As homes in Singapore are relatively expensive, many of us buy an HDB BTO flat as our first home. BTOs, or Built-to-Order flats, are heavily subsidised by the government to provide affordable housing for Singaporeans. In the August 2022 BTO launch, we can see that “Transacted Prices of Resale Flats Nearby” is always higher than the BTO’s “Selling Price (Excluding Grants)“.
For example, in the Woodlands South Plains project, the 3-room BTO Flats are priced from $188,000, which is almost half of what nearby HDB flats are selling for at the lower end ($374,000). At the other end of the spectrum, 4-room flats at Central Weave@AMK are selling from $535,000. This is 29% lower than what nearby HDB flats are selling for at the lower end ($690,000).
Source: HDB
What we need to always keep in mind is that, as with any decision, there are always pros and cons. The biggest disadvantage in buying a BTO is stated upfront in its name – it is built to order. This translates into a waiting time of between 3 and up to 6 years for the flat to be built, depending on the exact location we choose. There may also be unexpected delays with BTOs, such as the recent COVID-19 pandemic causing delays to as many as 80% of BTO projects at one point.
HDB Prices Have Been Rising (Unevenly Over The Last 3 Decades)
For those of us considering a BTO flat today, we would surely have heard how our parents were able to buy their HDB for a very modest amount in the 70s, 80s and 90s. The prices today look like they are a world apart from those days. This should not be a big surprise, as Singapore today is a different world from those decades.
While there are no statistics for how much HDB used to sell its newly built homes in previous decades, we can look at how HDB resale prices have been increasing since 1990.
Source: Singapore Department of Statistics (DOS)
The first thing we can observe in the chart above is that HDB prices have risen over 650% since 1990. This basically means that a home worth $100,000 in 1990 would be equivalent to a similar home worth about $675,000 today. If we were to go even further back, there’s no reason to believe the increases would not be even steeper.
Another thing we can see is that HDB resale prices are currently at its peak, breaching the previous high some time in 2013. Again, this isn’t surprising since we have been reading about how rising home prices have since COVID-19 hit.
In fact, there have been two rounds of cooling measures, in December 2021 and September 2022, aimed at slowing down the price rise. The latest September 2022 cooling measures was also more targeted to curb rising HDB prices.
But Does Your HDB Flat Price Appreciate While Waiting For It To Be Built?
As a function of market forces, HDB resale prices fluctuate – even as it tends to go in an upward trajectory. One question for some of us who have purchased our BTO flats is whether its price goes up even while we’re waiting for it to be built.
The short answer is that it does look like it.
Even though the BTO flats are outside of the market while its being built, and will continue to be outside of the market for the duration of our 5-year Minimum Occupation Period (MOP), its price should follow the market direction. A simple way to think about it is that even though we cannot sell our BTO flats until we hit the MOP, its value should track what’s happening in the HDB resale market.
It’s not just an unknown amount either. Apart from HDB resale prices, we can view how much HDB prices unsold BTO flats for its Open Booking of Flats – where buyers can purchase HDB flats as early as the next working day.
This is where we can learn whether our HDB BTO flats prices have appreciated – by studying whether prices are higher or lower than the initial launch price.
Read Also: Complete Guide To Understanding And Applying Under HDB’s Open Booking Of Flats Option
How Much Do HDB BTO Flat Prices Increase While They Are Being Built?
Locations for the October 2022 Open Booking of Flats have been published on the HDB website. For those waiting for our BTO flats to be built, we can try to look at whether prices in the estate have gone up.
Personally, I was checking whether there were any flats being offered from the new estate that I had applied for my BTO flat. I will use examples for my BTO flat purchase, while trying to refrain from mentioning the estate (although, readers may be able to guess which estate this is).
I purchased my BTO flat in the second half of 2017. While I cannot find a comparable unit to mine in the October 2022 Open Booking of Flats, I have price points from the launch to look at other similar units.
One example is the unit in the table below – a 4-room flat, on the 2nd floor. I can see that the price starts from $601,000.
I can also look at how much a similar unit was priced during the BTO launch in 2017 (in the table below). As we can see, units on the same floor and in the same block cost $532,200. This translates to a 13% price increase at the Open Booking of Flats in October 2022, comapared to the BTO launched 5 years ago in 2017.
We can also relook the earlier chart on HDB resale prices, to look at how much resale HDB prices have actually increased in the past 5 years. From the chart, the HDB resale price index has risen more than 23% from the 2nd half of 2017 to today (the 2nd half of 2022).
Source: HDB
In the 5 years since I booked my HDB flat, the HDB resale price index has gone up more than 23%. This is much higher than the 13% increase in price that the BTO flats offered 5 years ago (in 2nd half 2017) are being offered today. While this is only for one BTO estate (which is my personal BTO application in 2017), it is realistic to consider that flats offered in the Open Booking of Flat are priced attractively.
One logical explanation is that HDB tends to provide flats at a discount to the transacted prices of resale HDB flats in the vicinity. As prices of resale flats in the vicinity goes up, it makes sense that the BTO prices also go up – perhaps at a slower pace.
Read Also: Why It Doesn’t Make Financial Sense To Give Up Your HDB BTO Flat Due To Construction Delays
Top photo by Moo Kar Ming, DollarsAndSense
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