reporter2
03-01-23, 12:47
The HDB BTO flat as a generous wedding gift
Jan 03, 2023
BUY a Build-To-Order (BTO) flat from the Housing and Development Board (HDB) for a pleasant home to stay in as well as a chance to make money. While many buyers focus on getting an affordable flat to stay in, some buyers may prioritise making a profit from owning a BTO flat over staying in it.
However, would-be BTO flat owners who do not intend to live in their units should think twice. In a Facebook post in late 2022, National Development Minister Desmond Lee said BTO flats must be owner-occupied for the full Minimum Occupation Period (MOP). If the owners cannot fulfil the MOP, the flat needs to be returned to HDB.
Minister Lee said a family cannot buy a BTO flat, not live in it or move into it for five years, and then sell it as “almost brand new” on the resale market. The MOP is the time period that flat owners must physically occupy their units before they can sell them on the open market. The MOP is five years for flats bought from the HDB. A MOP of 10 years applies to flats bought from HDB under the Prime Location Public Housing model.
Minister Lee added that suspected misuse of flats can be highlighted to HDB at a toll-free hotline. HDB said between 2017 and November 2022, 53 errant flat owners who did not live in their HDB flats during the MOP were taken to task. Of these, 21 owners had their flats compulsorily acquired by HDB, while the rest were issued with fines or warnings.
Would people who live near flats that appear to be vacant rush to highlight such cases to HDB? Some people may opt to lie low and not be seen to be causing trouble. Others may be happy to enjoy the peace and quiet of living next to a hardly used flat.
BTO flats are sold at highly subsidised prices that cannot fully cover the total development cost, including construction and land costs, of the flats. Some BTO flats draw high application rates among non-elderly first-time buyers. Also, an empty flat could have provided shelter for a family. Hence, leaving HDB BTO flats vacant has led to an outcry by some people.
https://i.imgur.com/X2wGMCv.png
Buying BTO for potential profit
There may be less extreme cases of BTO flat owners who focus on the potential profit and underuse their units. A young couple may live largely with parents and use their BTO flat as a weekend home. Some owners could use the BTO flats mainly for holding social gatherings or as work spaces. Also, some owners may spend much of their time overseas and use their BTO flats sparingly. Should penalties apply to owners who underuse BTO flats?
People who can avail themselves of other housing options have plenty of financial incentive to try to snare a BTO unit.
In the November 2022 BTO exercise, the price range of a new five-room flat at Miltonia Breeze @ Yishun with a 99-year lease was S$375,000-450,000 versus transacted prices of comparable resale flats nearby with land leases outstanding of about 91 to 92 years of S$560,000-628,000. Based on the mid-point of the respective price ranges, the resale flat is priced about 44 per cent higher than the BTO unit.
Assume one buys a S$400,000 BTO flat. Applying a 40 per cent mark-up, the mark-to-market price of the said flat today is S$560,000. After 10 years, which allows for time to complete the flat and MOP, the flat could be worth S$829,000 if the price grows at 4 per cent per annum. This translates to a simple average annual return on investment of nearly 11 per cent.
Couples comprising a Singapore citizen and another citizen or a permanent resident who meet the monthly household income ceiling of S$14,000, among other criteria, can buy new flats directly from HDB. As it stands, HDB’s policy encourages people to get married, possibly at a fairly young age, and hopefully have babies thereafter.
Marriage bonus
Raising the fertility rate of locals matters, given the rapidly ageing population and the need for economic dynamism. Nonetheless, the decision by some couples not to have children is respected. Couples who buy four-room or five-room BTO flats do not need to return such flats to HDB if they do not have children. Also, there is no clawback of sales proceeds from childless couples who sell their BTO units post-MOP.
Maybe there is no need to fret over BTO flat buyers who underuse their flats. If allowing couples to make a few hundred thousand dollars from an HDB BTO unit is seen as the Singapore way of encouraging locals to get hitched, then whether or not BTO flats are underused is irrelevant.
For some young couples, splitting their time between living with both sets of parents and living in their own BTO unit may make perfect sense. The young couple has financial security from owning their own home, the opportunity to build deeper ties with parents and in-laws, as well as the chance to have a place to do up as they please.
Typically, HDB homes are well served by transport links and amenities such as schools, healthcare facilities, shops, parks and recreational facilities. HDB estates are generally well-maintained and owners may benefit from home improvement programmes. Also, HDB dwellers live in multi-racial communities.
As such, many people seek a BTO unit because they desire to live in them. Many homeowners will live in their BTO flats well beyond the MOP. Some owners may not want to trade a BTO flat for a private home, even if they can afford to do so.
HDB launched 23,184 BTO flats for sale in 2022. In February 2023, HDB will offer about 4,400 BTO flats in towns/estates such as Jurong West, Tengah, Kallang Whampoa, and Queenstown.
To all potential first-timer applicants, good luck. For those who hope to land a BTO unit largely for the potential profit instead of a place to stay, consider the risk of flats being returned to HDB, the cost of depriving others of a home, and the positives of HDB living.
Meanwhile, may many people be swayed to tie the knot to get the bountiful marriage bonus of a BTO flat.
https://www.businesstimes.com.sg/opinion-features/hdb-bto-flat-generous-wedding-gift
Jan 03, 2023
BUY a Build-To-Order (BTO) flat from the Housing and Development Board (HDB) for a pleasant home to stay in as well as a chance to make money. While many buyers focus on getting an affordable flat to stay in, some buyers may prioritise making a profit from owning a BTO flat over staying in it.
However, would-be BTO flat owners who do not intend to live in their units should think twice. In a Facebook post in late 2022, National Development Minister Desmond Lee said BTO flats must be owner-occupied for the full Minimum Occupation Period (MOP). If the owners cannot fulfil the MOP, the flat needs to be returned to HDB.
Minister Lee said a family cannot buy a BTO flat, not live in it or move into it for five years, and then sell it as “almost brand new” on the resale market. The MOP is the time period that flat owners must physically occupy their units before they can sell them on the open market. The MOP is five years for flats bought from the HDB. A MOP of 10 years applies to flats bought from HDB under the Prime Location Public Housing model.
Minister Lee added that suspected misuse of flats can be highlighted to HDB at a toll-free hotline. HDB said between 2017 and November 2022, 53 errant flat owners who did not live in their HDB flats during the MOP were taken to task. Of these, 21 owners had their flats compulsorily acquired by HDB, while the rest were issued with fines or warnings.
Would people who live near flats that appear to be vacant rush to highlight such cases to HDB? Some people may opt to lie low and not be seen to be causing trouble. Others may be happy to enjoy the peace and quiet of living next to a hardly used flat.
BTO flats are sold at highly subsidised prices that cannot fully cover the total development cost, including construction and land costs, of the flats. Some BTO flats draw high application rates among non-elderly first-time buyers. Also, an empty flat could have provided shelter for a family. Hence, leaving HDB BTO flats vacant has led to an outcry by some people.
https://i.imgur.com/X2wGMCv.png
Buying BTO for potential profit
There may be less extreme cases of BTO flat owners who focus on the potential profit and underuse their units. A young couple may live largely with parents and use their BTO flat as a weekend home. Some owners could use the BTO flats mainly for holding social gatherings or as work spaces. Also, some owners may spend much of their time overseas and use their BTO flats sparingly. Should penalties apply to owners who underuse BTO flats?
People who can avail themselves of other housing options have plenty of financial incentive to try to snare a BTO unit.
In the November 2022 BTO exercise, the price range of a new five-room flat at Miltonia Breeze @ Yishun with a 99-year lease was S$375,000-450,000 versus transacted prices of comparable resale flats nearby with land leases outstanding of about 91 to 92 years of S$560,000-628,000. Based on the mid-point of the respective price ranges, the resale flat is priced about 44 per cent higher than the BTO unit.
Assume one buys a S$400,000 BTO flat. Applying a 40 per cent mark-up, the mark-to-market price of the said flat today is S$560,000. After 10 years, which allows for time to complete the flat and MOP, the flat could be worth S$829,000 if the price grows at 4 per cent per annum. This translates to a simple average annual return on investment of nearly 11 per cent.
Couples comprising a Singapore citizen and another citizen or a permanent resident who meet the monthly household income ceiling of S$14,000, among other criteria, can buy new flats directly from HDB. As it stands, HDB’s policy encourages people to get married, possibly at a fairly young age, and hopefully have babies thereafter.
Marriage bonus
Raising the fertility rate of locals matters, given the rapidly ageing population and the need for economic dynamism. Nonetheless, the decision by some couples not to have children is respected. Couples who buy four-room or five-room BTO flats do not need to return such flats to HDB if they do not have children. Also, there is no clawback of sales proceeds from childless couples who sell their BTO units post-MOP.
Maybe there is no need to fret over BTO flat buyers who underuse their flats. If allowing couples to make a few hundred thousand dollars from an HDB BTO unit is seen as the Singapore way of encouraging locals to get hitched, then whether or not BTO flats are underused is irrelevant.
For some young couples, splitting their time between living with both sets of parents and living in their own BTO unit may make perfect sense. The young couple has financial security from owning their own home, the opportunity to build deeper ties with parents and in-laws, as well as the chance to have a place to do up as they please.
Typically, HDB homes are well served by transport links and amenities such as schools, healthcare facilities, shops, parks and recreational facilities. HDB estates are generally well-maintained and owners may benefit from home improvement programmes. Also, HDB dwellers live in multi-racial communities.
As such, many people seek a BTO unit because they desire to live in them. Many homeowners will live in their BTO flats well beyond the MOP. Some owners may not want to trade a BTO flat for a private home, even if they can afford to do so.
HDB launched 23,184 BTO flats for sale in 2022. In February 2023, HDB will offer about 4,400 BTO flats in towns/estates such as Jurong West, Tengah, Kallang Whampoa, and Queenstown.
To all potential first-timer applicants, good luck. For those who hope to land a BTO unit largely for the potential profit instead of a place to stay, consider the risk of flats being returned to HDB, the cost of depriving others of a home, and the positives of HDB living.
Meanwhile, may many people be swayed to tie the knot to get the bountiful marriage bonus of a BTO flat.
https://www.businesstimes.com.sg/opinion-features/hdb-bto-flat-generous-wedding-gift