200 over 4 years.
Additionally, for those with larger budgets, there are other rental options such as co-living spaces, condominiums, service apartments, etc.
#3 Living With Parents Or In-Laws
Living with parents or in-laws can be the best or worst living arrangement for a young couple. If your childhood home has sufficient space (and you have your own bedroom), it may work out well to stay put until your new BTO home is ready. You can save money because you are not spending on rent (or paying the rent to your parents so the money stays within the family). However, depending on your living situation and relationship with your parents or in-laws, this can quickly devolve to a thorny situation where you will have to mediate between your parents and your new spouse.
This could cost you nothing (free!), monetary contribution to your parents, or cost you your relationships if things go absolutely south.
You Need To Ballot Successfully (Again) To Rent A Flat Under The Parenthood Provisional Housing Scheme (PPHS)
Unsurprisingly, the demand for rental flats outstrips the limited availability and supply of rental flats. There were only 25 rental flat units available in February 2021 and a total of 71 applications. This is an oversubscription of 2.84, which is higher than some BTO launches. This means that you need to be lucky twice to get a chance to rent a flat from HDB while you wait for your BTO flat.
As you can only apply for the PPHS first and then choose your desired flat (including location and flat type) once you are approved, you may not have much of an eventual choice in the selection. Not all locations are available at the same time According to HDB guidelines, “tenancy duration is capped at 3 years, and the tenancy term should end within 4 months of the Estimated Completion Date of your flat or the PPHS site’s availability of use, whichever is shorter.”
If your flat is not ready when the tenancy expires, your tenancy may be renewed, subject to HDB’s approval and the site availability. Potentially, this could lead to a situation where you will still find alternative living arrangements even after securing a rental flat under PPHS.
Buying And Waiting For Your BTO May Not Be The Most Affordable Choice
There is a cost to waiting for BTO completion and this will cost you $24,000 minimally (if you rent from HDB) and exclude living with parents as a viable living arrangement. This can go up to $35,000 if you wait for 6 years instead of 4 years.
While the PPHS is likely the most affordable living arrangement, besides staying with your parents or in-laws, not every couple who buys a BTO flat will have a chance. Additionally, as the rental flats tend to be older or repurposed from Selective En-Bloc Schemes, they can be rather run-down. Your cost to rent can increase further if you end up having to choose a more expensive option of renting from the resale market or having to rent a larger unit from HDB due to the lack of choice.
Once you factor in the housing grants that you can receive for resale flats, the added cost of renting while waiting for your BTO flat may make choosing a resale flat a more affordable option.
For example, the median resale price for a 4-room flat in Kallang/Whampoa is $552,500 while the February 2021 BTO launch price for Kallang Whampoa is $532,000 to $672,000 for a 4-room flat. This makes the resale price comparable to the BTO flat price, if not slightly cheaper.
Of course, the potential for capital appreciation with a BTO flat is much higher than a resale flat that is older and facing lease decay. In the end, the actual cost of buying a BTO flat and waiting for it may be higher than it seems, and you need to weigh the upsides as well as the downsides before deciding.
Cover image credit: Raymond Quek
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