Thursday, September 3, 2015

Should Couples Buy A 5 Room HDB Flat For Their First BTO Application?

Its election season again. I've been seeing a lot of people coming on Facebook to voice out their opinions and somehow, housing prices is still a hot topic. Is housing really that unaffordable and will it be worse in the future? Actually, if you ask me, I would think we actually have a lot of options in Singapore and its up to us to make our own choices. Some buy more expensive flats than others because of misinformed choices. Let's take a look in terms of buying a 5 room HDB flat or should we buy a smaller flat?

During the national day rally recently, it was announced by PM Lee that there will be more grants available to make HDB flats in Singapore more affordable. Now, couples can get up to $80,000 in grants from September 2015 sales launch. This is quite good news for those who are planning to buy their own flats from now onwards. However, this increase in grants does not apply for 5 Room Flat owners. Why is this so? Let's find out more about the enhanced grants in this post.

Different income levels and their eligible housing grants

A couple who wants to purchase their first home will most probably apply for a Built To Order (BTO) flat. The government has subsidized these flats and this is especially so for first time buyers. There are various grants available such as the additional housing grant and the special housing grant. The special housing grants was initially up to $20,000 but now it has been increased to a maximum of $40,000. Let's take a look at the cost of housing for 2, 3, 4 and 5 rooms flats in Singapore. What are the grants you will be eligible for your income bracket?

5 Room Flat not eligible for Special CPF Housing Grant

As mentioned earlier, the special CPF housing grant has been increased from $20,000 to $40,000. The special housing grant all along only applies to 2 room, 3 room and 4 room flats in non mature estates only. The grant has increased much more that a couple who buys a 5 room flat first would potentially lose out on $40,000 worth of grants assuming they have a combined income of less than $5000.  

If a couple choose to buy a 5 room flat as their first house, they will not be eligible for further grants when they decide to sell this house and buy another flat later on. 

Average Monthly Household Income of $1500 or less 

Have you heard that a household with an income of less than $1500 can own a HDB flat also? This is actually true as the grants has been increased substantially for this group of people. Total grants has been increased to $80,000 for households which have an income of less than $1500.

A 2 room flat in Punggol or Sembawang cost around $75,000 to $113,000 from the May 2015 BTO exercise. After deducting the grants of $80,000, this household can actually get the flat for free or just a low fraction of the cost. 

Average Monthly Household Income of $1500-$3500

Couples who just got married and earn $1000 plus each or those with single household income should fall within the $1500-$3500 range. They can get total grants in the range of $60,000 to $75,000. 

A 3 room flat in non mature estates cost around $152,000 to $211,000 from the May 2015 BTO exercise. It will be quite affordable for this group of people after deducting the grants of $60,000 to $75,000. The 3 room flat would only cost about $130,000 plus. 

Average Monthly Household Income of $4500-$8500

Even if your family income is as high as $8500, you will still be eligible for grants. A household with $4500 average income will still get grants of $45,000. 

For more information on the various revised grants, you can check out HDB's website here: 

Let me summarise the special CPF grants available:

Income of $5000 or lesser: $40,000
Income of $5001-$5500: $35,000
Income of $5501-$6000: $30,000
Income of $6001-$6500: $25,000
Income of $6501-$7000: $20,000
Income of $7001-$7500: $15,000
Income of $7501-$8000: $10,000
Income of $8001-$8500: $5000

The new grants should be warmly welcomed by most couples who intend to buy a BTO flat. Housing prices are expensive but as long as we buy a flat which is within our reach, all of us will still be able to buy our own property instead of renting one. 

The newly revised special CPF housing grants will not be applicable for 5 Room flat buyers where they will lose out potentially on additional $40,000 worth of grants. 

There are also enhanced grants available for resale flat buyers which I will discuss on in the next post.

Read on grants for resale flats here: Knowing The Grants Available For Resale Flats [With new Proximity Housing Grant]

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  1. Qns: If I decide to buy a 4 or 5 room resale flat at 35 years old as a single, what are my options? I understand that there is a restriction that 35 y.o singles can only buy up to a max of 2 room flat. What are my choices if I do not wish to own a private house (condo, etc) but do not want to restrict myself to a 2 room flat?
    Thanks =)

    1. Hi Lakota,

      You can actually buy any HDB flat from the resale market once you reach 35 years old. You can refer to HDB website here for more information:

  2. Hi I'm actually considering to purchase a 4 or 5 room sales of balance w my spouse now. If I am looking to buy a 5 room at non matured does that means we will not have any grant now and in future when we sell our flat? Not sure if 5 room is a better choice than 4 room given so many changes to housing rules recently and in future when we want to upgrade. Would u be able to advise? Thanks!

  3. Hi!
    I'm considering between a 5 room sales of balance in a non matured area with my spouse and wondering does that mean we will not qualify for even ahg if our combine income is more than 5k? I like the space 5 room provides but am also afraid it will not be as sellable as 4 room in future due to many changes within the housing rules now. Would you be able to advise? Thanks!

    1. Hi Kelly,

      You'll still be eligible for the ahg. Just that you won't be eligible for the shg if you get a 5 rm flat. The full grant is only given to first time buyers of hdb flat. If you are second time buyer, the grant would not be the same anymore which means if you buy a 5 room and downgrade later, you'll not be able to take full advantage of the grant. As for whether 4 rm or 5 rm would be able to sell better, I think in Singapore generally it shouldn't be a problem.