When buying an HDB home, many buyers usually have a location and flat size in mind. For example, you could be shopping specifically for a 4-room flat in Tampines. Once settling on this, you still have two main options: to choose a new HDB flat, such as a Build-to-Order (BTO) flat or a Sale of Balance (SBF) flat, or an older HDB resale flat.
Recently, there’s been quite a bit of buzz around HDB resale flats. As demand continues to surpass supply, prices for HDB resale flats increased for the 23rd consecutive month in May 2022. There was also a $1.04 million transaction made for an executive flat in Woodlands Street 83.
So why are so many Singaporeans snapping up HDB resale flats? Could ‘preloved’ really be better than brand new? If picking an HDB resale flat, how new or old should you go? And what are the factors affecting Singapore HDB prices?
With the volume and interest in the HDB resale property market at a high (no thanks to the BTO construction delays), we explore some things a buyer may need to take into consideration when deciding between an HDB resale flat or a BTO flat in the same estate.
Furthermore, if you require some assistance on how to finance your home purchase after purchasing one, our helpful Mortgage Experts can help. They’ll give you tailored financial advice and find you the best home loan interest rates, all at no cost!
5 Considerations When Choosing HDB Flats in the Same Estate: Singapore HDB Price
When researching for this article, we found that 78.3% of the population resided in an HDB flat. Of which, 4-room HDB flats were the most commonly occupied type of dwelling at around 31.5%.
Hence for this article, we mainly compared 4-room HDB flats. For buyers who want 5-room or larger flats, there may be additional constraints like the location of where the HDB flats are built.
1. New vs Old 4-Room Flat Sizes and Layouts
From the starting years of HDB to the current period, 4-room flats have been constructed in various sizes and concepts. In other words, not all 4-room flats are made equal. Which ‘era’ it is from and when it was built matters.
There are at least four different types of 4-room flats: the 4A, the 4 New Generation (NG), the 4 Simplified (S), the 4I (Improved) and the 4 Standard (STD). Here’s a quick breakdown of the different types of 4-room flats built over the years.
The newest 4-room (A) flats were also built in different sizes depending on the construction years.
The older HDB flats from the 90s offer a bigger HDB layout and more space than the current HDB BTO flats. You may also find that the newer HDB blocks are built closer to one another as compared to the older HDB flats, losing some sense of privacy in the process.
Read more here.
2. Depreciating Lease of HDB Flats Affects Singapore HDB Price
Another factor that differentiates HDB flats of the same size in the same estate is the remaining lease left. The value of all 99-year leasehold properties drops as they age, but the depreciation may be faster as the lease nears its end.
This effect on the valuation affects the demand for the older leasehold units as it gets harder for a home buyer to get a mortgage loan from HDB or a bank. For some idea of the depreciating effect, we compared 4-room flats in Queenstown with different lease balances (from Jun 2021 to Jun 2022).
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Although it may not exactly be an apple-to-apple comparison (the exact location, sun-facing direction, high vs low floor and condition of the flats within the same town can command different prices), we can generally see a trend of lower prices for flats with a shorter lease left compared to the newer flats in the same town.
3. Singapore HDB Price Affected by Proximity to MRT Stations and Nearby Amenities
Properties are bought based on location, location, and location. The reason is simple: Convenience. Buyers are often willing to fork out a premium for better accessibility to amenities and transport nodes, which is known as the "MRT effect".
We take a look at whether the resale market can offer better value in terms of the premiums paid, compared to BTO flats when choosing a flat next to transport nodes and public amenities.
For this, we compared the selling prices of two 4-room BTO flats in a new town such as Canberra, where one is close to Canberra MRT on the North-South Line (NSL) and the other is relatively further away. Likewise, we use the data from a nearby non-mature town, such as Sembawang to make a similar comparison for the resale market.
In Canberra, the premium for choosing a flat that is close to the MRT station compared to another flat within the same town that is relatively further away is around $50,000. The premium demanded in the resale market in Sembawang seems to be smaller at around $56,000.
From this example, the price premium seems pretty similar. However, the resale market offers one advantage: Negotiation. You definitely can’t haggle with HDB, but for HDB resale flats, you may be able to negotiate with sellers for a better price and better value.
4. CPF Housing Grants for BTO vs Resale Flat
Keeping HDB flats affordable for the masses has been a key driving force for HDB. As such, generous government subsidies are offered to eligible buyers.
Generally, a BTO buyer can expect up to $80,000 in maximum grants and a first-time buyer purchasing an HDB resale flat can expect to receive up to $160,000 in grants, where eligible. Knowing the total amount of grants available for either purchasing a BTO or HDB resale flat would allow the buyer to make an informed decision on whether it would be justifiable to jump into the resale market at current price levels instead of going through the long waiting period for a BTO flat.
If you’re not sure how much CPF grant you are eligible for, you can use CPF’s housing grant calculator.
5. Singapore HDB Price: Financing and Paying for a New BTO vs Resale Flat
Regardless of BTO or resale flat, there are two choices for HDB home buyers to finance their mortgage, HDB and bank loans. You can read more about HDB vs bank loans here: Bank Loan Vs HDB Loan 5 Key Differences: The Complete Guide to Financing Your HDB
If you’re choosing between a BTO flat and a relatively new HDB resale flat, the financing journey is quite similar.
- For HDB loans, the main difference is that for BTO flats, cash payment may not be necessary. In other words, if you have enough CPF OA savings, you may not need to fork out a single cent.
- For HDB resale flats, there are cash-compulsory payments, like the option fee and deposit to the seller.
- For banks, there is no difference between BTO and resale flat financing.
If you’re eyeing a super old HDB resale flat, though, then it’s another story. You may not be able to borrow as much in home loans as banks may lower the LTV. How much of your CPF savings you can ‘unlock’ may also be limited.
To obtain maximum CPF usage and HDB housing loan, the remaining lease of the flat must cover the youngest buyer until at least the age of 95. If not, the amount will be pro-rated.
And this is already after the CPF rules were relaxed in 2019. Previously, the rules focused mainly on the remaining lease. This recent change mainly benefits the older buyers – for younger buyers who are likely to outlive the remaining leases of these super old flats, it is still a tough situation.
Limitations of HDB Loan for Second-Timers
What about if you’re a second-time HDB buyer – is there any difference?
Yes. One of the main appeals of an HDB loan is that first-timers can potentially loan up to 90% of the flat’s price (or value). However, the allure of an HDB loan wanes when it is applied to be used for a second time after selling your first home and to finance a second HDB flat.
When taking the HDB loan for the second time, the loan quantum (i.e. how much you can borrow) is right-sized by utilising the CPF monies refunded and up to 50% of the cash proceeds from the disposal of the existing or previously owned HDB flat.
For example, let’s assume the buyer had made $200,000 in cash by selling his BTO flat after deducting the loan refund and accrued interest. For the second purchase, the buyer has to use 50% of his $200,000 cash proceeds for the purchase of the second flat and everything in his CPF OA (save for the $20,000 allowed) before the loan quantum is determined. This means the second HDB loan may be of a much lower loan quantum percentage compared to the first loan.
You would also need to take note of the HDB resale levy for second-timer HDB buyers. You can find out if you are required to pay the HDB resale levy when you register your Intent to Sell on the HDB Resale Portal. There are only 9 steps you must follow once you are on the HDB resale portal.
Banks Do Not Consider Your Sales Proceeds
This is not the case for bank loans, which do not consider your profit from the previous property, meaning you can potentially loan a bigger amount to finance your new home.
Assuming this is your only mortgage, you can usually loan up to 75% of your flat’s price (or valuation). Nevertheless, check out the HDB flat portal if you are interested in an HDB BTO flat. On the other hand, if you are keen on an HDB resale flat, then the HDB resale portal is the place to go!Chat with us on Whatsapp Fill up an online form
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