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October 19, 2022

Game of Luck: A Crazy Little Thing Called BTO

By Daryl Wee 


My parents only told me about BTO
Am I running the right race?
What am I waiting for?

If you are living in Singapore and not hidden entirely under a rock, one of the talks of the town lately has been about Built-to-Order (BTO) flats. As we all know, generally the Housing & Development Board (HDB) releases four BTO sales launches in a year – February, May, August, and November. And as one would quite easily notice from these launches, the subscription rates are off the charts.

Let’s take a look at the most recent August BTO exercise that just closed on 5 September.

What we can immediately deduce from the table is that Singaporeans generally prefer mature towns as there is always this assumption that homes in the mature towns can rake in higher profit margins when selling - which in all honesty is still dependent on many underlying factors. It is more of a buy and hope situation where they buy into the BTO project hoping for the gains, rarely having any plan for their long-term goals which might affect their financial future.

Others might be into mature towns due to proximity to family, which in turn provides them with additional grants or balloting chances. Mature towns are perceived also more established in the sense of a well-rounded amenity pool that residents are able to enjoy. The other observation we can make is that people like bigger space, and that is why the larger units tend to see more competition.

But I would like to bring your attention closer to the Tampines (Sun Plaza Spring) project where the subscription rates for first-timers and second-timers are 17.2 and 178.2 respectively. Just imagine 17 people vying for a unit for first-timers and 178 people battling it out for a unit for second-timers, it’s no wonder at times it might feel like winning the lottery when you actually land yourself a queue number within the allocated number of units available.

What would an overly-subscribed and highly-competitive BTO scene imply?

It implies that many aspiring homeowners are actually denied an opportunity to land themselves a place they can call home. In our line of work, we have encountered people who even went through the BTO exercise EIGHT TIMES, just to finally get themselves a home. You can make the argument that it would likely increase your chance in securing a BTO flat if you choose a not-so-popular location, but doesn't everyone yearn to find a home at a location that is ideal for them, whatever the reason may be?

It can be a long and arduous process for some, which results in them turning to alternatives, such as the resale market or private homes. Apart from the game of luck with each BTO application, then there is the stretch from the day you apply until the day you get to move in, with some of these constructions taking up to a lengthy five years.

What has the government done to ease the situation?

The government has been working on fine-tuning the balance between BTO sale launches and demand for new flats since 2013, several measures were put in place to either deter and aid the growth of the pricing of the HDB landscape. Today, we see highly-priced public housing and dreadful long periods of waiting exacerbated by the pandemic.

The government announced at the end of 2021 that they will be increasing the number of BTO flats launched over 2022 and 2023, which sees an increase of 35% of the total BTO flats in 2021.

The next thing they did in late August this year was to increase the percentage of four-room and larger BTO flats for first-timers, seeing that figure go up from 85% to now 95%.

Despite the two measures that are implemented to alleviate the major demand for a new home, the figures from August 2022 BTO exercise is still seemingly worrying for home hopefuls. Ultimately, it depends on your goal. Are you looking to get a place quickly to start a family or have the luxury of time to wait no matter how long the process might take you? Or perhaps your long-term goal is to bang on capital appreciation of your property and sell it as soon as you can in order to upgrade.

Looking at the historical chart for HDB resale price index, we can see that in 2013, the government implemented the Total Debt Servicing Ratio (TDSR), and also made revisions to the Additional Buyer’s Stamp Duty (ABSD) and Loan to Value (LTV) ratio. This caused the HDB market to dip by 12.4%. 2013 really hit hard on those who want to sell their homes and upgrade. Even though HDB flats are selling at a premium now, what if the government decides to stifle heated prices and what happened in 2013 repeats itself?

Fret not, there are always alternative options for aspiring homeowners and existing ones who seek your dream abode. Private homes build at a faster pace as there is a deadline for developers to finish construction and sell the homes they build. There is also a huge assortment to choose from around the island, whether you want to live in a mature/non-mature town, particular parts of Singapore, or even the regions they belong to (CCR, RCR, OCR).

The private property market is a less talked about option to the conservative ones because they always felt that it is an arena for the rich and affluent or they have never done any comprehensive assessment planning to plot out their current affordability versus financial future.

It might catch you as a surprise that there are many people who didn’t know that private new launches actually work on a progressive payment scheme, which when broken down can make securing a private property more affordable than you think it is.

The most important thing is to carefully plan ahead, have a good sense of your finances, and then find a home that is suitable to your budget & requirements. A bespoke property assessment is usually required to identify every little detail in affordability and the best route to reach your dream financial future.

Buying a home always seems daunting, especially as it is a big-ticket item and the prices for private homes can easily start at a million dollars. But when you have the ability to break down the figures and have a clear overview of your financial capabilities in terms of servicing your monthly mortgages, you’ll realise that owning private homes is actually very within reach.

With a clear understanding of your finances and actual proven strategies on choosing a home, some have seen huge capital gains of $300,000 or even half a million in just a short span of three years!

One huge perk of engaging consultation services of any PropNex associates is them having proprietary financial tools that can assist you in planning well. The tools help you map out your finances easily and provide a vote of confidence to any first-timers or upgraders looking to take their next step.

You might want to speak to any of our PropNex associates to see what’s achievable for your situation as it differs from client to client.

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