Four Questions Before Buying a Bidadari BTO (Or Any Home)
In September, HDB will place a new Bidadari BTO (Built-to-Order) on sale. This is the first time HDB has planned to build a Bidadari BTO.
The way a BTO works is that HDB sells the units before it starts to build. So, in essence, the buyer is making his or her purchasing decision based on evaluating a concept as opposed to viewing a physical home.
HDB benefits from this arrangement in that it does not have to commit to a construction project until it knows it has enough occupants. At the same time, eligible buyers benefit because HDB offers discounts and subsidies.
Even though the proposed Bidadari BTO is still a concept, you can use fundamental analysis to determine whether buying into the project is the right move for you.
We suggest that you ask and answer four questions:
- Is this the right location for me?
- What is the value of the BTO today?
- Can I afford the BTO?
- Do I believe in the neighborhood?
Depending on how you answer these questions will determine whether Bidadari is the right BTO at the right price for your particular circumstances.
1) Is Bidadari the right location for me?
One of the most important determinants of the value of a home is its location. In general, the better the shops, parks, schools and transportation, the better the neighborhood.
However, there are many great neighborhoods in Singapore, so you should ask yourself if Bidadari is right for you.
Here is what we know about Bidadari BTO in terms of location.
HDB intends to build Bidadari BTO at the corner of Upper Serangoon Road and Upper Aljunied Road, between Bartley Road and Macpherson Road.
Driving time to Raffles Place is about 15 minutes on a good day. 
The closest MRT stations are Woodleigh and Potong Pasir. Both are within walking distance of the Bidadari BTO project.
Nearby schools include Maris Stella High, Cedar Girls’ Secondary, Stamford American International School, and St. Andrews Secondary School.
According to URA Master Plan (2014), the government expects to develop some new amenities in the vicinity. They include a commercial complex, health and medical centre as well as a new park with a pond and heritage walk.
In evaluating the Bidadari BTO for purchase, you should be comfortable that its location and amenities, as described above, will contribute to the lasting value of the neighbourhood and your lifestyle requirements.
2) What is the Value of Bidadari BTO?
Since Bidadari BTO does not exist yet, you might ask how can we value it? It is common to value property out of thin air. Commercial developers do it all the time when they are evaluating whether or not to build a new apartment building or shopping mall. HDB will value the BTO in order to determine what discount to apply to each unit.
Whether you are valuing an actual, physical home or a planned home, you start by comparing it with other similar homes in the neighborhood. This method of valuation is called Comparable Market Analysis (CMA).
CMA is not the same thing as an appraisal by a licensed valuer, but it is a good way for you and your agent to approximate the value of a home, which you can factor into your purchasing decision. (For a fast, inexpensive licensed valuation, visit StreetSine Valuations at valuation.streetsine.com.)
We can use CMA to estimate the market value of a Bidadari unit by assuming it existed today and could be sold in the open market. We can do this because CMA is based on attributes like location, size, floor level, number of rooms, and age. Since we know that Bidadari BTO will consist of three, four, and five room units, all we need to do is determine the value of similar units nearby.
In the table above, we have selected five nearby blocks that contain similar units to that of the planned Bidadari BTO.
As you can see from the table above, the price range of recent transactions for a comparable 3-room BTO unit in the Bidadari area to that of Bidadari BTO would be from $450,000 to $510,000. A 4-room flat in the area goes for a median price range of $640,000 to $740,000, while a five-room costs from $770,000 to $880,000.
These ranges give you a rough approximation of the median market value of a three, four, or five room unit in the Bidadari BTO. The ranges do not take into account the floor level and other characteristics.
If you would like a more precise approximation, ask your real estate agent to conduct an X-Value for the floor level and room type of your choice or get a valuation from StreetSine Valuations.
Now that you know today’s approximate value of the BTO, you can evaluate whether HDB’s discount will make it attractive for you to buy a BTO unit and achieve your financial goals.
Typically a BTO trades at an 18% to 33% discount off of comparable HDB resale flats. If we crunch these discounts into a calculator, we get the following savings off the average resale price.
Once HDB announces the pricing for the Bidadari BTO, you and your advisers will be able to run the same exercise as we did. Using CMA and X-Value, determine the approximate price of your BTO at today’s market value. Then apply HDB’s pricing. BTO value – HDB price = your savings.
3) Can I afford Bidadari BTO?
Once you know the price of the BTO, you can go to your Property Tracker (SRX.com.sg/tracker), and use the TDSR/MSR calculator to determine whether or not you have the minimum income to qualify for financing. Simply enter the required information to determine the minimum household income required under the TDSR (Total Debt Servicing Ratio) and MSR (Mortgage Service Ratio) requirements.
However, take note that HDB evaluate the imposition of TDSR and MSR on a case-by-case basis for BTO purchases.
In the table below, we have summarized the minimum income for each HDB room type assuming no debt, a loan-to-value ratio of 80%, and maximum loan tenure of 25 years at HDB rate of 2.6%. Note that we estimated the pricing for illustrative purposes - actual sale prices may vary. Also, depending on whether the applicant is eligible for additional housing subsidies, actual minimum household income may vary.
4) Do I believe in the Bidadari neighbourhood?
Whenever you purchase a home, you want to ask yourself if you believe the neighborhood has potential to grow and increase the value of your home.
In order to get a feel for what type of price appreciation a buyer of a flat in Bidadari could expect, we looked at the price appreciation of resale flats in Toa Payoh HDB Town.
As you can see in the chart below, since 2002, flats in this HDB town have done well. 
The average annual appreciation has been ranging from 3.0% to 5.5% on a yearly basis.
However, note that historical performance of comparables is no guarantee of future performance of the Bidadari BTO. The actual performance of units in Bidadari BTO may vary greatly from past performance.
In fact, buyers in Bidadari should be cautious about getting similar returns to the homes in this table for two reasons.
First, government Cooling Measures, like TDSR and MSR, are slowing growth.
Second, the building of a BTO in Bidadari will introduce more supply into the market, which will put downward pressure on price appreciation.
Before purchasing a BTO, you should consult with a real estate agent and financial advisor to help you determine if investing in Bidadari is appropriate for your circumstances.
You might want to check out resale properties surrounding Bidadari.
Also, find out more on the Bidadari BTO deep discount below nearby HDB Resale flats.
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In general, if you answer in the affirmative to all four questions, it might make sense for you to consider purchasing a BTO in Bidadari. However, we want to stress that purchasing a home is a big decision. It must be right for your family in terms of lifestyle as well as affordability. We encourage you to apply fundamental analysis to your decision while seeking the advice of trusted professionals who can help guide you through the process.