First-time Buyer: HDB Resale or BTO? | Singapore Property News

First-time Buyer: HDB Resale or BTO?

14 Oct 2016
How To

HDB Resale or BTO

The surest way to make money in real estate is to climb the “property ladder.” Here’s how it works.

As soon as you can, buy the least expensive property in the best location you can afford. Over time, as your earning power increases, sell your existing home and trade up for a more expensive property. At this higher rung, buy the least expensive property in the best location you can afford.

Over time, if you stay focused on climbing the ladder, you should find yourself sitting on a nice retirement fund that will be commensurate with your lifestyle.

As a young buyer, Housing Development Board (HDB) makes it less expensive for you to climb onto the first rung of the property ladder. It subsidizes first-time buyers of HDB resale flats and Built-to-Order (BTO) units.

Which route – resale or BTO – is better for you? It depends on your circumstances and the BTO project in question.

The good news you can model your options to help you make a decision. Let’s step through two real-life examples to illustrate my point.

A young couple with a combined household income of $5,000 is considering a 3-room HDB in Toa Payoh. One option is to apply for a unit in the Bidadari BTO estate, Woodleigh district, which is scheduled to launch this November.


600X600 BTO press release bedok600X600 BTO press release Bidadari600X600 BTO press release Kallang600X600 BTO press release Punggol

While HDB has not announced its price, if the Bidadari project launched last February is any indication, the median price should be around $350,000. (For price forecasts on all upcoming BTO launches, visit SRX.com.sg/hdb/BTO.) Based on this, it’s possible to calculate the cash, out-of-pocket, required to service the couple’s mortgage.

As the table, below, illustrates, the cash payment required to service the mortgage is $256 per month. This cash outlay translates to a mortgage servicing ratio of 28%.

BTO resale table

In contrast, if young couple purchases a resale HDB 3-room in the same location at a BTO Bidadari unit, cash outlay is $0 with a mortgage servicing ratio of 20%.

Given this information, the decision matrix looks something like:


BTO Resale 03

Let’s do a second example. Another young couple has a combined income of $7,000 and they would like to purchase a 4-room HDB.

BTO Resale table 02

The decision matrix for this couple looks something like:


BTO Resale 04
As the matrix suggests, the decision is not straight forward. Yes, it is slightly less expensive to go BTO in the short run. However, the couple has significantly less flexibility to climb the property ladder. They won’t be eligible to sell for at least seven years. This means that they won’t be able to take advantage of increasing household income and market opportunities to trade up during this period.

Also, they risk the possibility that the BTO, which is still a concept only on paper, won’t appreciate at the same rate as resale units with known track rates.

Sound complicated?

Yes, of course. Decisions in real estate always require trade-offs. However, the Government is modeling what subsidies to grant so that means you should also model your options.

Take the time to explore your options in both the BTO and HDB resale markets and understand the impact of first-time buyer subsidies on each possible purchase. If you do that, you are more likely to find success on the first rung of the property ladder and set yourself up for easier climbs to rungs two and three.

Jeremy Lee is co-founder and Chief Technology Officer of SRX Property. Track new and past BTO launches, get BTO price forecasts, and compare BTO with HDB Resale for free at srx.com.sg/hdb/BTO.



This BTO article was published on TODAYOnline news as well.  

Source: TODAY News
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