Upgrading choices

By Felicia Tan / EdgeProp Singapore | November 5, 2021 11:16 AM SGT
Photo: Samuel Isaac Chua
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SINGAPORE (EDGEPROP) -- When it comes to owning property in Singapore, having a private address is still seen as a status symbol. Some even see it as a means to chalk up wealth. But when it comes to owning your first home — whether it is a HDB build-to-order (BTO) flat, resale flat, condominium or landed property — that very much depends on several factors like eligibility and financial resources, says Thomas Tan, COO of agency business at ERA Singapore.
He was speaking at the ERA x EdgeProp: Does It Make Sense To Upgrade Now For The Future? webinar on Nov 1.
For young couples starting out — especially if they have little cash savings — HDB BTO flats are a good choice, as HDB could provide a loan of up to 90% loan-to-value ratio. The remaining 10% coming from their Central Provident Fund (CPF) account, he adds.
With BTO flats, however, Tan says couples will have to wait up to five years before they can get the keys to their new home due to the time taken for construction.
Photo: Thomas Tan

Longer wait for BTO flats

Prior to Covid-19, couples would typically get the keys to their new BTO flats within three years, if they were successful in their application for a new home. But as the pandemic continues, National Development Minister Desmond Lee said in Parliament on Oct 5 that the average waiting time for ongoing BTO flats is about four to five years. This is due to difficult construction conditions and taller buildings.
For couples who prefer not to wait, they have the option of buying a resale HDB flat, executive condominiums (ECs) or private property. Tan says resale flats are an affordable option for young couples who want to have their own place fast, but they may have to deal with [higher] cash on valuation (COV) nowadays, as “construction delays continue to drive demand in the resale HDB market”. (Find HDB flats for rent or sale with our Singapore HDB directory)
ECs are good for couples who aspire to buy private, but may not yet have sufficient cash savings. These types of apartments are also good for couples who prefer new homes but do not want to either purchase resale flats or want to have too much gearing. Furthermore, prices for ECs are relatively more affordable compared to private condominiums.
Finally, couples with the means to afford private property and do not wish to be tied down with the five-year minimum occupation period (MOP) set out by the HDB, may consider getting such a unit for their first home. Tan also says buying a private unit may mean a higher barrier to entry due to the cost, but will come with fewer restrictions.

Key considerations for upgrading

When looking to upgrade their homes, Tan says property owners need to keep three things in mind. At the top of the list is finance: Couples need to ask themselves if their existing cash and CPF savings can afford a private property upon the sale of their HDB flat.
“[They also need to think about factors] such as contingency funds for renovation, loss of income and so on,” notes Tan.
Should couples prefer to buy an EC due to the second-timer privilege, they will have to consider the longer waiting time as well. That said, an EC “presents a good stepping stone to eventually own a private property [once it goes private after 10 years],” says Tan.
Finally, location is another consideration for upgraders. For instance, upgraders may have school-going children, so proximity to institutions is important, he adds.

Shifts during Covid-19

During the Covid-19 pandemic where working from home is now the new norm, Tan is seeing more property owners moving to the suburbs where there are bigger properties at lower prices.
The shift, he adds, may also be due to an ageing demographic. Tan says he has also seen a higher demand for bigger units this year, such as dual-key condominium units or landed homes.
Dual-key condominium units are gaining in popularity among buyers, as there is no need to pay the additional buyer’s stamp duty (ABSD) as it is still considered a single unit. A large number of home buyers making such purchases include nuclear and three-generation families.
The larger units, says Tan, reflects homeowners’ desire to live together as a unit while still enjoying their respective privacy. He has also attributed the rising trend to dining-in restrictions imposed in September, where only a maximum of two fully-vaccinated persons can dine out. “People are now choosing to live together because of dining restrictions. So, people with bigger budgets prefer to buy homes to live closer or together,” he adds.
Finally, another shift that was brought about by the pandemic is the increased demand for new properties due to the higher construction and renovation costs.

Is now a good time to upgrade?

With the Singapore property market heating up and more properties commanding higher prices for both condominiums and landed houses, is now the right time to sell your HDB and upgrade?
Yes, says Eugene Lim, key executive officer at ERA. In fact, with the HDB resale price index catching up with the private residential index, the time to update has never been better.
In the short-term, Lim also predicts that HDB resale prices will “continue on the upswing” in terms of transactions and pricing due to the longer wait time for BTO flats.

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