Wednesday, June 6, 2018

Should I Get A BTO or Resale Flat?

There are pros and cons of getting a BTO vs a resale flat. In Singapore, a BTO flat is heavily subsidised by the government and we try our luck to ballot for a chance to select a unit. These flats are build to order (BTO) meaning those who managed to get a unit will have to wait about 3-5 years before they can collect the keys to their flat.

I would think most people will go for the BTO option first if they have the time to wait. However, even if you have the time to wait doesn't mean you will have the luck to get one of the units. The next best choice will be to go for resale flats which will ultimately cost more as compared to a BTO flat.



The Process of getting a BTO flat

BTO flats are launched every quarter which means we have 4 chances a year to try our luck. I have tried since 2016 but till now I didn't manage to get a good number. When people say its hard to get a good location through BTO, it is really true. Non-mature estates such as Sengkang & Punggol are generally easier to get precisely because the demand is not so high there. I did managed to get a queue number to select a flat in Sengkang but in the end decided to give it up as after consideration for the long term, the location is still important for me and my partner.

The process to getting a BTO flat can be quite long so if you're planning to get married in the next 3 years, then its better to start your BTO process earlier. The balloting process is fuss free. It can be done online and no documents need to be submitted in the early stages. You just have to fill in some information of yourself which takes less than 10 minutes.

BTO balloting guide

Have you wondered how the BTO balloting process work and how people are chosen to select a flat? Let me try to explain it based on the information I managed to find.



Firstly, first timer applicants will always have the priority in the balloting process. 85% of the 4/5 room flats and 70% of the 3 room flats are set aside for first timer applicants for non mature estates. For mature estates, 95% of the 3/4/5 room flats are set aside for first timers. If you think that its easier for first timers to get a unit in mature estates since 95% of the flats are set aside, its not true as there are many other first timers also aiming for a flat in the popular mature estates.

How the BTO balloting process works is unclear to many as HDB did not really state clearly how it is done. I tried to find as much information as I could and summarise my findings in this post. In essence, there is no way to get any advantage from the balloting process. HDB tries to ensure fairness to all parties in this process. As a first timer, even though you get to enjoy priority in getting a queue number, it does not mean you will get a good queue number. I will explain this in the next section below.


Why its so hard to get a good queue number?

The balloting process is completely random and it very much depends on our luck in order to get a good queue number. After the application closes, HDB will first shortlist first timer applicants based on the percentage of flats set aside for them. Then, HDB will shortlist second timer applicants based on the percentage of flats set aside for them. After the applicants are shortlisted, they will all go into a computer system and be assigned random queue numbers. Both first timers and second timers are in this pool. This means that even if you are a second timer applicant and you managed to get shortlisted into the ballot pool, you may still get a better queue number than a first timer.

There are also other priority schemes. The 2 main schemes are the Parenthood Priority Scheme (PPS) and the Married Child Priority Scheme (MCPS). For BTO, 30% of the flats are set aside for PPS and another 30% set aside for MCPS. Let me explain more on these 2 priority schemes.


Parenthood Priority Scheme (PPS) 

The PPS is for those who have kids or are going to have soon.

The eligibility condition as stated on HDB website is as such:

"You must be a first-timer applying as a married couple. In addition, you must either be expecting your first Singapore Citizen child at the time of your application, or have at least 1 Singapore Citizen child aged below 16 (natural offspring from the lawful marriage or legally adopted)."


Married Child Priority Scheme (MCPS)

The MCPS in essence is for those who apply for a flat to stay with their parents or near their parents. For those who apply to stay with their parents, the parents name must be included in the application. For those who apply to stay near their parents, as long as it is within 4km of your parents house, you will be eligible for it. Do note that for staying near parents, there is a restriction that your parents must continue to live in the same town or within 4km of your new BTO flat for 5 years after you collect your keys.

For more information on the priority schemes, you can refer to HDB website here.


Balloting process scenario

Now, let's get back to the balloting process and why its so hard to get a good queue number. As a first timer applicant, 70%-95% of the flats are set aside for you depending on the type of flat and the location. Within the 95%, 30% are set aside for PPS and another 30% for MCPS.

Let's take for example the following scenarios:

Location: Toa Payoh (Mature Estate)
Flats available: 1000
Total number of applicants: 2000 (Oversubscribed)
  • PPS applicants: 400
  • MCPS applicants: 400
  • Other first timers: 400
  • Second timers: 800

1. Flats for first timer: 950 (95%)
  • Flats for PPS: 300
  • Flats for MCPS: 300
  • Flats for other first timers: 350

2. Flats for second timer: 50 (5%)

Now, with the above scenarios, we can predict how the ballot process will work. This is just based on my understanding but it may not be exactly how it is done.

First, HDB will shortlist applicants up to 100% of the flat supply. There are 1000 flats available in this instance. 

Step 1: 
PPS applicants will be shortlisted first. 400 PPS applicants are shortlisted for 300 units set aside for them. This means that 100 PPS are out of the shortlist. 

Step 2: 
MCPS applicants will be shortlisted. 400 MCPS applicants are shortlisted for 300 units set aside for them. This means that 100 MCPS are out of the shortlist. 

Step 3: 
Other first timer applicants will be shortlisted. There are 400 other first timer applicants plus 100 PPS who failed in step 1 and 100 MCPS who failed in step 2. They will probably be shortlisted in this step 3 as well. This part is unclear as I could not get any information from HDB. If the PPS and MCPS are put in this pool as well, we have a total of 600 applicants who will fight for 350 units. This means 250 first timers (regardless of priority schemes) will be out of the 1000 queue number. 

Step 4:
Now, second timers will be shortlisted. 800 second timer applicants will be shortlisted for 50 units set aside for them. This means that 750 second timer applicants will be out of the shortlist. As a second timer applicant, you must be really lucky if you can get shortlisted within the 100% supply of flats. 

Final step:
The final step is all those who are shortlisted (first and second timers) will now be assigned random queue numbers. A first timer applicant can still get the last queue number 1000 and a second timer applicant can get queue number 1. Those who are out of the 1000 flat supply will still be assigned queue numbers as HDB gives out queue numbers for 300% of the flat supply. 


By now, if you managed to follow the above scenario, you would have realised that the balloting process is completely based on luck to get a good queue number. It doesn't matter if you applied under any priority schemes. The priority schemes only increase your chance of being assigned a queue number but not your chance of a good queue number. 

Increasing your chance to get a BTO flat

Even though the ballot process is completely based on luck, there are still ways to increase our chance to get a BTO flat. 

Firstly, we can consider non mature estates which are not too high in demand. If you don't mind that its far from the city and not near the MRT, applying for a flat in a non mature estate will definitely increase your chances of securing a unit. The prices are much cheaper too. A 4 room flat in a non mature estate cost about $300K to $350K while the same flat in a mature estate can cost more than $500K. 

Secondly, if you still want to get a BTO in a good location, you can consider applying for a 3 room flat instead of a 4 room or larger flat. The demand for 3 room flats is definitely much lower even in mature estates and I think it is probably due to the fear of not enough rooms if you have more than one kid. However, I think 3 room flats in a good location is still a good consideration at least for a start. The price of 3 room flats in good location is also much lower than a 4 room flat.  


How about resale flats?

If all else fails and there is just no luck to get a BTO, then the plan will be to get a resale flat. Resale flats although they are more expensive, there are still grants available. The resale grant for first timer families is currently $50,000 and an additional $20,000 if you stay within 4km from your parents.

A quick check on the price of resale flats in non mature estates can be selling as high as $500,000 for a 4 room flat near Buangkok MRT. If the flat is further away from the MRT, it'll be about $50K to $100K lesser. For mature estates, we should be looking at around $500K to $600K for a 4 room flat.

There is also a visible advantage when buying resale flats. We can view the actual flat itself before committing to buy the flat. This cannot be done with a BTO flat. However, resale flats tend to be older and needs more renovation as compared to a new flat. This can be overcome by buying a newer resale flat (5-10 years old) with good renovation already done by the previous owner although there is almost certainly a premium price to be paid for this kind of flats.

Buying a resale flat will let us be able to move in almost immediately as compared to the waiting time of a BTO which can range from 3 to 5 years. If we buy a resale flat and take the grants available, we will automatically be considered as second timer if we ballot for a BTO in the future. If you still want to be considered as a first timer for BTO even after buying a resale flat, you have to make sure you do not take any CPF housing grants when you buy the resale flat. In this way, you can still have a higher chance of balloting for a BTO flat while staying in your resale flat. However, do take note that the 5 years MOP will still be applicable before you can sell your resale flat and buy another HDB.


Should I Get A BTO or Resale Flat? 

Buying a flat can be a long process so opening up this conversation early with your partner is important. There is much planning to do in terms of deciding on a location, planning for the finances and also deciding whether to go for a BTO or resale flat.

If you and your partner decides to go for a BTO flat, it is always better to apply earlier as it can be quite long before you can get your desired flat. If you fail to get a BTO or running out of time, resale flat is definitely another option worth a consideration. Nevertheless, having a stable relationship before committing to a flat purchase is important too since this is a long term commitment with great financial responsibilities.

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