journo
27-10-22, 12:15
Too picky? Why are young buyers refusing to compromise on their desired BTO property despite long waits and escalating prices?
25th of October, 2022
Ms Tan Gin Yee was still in her first year of university when she began voting for a Build-To-Order (BTO) flat with her boyfriend in late 2018.
Ms Tan, who was 20 at the time, expected to be able to marry and move into her own flat a few years after starting work.
Six BTO applications and two SBF exercises later — all for apartments in generally popular estates like as Ang Mo Kio and Dakota — she and her partner, Mr Tan Heng Wei, are still without a home.
"It's very annoying," Ms Tan, now 24, a content executive in a public relations agency, said.
"We were expecting that the home would be at least halfway finished by the time I started working, but after all these years, we're still at the same starting place," she explained.
While she and Mr Tan, a 29-year-old in the marine business, are not in a hurry to marry, they are concerned that the longer they wait to find a flat, the higher property prices would rise.
Their experience is similar to that of other young Singaporeans who have had repeated failed balloting efforts for a BTO, or extended delays even after acquiring one, in the midst of a flourishing housing market fueled by a rise in demand for apartments as the Covid-19 outbreak receded.
Ms Tan, like many of her colleagues, stated that she is unwilling to compromise on her must-haves, including the location of her ideal home, at this time.
"My first house doesn't require a walk-in closet," she noted, "but if we need to travel to work, purchase goods, and see our relatives, these are some things we don't really want to compromise on."
Mr Tan, her partner, stated that residing near an MRT station is very crucial because he works shift hours and getting a cab to work regularly will lead him to "become broke very quickly."
Other young Singaporeans we questioned stated they are reluctant to compromise on their basic needs, even failing to acquire a flat viewing after repeated voting.
They all want the flat to be close to an MRT station and other facilities, as well as their parents' residences, so they can better care for their parents as they age or obtain their help with childcare.
While some may criticise these new apartment purchasers for being excessively picky, property specialists say that such demands reflect young Singaporeans' rising prosperity and ambitions.
"As people get wealthier in Singapore, they naturally have greater aspirations and demand for higher-quality housing and better location," said Dr Lee Kwan Ok, Associate Professor and Dean's Chair of Urban Planning at the National University of Singapore (NUS).
Mr Xie Jiawei, 30, another young homebuyer questioned, ultimately acquired a four-room resale property in Telok Blangah last December after six unsuccessful ballots for a BTO.
All six prior polls, including one SBF exercise, were held in mature estates such as Queenstown, Dakota, and Kallang Whampoa, allowing him to reside near to his parents or in-laws, who dwell in Bouna Vista and Queenstown, respectively.
According to Mr Xie, who works in the real estate market, doing so would mean that the elderly might care for his children in the future.
Mr. Xie stated that he is ready to pay more for an excellent site that is within his budget, rather than paying less and serving out "a really long term" of the five-year Minimum Occupation Period (MOP) for a less perfect location.
EXTREME DEMAND
Long waits for BTO flats — where the idea by one's partner to jointly apply for a unit has become a surrogate for a distinctively Singapore marriage proposal — and rising property prices have recently cast a focus on the entire system.
Due to construction delays, waiting periods for BTOs soared to four to five years during the epidemic. Prior to the epidemic, flat applicants often had to wait two and a half to four years for their new residences.
Prices for new flats have also reached new highs, with the highest price for a five-room unit at Central Weave At Ang Mo Kio BTO, which opened in August, reaching a record S$877,000.
Earlier this week, many Members of Parliament (MP) expressed worry over escalating housing prices in Singapore and inquired about steps to shorten the waiting period for BTO flats.
The Housing and Development Board (HDB) previously said that there was still substantial demand for BTO apartments in both mature and non-mature estates, with demand for new flats in mature estates continuously greater.
Mature estates, which include Bishan, Ang Mo Kio, Tampines, Queenstown, and Toa Payoh, have limited area for public housing development.
Non-mature estates, which include Yishun, Tengah, Jurong East, Punggol, and Sengkang, have more land.
According to Ms Wong Siew Ying, the head of research and content at PropNex Realty, mature estates are popular with applicants due to their more central positions, a greater selection of facilities, and accessibility to MRT stations. Applicants may also apply in order to be closer to their parents, who reside in mature towns.
While less popular BTO projects tend to be in non-mature towns such as Tengah, which is still under construction, or those further distant from the city such as Yishun or Chua Chu Kang, "a handful" of projects in non-mature estates have application rates that outnumber those in mature estates.
During the BTO exercise in May, they included Lakeside View in Jurong West and Yishun Beacon in Yishun Central. According to Ms Wong, both developments are within walking distance of an MRT station.
Other property analysts agreed that, while competition for new flats in older estates has increased, demand for apartments in all types of estates has increased over the last two years.
They ascribed the trend to an ageing population in which elderly people living in private residences are looking to downsize, increased demand from singles, and a supply crisis caused by the delayed development of BTO apartments.
According to NUS' Dr Lee, the perfect storm, or confluence of events, has resulted in a rise in demand that has left some first-time applicants unsatisfied — even after choosing for less-popular, non-mature estates.
Ms Foo Myn, a 24-year-old café manager, claimed she sobbed after discovering she had been unsuccessful in her voting for a five-room property in a Lakeside BTO launch in May.
Ms Foo, who applied for the property since it was close to her boyfriend's parents' home in Jurong West, said she was certain of landing an apartment in a non-mature, "ulu" community distant from town. Ms Foo, discouraged, has shifted her focus to the HDB resale market.
MOVES BY THE GOVERNMENT TO ARREST THE SITUATION
The government has implemented a number of steps to relieve the issue and guarantee that Singaporeans, particularly those purchasing their first home, have access to affordable housing.
Increasing the availability of BTO apartments while decreasing wait times
Responding to queries from MPs earlier this week, National Development Minister Desmond Lee stated that since 2018, HDB has offered several BTO projects with reduced waiting times of three years or fewer by moving forward building activities for selected sites that are ready for development.
HDB has also upped its BTO unit supply to 23,000 apartments per year in 2022 and 2023, a 35% increase over last year. Mr Lee also stated that the agency is willing to build up to 100,000 more apartments between 2021 and 2025 if necessary.
In response to our inquiries, HDB stated on Saturday (Oct 22) that "almost 11,000 BTO units with shortened waiting times had been offered." "In reality, despite the interruptions created by Covid-19, we were able to deploy 7,200 such BTO apartments between 2020 and 2022," the company claimed.
Nonetheless, it admitted that the pandemic has impacted their pipeline of BTO flats with lower waiting periods.
"We also had to move forward several BTO projects in the last two years to accommodate excessive demand," it stated. "However, we will endeavour to create additional BTO flats with shorter waiting times subject to site availability and preparedness."
HDB has also made improvements to the BTO balloting method to improve the chances of first-time home purchasers obtaining a new unit.
In August, HDB stated that it will raise the proportion of flats in BTO launches reserved for first-time applicants, with at least 85% of three-room BTO flat supply and 95% of four-room and bigger flat supply in non-mature estates set aside for them.
This is an increase from the present standards of at least 70% and 85%, respectively.
The government would continue to set aside at least 95 percent of BTO flat supply for older estates.
The number of unique first-time family applicants has also "substantially grown" from over 19,000 in 2018 to about 34,000 in 2021, according to the authorities.
In 2021, there were 4.1 first-time family applications per BTO apartment, up from 2.2 in 2018, indicating strong demand for homes among this category.
https://i.imgur.com/59w2ARO.jpg
According to HDB's response to our questions, first-timer family applicants often ask for three-room or bigger BTO apartments, and the proportion of such flats booked by first-timer families across all estates climbed from roughly 70% in 2017 to 85% in 2021.
The average number of apartments booked by first-timer families in 2020 to 2021 "has also experienced a considerable rise of roughly 36%" compared to the previous three years, according to HDB. Despite the epidemic, "substantially more first-timer families have been able to rent new HDB apartments," according to the report.
Providing affordability
With potential purchasers seeing BTO units as getting more costly, Mr Lee stated in answer to a question in Parliament on October 4 that BTO flat prices remain accessible despite increased demand for housing.
He stated that affordability criteria, such as house price-to-income ratios and the amount of monthly income that purchasers use to service mortgage instalment payments, continue to be lower in the United States compared to international standards.
Mr Lee was replying to Yio Chu Kang MP Yip Hon Weng's query on what steps are being taken to combat "a rising feeling" that the Singapore housing market is out of reach for the public.
Mr Yip also inquired about the Government's plans to keep housing affordable for Singaporeans if housing market circumstances do not change.
Mr Lee stated that new HDB apartments are marketed at below-market prices due to considerable subsidies. According to Mr Lee, the average price for a new four-room apartment in a non-mature development has remained "pretty steady" at S$341,000 in 2019 and S$348,000 in the first three quarters of 2022 due to increasing market subsidies to keep homes affordable.
In response to our inquiries, HDB stated that the price of a five-room apartment in a similar estate was S$454,000 in 2019 and S$476,000 in the first three quarters of 2022.
HBD reaffirmed that it offers "a comprehensive choice of flat types in various locations... in every BTO exercise to accommodate varying budgets and housing demands." "This enables households to pick a flat type in a location that is within their budget; the important factor in pricing new flats is to ensure affordability for flat buyers, particularly first-time applicants," it stated.
In the previous two years, about nine out of ten four-room apartments provided in non-mature estates cost less than S$400,000 before grants, while approximately nine out of ten five-room flats in non-mature estates cost less than S$500,000 before subsidies.
According to HDB, "the average pricing of BTO apartments across flat types in non-mature estates have remained constant since 2019."
Eligible first-time purchasers can also get Enhanced CPF Housing Grants of up to S$80,000, with further assistance available for lower-income buyers. The amount of housing allowances given out by the government has risen throughout the years to provide additional assistance to house purchasers purchasing their first HDB flats.
The median amount of subsidies awarded across all flat types for BTO flats has grown by almost 33%, from S$30,000 in 2015 to S$40,000 in 2021. "As a consequence, most first-timer families utilise about 25% of their monthly income to pay for their monthly loan payments, and many can service their housing loans with little or no cash outlay," HDB added.
https://i.imgur.com/Ay6QLfd.jpg
In addition, HDB has encouraged young couples to apply for BTO units in less mature estates. It was reported that during the last several years, over 90% of first-timer families applying in non-mature estates were successful in their first two efforts, and nearly all first-timer families applying in a non-mature estate were successful in their first three attempts.
To help moderate demand for public housing and keep HDB resale flats affordable for buyers, particularly first-time buyers, the authorities announced last month that private property owners will now have to serve a temporary wait-out period of 15 months after selling their homes before they can buy a non-subsidised resale flat.
CHANGING EXPECTATIONS
When it comes to purchasing their first dream house, some young Singaporeans informed us that they have had to reduce their expectations after realising that BTO apartments are in high demand.
Ms Tan, a 26-year-old computer consultant who preferred to remain anonymous, said she and her boyfriend began looking for a property "that was close to ideal" so that they could live there for many years. They have therefore reduced their hopes to finding a house "reasonably close" to her boyfriend's business in Loyang following several balloting failures for a BTO flat.
Ms Tan stated that this is one area where she would not budge.
She and her partner are competing for a BTO apartment in Geylang.
"It's simple to say we can go for Tengah or Keat Hong (near Chua Chu Kang), but it's not really a solution," she said, adding that if they buy a new residence in these regions, it will be "extremely unpleasant" to commute for at least a few hours everyday between work and home.
A house in Geylang would also put her in-laws' house in Simei and her parents' house in Bukit Panjang in the same general vicinity. This would allow her to return to Bukit Panjang on a regular basis to care for her ageing grandma, she noted.
A house buyer who only wanted to be identified as Vincent stated that his first property should be large enough to raise children in, such as a five-room flat. It should also be close to his parents, who can look after his children.
Alternatively, the house should rise in value enough for him and his wife to move up to a larger home, according to the 28-year-old. He refused to say what his job is, just that it is in the professional, managerial, executive, and technical (PMET) category.
He and his 26-year-old wife, who works in the public sector, have failed eight BTO applications in places including Bishan, Telok Blangah, and Dakota. They were also unable to obtain an apartment in Bishan through the Sale of Balance application. Vincent stated that they will apply for a Tengah flat in the upcoming BTO exercise.
Aside from the location, property agent Shaik Amar, 30, said that while he has many customers who prefer higher-floor BTO units, the recent fierce competition for flats has pushed individuals to choose "everything and anything," even second-floor residences facing the garbage chutes.
According to Ms Wong of Propnex Realty, Singaporeans in their 40s and below may take a more "business-like approach" to purchasing their first property with the intention of utilising their flat to expand their wealth in the future.
In comparison, older-generation purchasers who purchased their first house in the 1980s or 1990s saw it as a solution to their housing requirements rather than an investment opportunity.
Ms Wong speculated that the disparities in expectations between age cohorts might be attributed to younger people's better degree of financial understanding.
Some younger Singaporeans who ultimately got an apartment after repeated efforts have been influenced by the fact that they had to settle for anything less than their "dream home."
Mr Amar, who obtained a home in SkyOasis At Dawson through the SBF process after three prior attempts to ballot for a BTO, stated that he was only able to obtain a three-room flat rather than the four-room one he desired.
As a result, he has chosen to delay having children until he can afford to move to a larger property in five years. He also stated that the 63sqm "shoebox" flat is insufficient for a family with children.
ANALYSTS ON ATTITUDE CHANGES
Analysts said they could see why young buyers, who are becoming more affluent, had specific expectations for their first residences.
Mr Colin Tan, a former research director of a global real estate consultancy firm, stated that because most jobs are still concentrated in the Central Business District area, it is inconvenient for Singaporeans who live in non-central areas such as Tengah or Sengkang to commute to and from work every day.
Other observers, such as NUS's Professor Sing Tien Foo, head of the Institute of Real Estate and Urban Studies, believe there is a mismatch between Singaporeans' expectations of where they want to live and the sort of property they can afford.
Prof Sing said that with over 80% of Singaporeans in the public housing market, it is also difficult for the government to provide the same facilities across all estates in order to fulfil the preferences of the majority of purchasers.
Prof Sing advised Singaporeans to temper their expectations and look for apartments in less mature communities to increase their chances of securing a house. They also have the choice to upgrade when their salaries rise, he says.
In terms of preferences, Ms Wong of PropNex suggested that buyers be made aware of the benefits of purchasing lower floors, such as how they are cooler because they are less exposed to sunlight than higher floors, and how their views can be more pleasant because HDB plans to add gardens and other recreational spaces within new housing estates.
However, Dr. Lee believes that even with a greater grasp of the expectations of younger customers, it will be impossible to fulfil the needs of all households.
As a result, authorities should continue to prioritise some groups, like as first-time home purchasers with children, when distributing new flats, or ensuring that these units provide more popular features, such as proximity to MRT stations, above others, such as unobstructed vistas.
IS THE BTO SYSTEM STILL SUITABLE FOR ITS PURPOSE?
As purchasers fret about rising property costs and lengthier wait times for new apartments, the unavoidable question arises: Is the system, which has been in place for more than two decades, in need of modification, if not an overhaul?
Associate Professor Ben Leong of the NUS School of Computing recently argued in a lengthy blog post written in his own capacity that it is time to rethink the BTO system. Among his objections was that the time lapse between applying for and building a BTO creates a housing scarcity, pushing up demand and flat costs.
However, according to property experts we spoke with, the present troubles in the BTO system are primarily the result of outside causes, namely Covid-19.
According to Mr Colin Tan, a property consultant, the unexpected jump in demand for properties following the epidemic has resulted in a "emotional response" from purchasers who are racing to acquire homes before prices rise further. This increases demand even more.
Some analysts interviewed were also opposed to the government returning to the former practise of developing apartments ahead of demand since it is resource-intensive and financially dangerous.
Still, they believe the BTO system may benefit from certain improvements at this time.
Mr Colin Tan proposed that the price difference between BTO apartments in mature and non-mature estates be increased to provide purchasers more incentive to dwell in non-mature estates. He noted that this would assist to balance demand among estates.
According to property experts we spoke with, the present troubles in the BTO system are mostly the result of outside causes, namely Covid-19.
Other academics, however, believe that doing so will increase income segregation in different housing complexes.
Dr. Lee proposed utilising residual income in addition to the existing benchmarks used by the government to assess the affordability of flats, such as housing price-to-income ratios.
This is the amount of money left over after paying for necessities like food and schooling. Dr. Lee stated that the amount each household spends on their mortgage will vary depending on their residual income. It might also be used as an eligibility criterion for BTOs to guarantee that units are allocated to those in greatest need.
She did admit, though, that residual revenue is difficult to quantify. Prof Sing further mentioned that HDB housing funds are already graded based on income to ensure that lower-income households receive greater financial assistance.
Regarding whether adjustments to the BTO system are required, HDB stated that it is "a flexible and responsive system that allows HDB to dynamically adapt its development plans to meet demand."
"When demand is high, as it is today," it added. "The BTO system offers the essential discipline to prevent a big supply overhang, which may result in unsold flats and reduced prices."
Previously, under the BTO system, HDB would start building if at least 70% of the units were reserved. However, it has asked for and granted construction contracts "for the bulk of BTO projects prior to the conclusion of the flat selection" since May 2011.
"As a result, HDB is already building ahead of demand or actual bookings, when feasible," it said. "How early the construction tenders may be called depends on a range of criteria, such as site preparedness, planning permission status, and design development process, among others."
THE STORM WILL PASS
Analysts predict the present market condition to improve in a few years, making it simpler for young buyers to get a BTO home, as the government increases the supply of BTO flats and imposes cooling measures to bring down property prices.
Moving forward, the government will need to better estimate demand based on Singapore's population growth, particularly given that there are greater and shifting demand for flats as households become smaller and people's wages rise, according to the experts.
Prof Sing, when asked if the present high in the HDB resale market is part of the typical property market cycle, noted that the latest cycle has been "shorter and quicker" because to building delays caused by the Covid-19 epidemic, which has led property values to climb swiftly. In previous cycles, the property market peaked between five and seven years.
According to Prof Sing, the property market cycle would become more difficult to anticipate in the future due to additional variables such as changes in interest rates and the economic climate.
However, for young Singaporeans hoping to settle down soon, such future estimates provide little relief for their current circumstances, particularly for those with limited time.
Vincent, a 28-year-old PMET, stated that another rejection in his BTO application will result in a "significant delay" in his hopes to establish a family.
"Now we realise that even if we are successful with the next BTO, we will still have to wait four years and I would be 32 years old, which is obviously later than when I planned to get married," he stated, adding that he wants to have children as soon as possible.
"It wasn't a fully calculated decision to continue to pursue BTO and risk having a late marriage... but in recent months, we've done a reality check, and I'm wondering if there's really a sense in applying for BTO if it means I can only start enjoying a married life four years from now."
While Vincent said he will still apply for a BTO at Tengah in next month's project launch, he will also be searching for resale apartments near primary schools, despite high costs in the bouyant resale market.
"Who knows, I might struggle in the HDB resale market for the next four years, but at least I have a BTO," he added.
25th of October, 2022
Ms Tan Gin Yee was still in her first year of university when she began voting for a Build-To-Order (BTO) flat with her boyfriend in late 2018.
Ms Tan, who was 20 at the time, expected to be able to marry and move into her own flat a few years after starting work.
Six BTO applications and two SBF exercises later — all for apartments in generally popular estates like as Ang Mo Kio and Dakota — she and her partner, Mr Tan Heng Wei, are still without a home.
"It's very annoying," Ms Tan, now 24, a content executive in a public relations agency, said.
"We were expecting that the home would be at least halfway finished by the time I started working, but after all these years, we're still at the same starting place," she explained.
While she and Mr Tan, a 29-year-old in the marine business, are not in a hurry to marry, they are concerned that the longer they wait to find a flat, the higher property prices would rise.
Their experience is similar to that of other young Singaporeans who have had repeated failed balloting efforts for a BTO, or extended delays even after acquiring one, in the midst of a flourishing housing market fueled by a rise in demand for apartments as the Covid-19 outbreak receded.
Ms Tan, like many of her colleagues, stated that she is unwilling to compromise on her must-haves, including the location of her ideal home, at this time.
"My first house doesn't require a walk-in closet," she noted, "but if we need to travel to work, purchase goods, and see our relatives, these are some things we don't really want to compromise on."
Mr Tan, her partner, stated that residing near an MRT station is very crucial because he works shift hours and getting a cab to work regularly will lead him to "become broke very quickly."
Other young Singaporeans we questioned stated they are reluctant to compromise on their basic needs, even failing to acquire a flat viewing after repeated voting.
They all want the flat to be close to an MRT station and other facilities, as well as their parents' residences, so they can better care for their parents as they age or obtain their help with childcare.
While some may criticise these new apartment purchasers for being excessively picky, property specialists say that such demands reflect young Singaporeans' rising prosperity and ambitions.
"As people get wealthier in Singapore, they naturally have greater aspirations and demand for higher-quality housing and better location," said Dr Lee Kwan Ok, Associate Professor and Dean's Chair of Urban Planning at the National University of Singapore (NUS).
Mr Xie Jiawei, 30, another young homebuyer questioned, ultimately acquired a four-room resale property in Telok Blangah last December after six unsuccessful ballots for a BTO.
All six prior polls, including one SBF exercise, were held in mature estates such as Queenstown, Dakota, and Kallang Whampoa, allowing him to reside near to his parents or in-laws, who dwell in Bouna Vista and Queenstown, respectively.
According to Mr Xie, who works in the real estate market, doing so would mean that the elderly might care for his children in the future.
Mr. Xie stated that he is ready to pay more for an excellent site that is within his budget, rather than paying less and serving out "a really long term" of the five-year Minimum Occupation Period (MOP) for a less perfect location.
EXTREME DEMAND
Long waits for BTO flats — where the idea by one's partner to jointly apply for a unit has become a surrogate for a distinctively Singapore marriage proposal — and rising property prices have recently cast a focus on the entire system.
Due to construction delays, waiting periods for BTOs soared to four to five years during the epidemic. Prior to the epidemic, flat applicants often had to wait two and a half to four years for their new residences.
Prices for new flats have also reached new highs, with the highest price for a five-room unit at Central Weave At Ang Mo Kio BTO, which opened in August, reaching a record S$877,000.
Earlier this week, many Members of Parliament (MP) expressed worry over escalating housing prices in Singapore and inquired about steps to shorten the waiting period for BTO flats.
The Housing and Development Board (HDB) previously said that there was still substantial demand for BTO apartments in both mature and non-mature estates, with demand for new flats in mature estates continuously greater.
Mature estates, which include Bishan, Ang Mo Kio, Tampines, Queenstown, and Toa Payoh, have limited area for public housing development.
Non-mature estates, which include Yishun, Tengah, Jurong East, Punggol, and Sengkang, have more land.
According to Ms Wong Siew Ying, the head of research and content at PropNex Realty, mature estates are popular with applicants due to their more central positions, a greater selection of facilities, and accessibility to MRT stations. Applicants may also apply in order to be closer to their parents, who reside in mature towns.
While less popular BTO projects tend to be in non-mature towns such as Tengah, which is still under construction, or those further distant from the city such as Yishun or Chua Chu Kang, "a handful" of projects in non-mature estates have application rates that outnumber those in mature estates.
During the BTO exercise in May, they included Lakeside View in Jurong West and Yishun Beacon in Yishun Central. According to Ms Wong, both developments are within walking distance of an MRT station.
Other property analysts agreed that, while competition for new flats in older estates has increased, demand for apartments in all types of estates has increased over the last two years.
They ascribed the trend to an ageing population in which elderly people living in private residences are looking to downsize, increased demand from singles, and a supply crisis caused by the delayed development of BTO apartments.
According to NUS' Dr Lee, the perfect storm, or confluence of events, has resulted in a rise in demand that has left some first-time applicants unsatisfied — even after choosing for less-popular, non-mature estates.
Ms Foo Myn, a 24-year-old café manager, claimed she sobbed after discovering she had been unsuccessful in her voting for a five-room property in a Lakeside BTO launch in May.
Ms Foo, who applied for the property since it was close to her boyfriend's parents' home in Jurong West, said she was certain of landing an apartment in a non-mature, "ulu" community distant from town. Ms Foo, discouraged, has shifted her focus to the HDB resale market.
MOVES BY THE GOVERNMENT TO ARREST THE SITUATION
The government has implemented a number of steps to relieve the issue and guarantee that Singaporeans, particularly those purchasing their first home, have access to affordable housing.
Increasing the availability of BTO apartments while decreasing wait times
Responding to queries from MPs earlier this week, National Development Minister Desmond Lee stated that since 2018, HDB has offered several BTO projects with reduced waiting times of three years or fewer by moving forward building activities for selected sites that are ready for development.
HDB has also upped its BTO unit supply to 23,000 apartments per year in 2022 and 2023, a 35% increase over last year. Mr Lee also stated that the agency is willing to build up to 100,000 more apartments between 2021 and 2025 if necessary.
In response to our inquiries, HDB stated on Saturday (Oct 22) that "almost 11,000 BTO units with shortened waiting times had been offered." "In reality, despite the interruptions created by Covid-19, we were able to deploy 7,200 such BTO apartments between 2020 and 2022," the company claimed.
Nonetheless, it admitted that the pandemic has impacted their pipeline of BTO flats with lower waiting periods.
"We also had to move forward several BTO projects in the last two years to accommodate excessive demand," it stated. "However, we will endeavour to create additional BTO flats with shorter waiting times subject to site availability and preparedness."
HDB has also made improvements to the BTO balloting method to improve the chances of first-time home purchasers obtaining a new unit.
In August, HDB stated that it will raise the proportion of flats in BTO launches reserved for first-time applicants, with at least 85% of three-room BTO flat supply and 95% of four-room and bigger flat supply in non-mature estates set aside for them.
This is an increase from the present standards of at least 70% and 85%, respectively.
The government would continue to set aside at least 95 percent of BTO flat supply for older estates.
The number of unique first-time family applicants has also "substantially grown" from over 19,000 in 2018 to about 34,000 in 2021, according to the authorities.
In 2021, there were 4.1 first-time family applications per BTO apartment, up from 2.2 in 2018, indicating strong demand for homes among this category.
https://i.imgur.com/59w2ARO.jpg
According to HDB's response to our questions, first-timer family applicants often ask for three-room or bigger BTO apartments, and the proportion of such flats booked by first-timer families across all estates climbed from roughly 70% in 2017 to 85% in 2021.
The average number of apartments booked by first-timer families in 2020 to 2021 "has also experienced a considerable rise of roughly 36%" compared to the previous three years, according to HDB. Despite the epidemic, "substantially more first-timer families have been able to rent new HDB apartments," according to the report.
Providing affordability
With potential purchasers seeing BTO units as getting more costly, Mr Lee stated in answer to a question in Parliament on October 4 that BTO flat prices remain accessible despite increased demand for housing.
He stated that affordability criteria, such as house price-to-income ratios and the amount of monthly income that purchasers use to service mortgage instalment payments, continue to be lower in the United States compared to international standards.
Mr Lee was replying to Yio Chu Kang MP Yip Hon Weng's query on what steps are being taken to combat "a rising feeling" that the Singapore housing market is out of reach for the public.
Mr Yip also inquired about the Government's plans to keep housing affordable for Singaporeans if housing market circumstances do not change.
Mr Lee stated that new HDB apartments are marketed at below-market prices due to considerable subsidies. According to Mr Lee, the average price for a new four-room apartment in a non-mature development has remained "pretty steady" at S$341,000 in 2019 and S$348,000 in the first three quarters of 2022 due to increasing market subsidies to keep homes affordable.
In response to our inquiries, HDB stated that the price of a five-room apartment in a similar estate was S$454,000 in 2019 and S$476,000 in the first three quarters of 2022.
HBD reaffirmed that it offers "a comprehensive choice of flat types in various locations... in every BTO exercise to accommodate varying budgets and housing demands." "This enables households to pick a flat type in a location that is within their budget; the important factor in pricing new flats is to ensure affordability for flat buyers, particularly first-time applicants," it stated.
In the previous two years, about nine out of ten four-room apartments provided in non-mature estates cost less than S$400,000 before grants, while approximately nine out of ten five-room flats in non-mature estates cost less than S$500,000 before subsidies.
According to HDB, "the average pricing of BTO apartments across flat types in non-mature estates have remained constant since 2019."
Eligible first-time purchasers can also get Enhanced CPF Housing Grants of up to S$80,000, with further assistance available for lower-income buyers. The amount of housing allowances given out by the government has risen throughout the years to provide additional assistance to house purchasers purchasing their first HDB flats.
The median amount of subsidies awarded across all flat types for BTO flats has grown by almost 33%, from S$30,000 in 2015 to S$40,000 in 2021. "As a consequence, most first-timer families utilise about 25% of their monthly income to pay for their monthly loan payments, and many can service their housing loans with little or no cash outlay," HDB added.
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In addition, HDB has encouraged young couples to apply for BTO units in less mature estates. It was reported that during the last several years, over 90% of first-timer families applying in non-mature estates were successful in their first two efforts, and nearly all first-timer families applying in a non-mature estate were successful in their first three attempts.
To help moderate demand for public housing and keep HDB resale flats affordable for buyers, particularly first-time buyers, the authorities announced last month that private property owners will now have to serve a temporary wait-out period of 15 months after selling their homes before they can buy a non-subsidised resale flat.
CHANGING EXPECTATIONS
When it comes to purchasing their first dream house, some young Singaporeans informed us that they have had to reduce their expectations after realising that BTO apartments are in high demand.
Ms Tan, a 26-year-old computer consultant who preferred to remain anonymous, said she and her boyfriend began looking for a property "that was close to ideal" so that they could live there for many years. They have therefore reduced their hopes to finding a house "reasonably close" to her boyfriend's business in Loyang following several balloting failures for a BTO flat.
Ms Tan stated that this is one area where she would not budge.
She and her partner are competing for a BTO apartment in Geylang.
"It's simple to say we can go for Tengah or Keat Hong (near Chua Chu Kang), but it's not really a solution," she said, adding that if they buy a new residence in these regions, it will be "extremely unpleasant" to commute for at least a few hours everyday between work and home.
A house in Geylang would also put her in-laws' house in Simei and her parents' house in Bukit Panjang in the same general vicinity. This would allow her to return to Bukit Panjang on a regular basis to care for her ageing grandma, she noted.
A house buyer who only wanted to be identified as Vincent stated that his first property should be large enough to raise children in, such as a five-room flat. It should also be close to his parents, who can look after his children.
Alternatively, the house should rise in value enough for him and his wife to move up to a larger home, according to the 28-year-old. He refused to say what his job is, just that it is in the professional, managerial, executive, and technical (PMET) category.
He and his 26-year-old wife, who works in the public sector, have failed eight BTO applications in places including Bishan, Telok Blangah, and Dakota. They were also unable to obtain an apartment in Bishan through the Sale of Balance application. Vincent stated that they will apply for a Tengah flat in the upcoming BTO exercise.
Aside from the location, property agent Shaik Amar, 30, said that while he has many customers who prefer higher-floor BTO units, the recent fierce competition for flats has pushed individuals to choose "everything and anything," even second-floor residences facing the garbage chutes.
According to Ms Wong of Propnex Realty, Singaporeans in their 40s and below may take a more "business-like approach" to purchasing their first property with the intention of utilising their flat to expand their wealth in the future.
In comparison, older-generation purchasers who purchased their first house in the 1980s or 1990s saw it as a solution to their housing requirements rather than an investment opportunity.
Ms Wong speculated that the disparities in expectations between age cohorts might be attributed to younger people's better degree of financial understanding.
Some younger Singaporeans who ultimately got an apartment after repeated efforts have been influenced by the fact that they had to settle for anything less than their "dream home."
Mr Amar, who obtained a home in SkyOasis At Dawson through the SBF process after three prior attempts to ballot for a BTO, stated that he was only able to obtain a three-room flat rather than the four-room one he desired.
As a result, he has chosen to delay having children until he can afford to move to a larger property in five years. He also stated that the 63sqm "shoebox" flat is insufficient for a family with children.
ANALYSTS ON ATTITUDE CHANGES
Analysts said they could see why young buyers, who are becoming more affluent, had specific expectations for their first residences.
Mr Colin Tan, a former research director of a global real estate consultancy firm, stated that because most jobs are still concentrated in the Central Business District area, it is inconvenient for Singaporeans who live in non-central areas such as Tengah or Sengkang to commute to and from work every day.
Other observers, such as NUS's Professor Sing Tien Foo, head of the Institute of Real Estate and Urban Studies, believe there is a mismatch between Singaporeans' expectations of where they want to live and the sort of property they can afford.
Prof Sing said that with over 80% of Singaporeans in the public housing market, it is also difficult for the government to provide the same facilities across all estates in order to fulfil the preferences of the majority of purchasers.
Prof Sing advised Singaporeans to temper their expectations and look for apartments in less mature communities to increase their chances of securing a house. They also have the choice to upgrade when their salaries rise, he says.
In terms of preferences, Ms Wong of PropNex suggested that buyers be made aware of the benefits of purchasing lower floors, such as how they are cooler because they are less exposed to sunlight than higher floors, and how their views can be more pleasant because HDB plans to add gardens and other recreational spaces within new housing estates.
However, Dr. Lee believes that even with a greater grasp of the expectations of younger customers, it will be impossible to fulfil the needs of all households.
As a result, authorities should continue to prioritise some groups, like as first-time home purchasers with children, when distributing new flats, or ensuring that these units provide more popular features, such as proximity to MRT stations, above others, such as unobstructed vistas.
IS THE BTO SYSTEM STILL SUITABLE FOR ITS PURPOSE?
As purchasers fret about rising property costs and lengthier wait times for new apartments, the unavoidable question arises: Is the system, which has been in place for more than two decades, in need of modification, if not an overhaul?
Associate Professor Ben Leong of the NUS School of Computing recently argued in a lengthy blog post written in his own capacity that it is time to rethink the BTO system. Among his objections was that the time lapse between applying for and building a BTO creates a housing scarcity, pushing up demand and flat costs.
However, according to property experts we spoke with, the present troubles in the BTO system are primarily the result of outside causes, namely Covid-19.
According to Mr Colin Tan, a property consultant, the unexpected jump in demand for properties following the epidemic has resulted in a "emotional response" from purchasers who are racing to acquire homes before prices rise further. This increases demand even more.
Some analysts interviewed were also opposed to the government returning to the former practise of developing apartments ahead of demand since it is resource-intensive and financially dangerous.
Still, they believe the BTO system may benefit from certain improvements at this time.
Mr Colin Tan proposed that the price difference between BTO apartments in mature and non-mature estates be increased to provide purchasers more incentive to dwell in non-mature estates. He noted that this would assist to balance demand among estates.
According to property experts we spoke with, the present troubles in the BTO system are mostly the result of outside causes, namely Covid-19.
Other academics, however, believe that doing so will increase income segregation in different housing complexes.
Dr. Lee proposed utilising residual income in addition to the existing benchmarks used by the government to assess the affordability of flats, such as housing price-to-income ratios.
This is the amount of money left over after paying for necessities like food and schooling. Dr. Lee stated that the amount each household spends on their mortgage will vary depending on their residual income. It might also be used as an eligibility criterion for BTOs to guarantee that units are allocated to those in greatest need.
She did admit, though, that residual revenue is difficult to quantify. Prof Sing further mentioned that HDB housing funds are already graded based on income to ensure that lower-income households receive greater financial assistance.
Regarding whether adjustments to the BTO system are required, HDB stated that it is "a flexible and responsive system that allows HDB to dynamically adapt its development plans to meet demand."
"When demand is high, as it is today," it added. "The BTO system offers the essential discipline to prevent a big supply overhang, which may result in unsold flats and reduced prices."
Previously, under the BTO system, HDB would start building if at least 70% of the units were reserved. However, it has asked for and granted construction contracts "for the bulk of BTO projects prior to the conclusion of the flat selection" since May 2011.
"As a result, HDB is already building ahead of demand or actual bookings, when feasible," it said. "How early the construction tenders may be called depends on a range of criteria, such as site preparedness, planning permission status, and design development process, among others."
THE STORM WILL PASS
Analysts predict the present market condition to improve in a few years, making it simpler for young buyers to get a BTO home, as the government increases the supply of BTO flats and imposes cooling measures to bring down property prices.
Moving forward, the government will need to better estimate demand based on Singapore's population growth, particularly given that there are greater and shifting demand for flats as households become smaller and people's wages rise, according to the experts.
Prof Sing, when asked if the present high in the HDB resale market is part of the typical property market cycle, noted that the latest cycle has been "shorter and quicker" because to building delays caused by the Covid-19 epidemic, which has led property values to climb swiftly. In previous cycles, the property market peaked between five and seven years.
According to Prof Sing, the property market cycle would become more difficult to anticipate in the future due to additional variables such as changes in interest rates and the economic climate.
However, for young Singaporeans hoping to settle down soon, such future estimates provide little relief for their current circumstances, particularly for those with limited time.
Vincent, a 28-year-old PMET, stated that another rejection in his BTO application will result in a "significant delay" in his hopes to establish a family.
"Now we realise that even if we are successful with the next BTO, we will still have to wait four years and I would be 32 years old, which is obviously later than when I planned to get married," he stated, adding that he wants to have children as soon as possible.
"It wasn't a fully calculated decision to continue to pursue BTO and risk having a late marriage... but in recent months, we've done a reality check, and I'm wondering if there's really a sense in applying for BTO if it means I can only start enjoying a married life four years from now."
While Vincent said he will still apply for a BTO at Tengah in next month's project launch, he will also be searching for resale apartments near primary schools, despite high costs in the bouyant resale market.
"Who knows, I might struggle in the HDB resale market for the next four years, but at least I have a BTO," he added.