With manpower and supply shortage, the wait for BTO flats have gotten longer. Is there a plan B ?
BTO flats come brand new and also tend to be more affordable. Which is why it has been the preferred choice for many couples. But due to disruptions caused by Covid-19, the wait time for BTO flats has increased from 3-4 years, to 5-7 years ^1.
Under these circumstances, couples may have to consider other alternatives.
Option 1: Buy a 3-room Resale flat and apply for a BTO flat after
Costs:
So what are the pros?
The downpayment and monthly loan repayment of resale flat is likely to be fully payable with CPF.
Couples can buy a smaller resale flat first and apply for a bigger BTO flat after fulfilling the 5 years MOP (Minimum Occupancy Period) for their resale flat^3. The upgrade will come at a perfect time for couples who intend to have children. And couples will only need to sell the resale flat within 6 months of collecting keys for the BTO flat.
Lucky couples who are able to buy from the Sale of Balance flats scheme, might even be able to move into a BTO flat immediately after their resale flat’s MOP.
With pros, there's bound to be cons. So here are the cons:
A resale flat is likely to require additional renovation compared to a BTO flat, such as renovating the toilets. Other extra renovation works will depend on the age of the resale flat.
Each person has only 2 “chances” to buy a BTO flat and/or apply for a CPF grant/HDB loan. So, if a couple buys a resale flat and a BTO flat subsequently, both times with CPF grants or using HDB loan, the couple cannot apply for another BTO flat nor CPF grant/HDB loan in the future.
Option 2: Apply for BTO and rent while waiting for its completion
Costs:
So what are the pros?
Rental flats are usually move-in ready and do not require renovations.
No large upfront cash outlay required. There is only the agent’s fee and the security deposit (1-2 months’ worth of rent^5).
What about the cons:
Rental cost is likely to increase at each contract renewal given the current rental trend^6
Couples run the risk of needing to relocate if the landlord does not renew the lease, as 36 months is the maximum rental period per rental application^7
There is no ROI (return on investment) on rental payments as compared to paying the mortgage on a HDB flat that you own.
Option 3: Buy a condo unit that has obtained Temporary Occupation Permit (TOP)
Costs:
You are encouraged to read our Jun 2018 article to find out what to take note of when buying a condo unit^9
So what are the pros?
Comes with facilities (e.g. clubhouse, BBQ pits, swimming pool, the gym).
Bragging rights.
What about the cons?
Much more expensive than HDB flats. Hence couples probably can only afford smaller sized units (e.g. 2-bedder), and will still need to ‘upsize’ to a bigger property if they intend to have children.
‘Hidden’ monthly condo maintenance fees between $500 - $1,000^10.
Difficult to ‘downgrade’ to a HDB flat in the future as you’ll need to sell off your condo unit
Besides these 3 options, there are other options as well. Such as moving into an in-laws’ place, alternating between both parents’ place, and more. Ultimately, every couple’s circumstances and preferences are unique. And buying property is the biggest purchase most of us will make. So why not consult a professional just to be safe?
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