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Why Purchasing An HDB Resale Flat – Without Grants – Can Be A Good Starter Home Option In Singapore

Purchasing a resale flat without grant (even if you are eligible for one) could be a good idea for some group of buyers in the long-term


With property prices in Singapore hitting a high never seen before, options for home buyers looking for a starter home appear to be getting limited and more expensive. The property price index for private residential properties is at 165.3 as of 3Q2021, up about 1.1% compared to the quarter before. And if you look further back, it has been on an upwards trend for a few years already.

Source: URA

The increase in private property prices also means more people will consider the HDB resale market, which has led to an increase in HDB prices. According to HDB, prices for HDB resale flats increased by about 2.9% in 3Q2021, compared to the previous quarter. Such increases of between 2 to 3% has been observed in multiple quarters since the start of the pandemic.

Source: HDB

The private residential and HDB resale markets represent the bulk of Singapore’s residential property market and are the main options available to most people looking for a home in the open market.

Unsurprisingly, given the unique circumstances that we are facing due to the pandemic (everyone needs a home, or a bigger home today and labour shortage plus an increase in material costs mean homes are more expensive now) and general inflation over the years means that prices of properties – and rightly so – have increased over the years and are now at a record high.

Read Also: 10 Housing Estates That Have HDB Flats More Than $1 Million

The BTO Comparison

Before we explain why buying an HDB resale flat (without grants) can be a good starter home option, let’s first try to understand how BTO comparison affects our perception of how expensive HDB resale property prices are.

The BTO comparison can be understood by this. Any potential home buyer in Singapore’s HDB resale market will likely base how expensive they think property prices of resale flats are by comparing it to current BTO prices.

For example, in the November 2021 BTO launch, a brand new 4-room BTO flat at the estate of Hougang (Hougang Olive) would cost on average $342,500 (price range was between $308,000 to $377,000). As of 3Q2021, the median price for a 4-room HDB resale flat at Hougang is $450,000, or about 31% higher. And this is on top of the fact that resale flats have a shorter remaining lease.

At Jurong West, we see a similar trend. For the November 2021 BTO launch, 4-room BTO flats at Jurong West costs an average of $292,500, while median prices for HDB resale flat at Jurong West is $435,000, or about 48% higher.

In both estates, similar-sized leasehold condominiums would easily cost $1 million or more, or more than two times the price of an HDB resale flat. For example, The Minton, which is a leasehold condominium that TOP in 2014 and is situated near the Hougang BTO launch, has seen transactions of 3-bedroom units at a price of mostly about $1.1 million or more.

While not cheap (it’s almost impossible to find any home that is going to cheap in land-scare Singapore), the point here is that property prices of resale HDB flat aren’t very expensive once you compare it to private condominium, which is the most common option available in the open market.

Rather, it’s when we compare the prices of HDB resale flats to current BTO flats, or with what prices used to be 10, 20 or even 30 years ago, that we tend to lament how expensive prices are.

Why Resale Flats, Purchased Without Grants, Can Offer Good Value As A Starter Home To Some

Given an option, there is not much of a debate that a BTO flat would offer excellent value for first-time homeowners.

BTO flat owners who sell their flats upon MOP would usually enjoy a decent profit (though it’s questionable whether they make a profit if they end up overpaying for their next property). Those who continue staying for 10 to 20 years in their BTO flat would enjoy the benefit of living in a brand-new estate from day one while paying less than other similar-sized but older resale flats in the area.

However, just because an BTO flat offers excellent value for those who are fortunate to have purchased one doesn’t automatically means a resale flat is a poor deal for anyone purchasing it as their starter home.

Like it or not, we need to recognise that BTO flats are a housing option that offers a housing solution (at a great price) to a selected group of Singaporeans. Typically, this group consists of married Singaporean couples or those forming family units with their parents/child (e.g. single parent purchasing with a child). It’s not an open market and thus prices of BTO flats do not necessarily reflect the market price.

For those who are single or married to a foreign spouse, the fact is that the BTO market is simply not accessible for them – yet. However, this doesn’t mean their housing needs are any less critical, and more importantly, the inability to purchase a cheaper BTO flat doesn’t mean that they are getting a poor deal in the resale market.

Read Also: Second-Timer HDB Buyers: What Are The Grants and Subsidies Available For Your Second HDB Flat?

Buying A Resale Flat Without Grants – An Ideal Option For Singles & Those Married To Foreign Spouse

When we buy a resale flat without the grant, we purchase it from the open market without any form of subsidies from the government.

While doing so means we may be paying more than we need to for our resale flat, the critical point here is that purchasing a resale flat without grants means we continue to retain our eligibility as a first-time applicant for the future.

For example, if you are married to a foreign spouse (non-PR), you could have purchased a 2-room flexi BTO flat as your first home. However, you may feel that a 2-room flat is too small and thus, an alternative would be to purchase a bigger HDB resale flat via the non-Citizen spouse scheme.

Through the non-Citizen spouse scheme, you may be eligible for housing grants under the Enhanced CPF Housing Grant (EHG). But just because you qualify for it doesn’t mean you should be using it.

By not using the grant even if you are entitled to it, you retain your first-time home buyer eligibility status for the future. This means that if your spouse becomes an SPR or Singapore citizen in the future, both of you would still be eligible to apply for a BTO flat as a first-timer along with grants (if eligible). Alternatively, you can also apply to purchase a resale flat and tap on the Family Grant in the future. For both cases, do note that you need to be within the income ceiling.

In other words, besides having to serve out the 5-year MOP, which is something that all HDB buyers need to do so anyway, buying an HDB resale flat without a grant as a starter home does not affect any future opportunities to still purchase an BTO flat as a first-time applicant.

The same logic applies to singles who are purchasing an HDB resale flat. By purchasing an HDB resale flat without using any grants, singles would still retain the eligibility that allows them to apply for an BTO flat in the future as a first-time applicant if they get married, or choose to apply with their parents. As an added bonus, while waiting for their BTO flat to be constructed, they can also continue living in the resale flat they already own.

A Resale Flat Purchased Within Your Budget (Without Grant) Can Be A Good Option

By not using any grants to purchase an HDB resale flat within their budget, resale home buyers can get a home that they need, while still retaining the option to apply for an BTO flat in the future as a first-time applicant. Furthermore, they don’t have to worry about needing a home to live in while waiting for their BTO flat to be constructed since they already own a resale flat. The only caveat here is that you must complete your 5-year MOP before you can apply for a BTO flat.

In our opinion, the biggest stumbling block here is overcoming the perception that you will be the one paying more than everyone else who purchases a BTO flat. Technically, while this is true, it doesn’t mean you are going to get a poorer deal in the long-term. The other way to look at it is that while everyone is purchasing an 1) BTO flat or a 2) resale flat with grant first as their starter home, you are possibly doing it the other way around – and that is, to purchase a resale flat (without grant), before thinking about buying your BTO flat in the future. And if you do remain single and never qualify to purchase an BTO flat, you would at least have purchased a property earlier that you can call home.

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

Top photo by Moo Kar Ming, DollarsAndSense

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