Calculations on a HDB purchase versus rental part III

In my previous posts Calculations on a HDB purchase versus rental Part I and Part II, I have covered what would be the absolute cost of renting versus buying with a hypothetical example, and also the unrecoverable costs consideration when buying a resale HDB flat instead of renting for singles. In this post, I will talk about pros and cons of BTO for singles.

BTO for singles


Upon reaching the definitive age of 35, eligible SINGLE Singaporeans can apply for BTO at last! Albeit only two-room flexi flats in non-mature estates. The average cost is assumed to be $100k for 45sqm space (prior to eligible grants). 

Available grants under Single Singapore Citizen Scheme are as illustrated on the HDB website here. Do note that Proximity Housing Grant in this case does not apply.


Source: HDB website

Who should apply?


Two-room flexi flat is for you if you are
  • Eligible:
    Average gross monthly household income does not exceed $4,500 (You are earning more? Ok you can stop reading here.)
  • Not concerned with a few years waiting time period (for a successful ballot plus flat building) before you can move in
  • Not concerned with living in a small space
  • Not intending to earn rental income from your flat or use it for investment gain
  • Financially constrained or concerned with loan overload (most of the fixtures are already put in for you, purchase cost is lower than buying resale)
  • Has no plan to get married and buy new property anytime soon (you have the MOP to serve out, remember?)
  • Not concerned about limited choices (choosing your preferred unit is based on your ballot luck)

For those interested, the good news is that demand for flexi BTO has been easing up with reference to TODAY's article. The competition ratio for application was down to 4.2 to 1 compared to the previous crazy figure. However, that is bound to change depending on the number of singles looking to buy BTO in future and the number of new BTO launches.

What if you do not fancy a 2-room BTO but want a bigger one? Then you would have to either say bye to single-hood or apply together with your parents / siblings (if orphaned).


How does it compare to renting?


With a brand new 99-year lease in place, you will have no worry of having no shelter till a really ripe old age, getting kicked around by landlords or terrorized by co-tenants. 

Looking at my previous estimation of renting cost, in approximately 14 years time, one would have saved enough rental cost to cover for the BTO cost. If the rental cost is being used to invest for say a 4% return, then the cost might be covered even sooner.

Thereafter, the BTO becomes "free to stay"!

My toilet's not rented at last!


TLTR


It is really very much the same old grouse as those who are married and looking for a flat. I shall summarize the comparison in the following table.

Resale flat
BTO flat (2-room flexi)
Pay a premium
Pay lower subsidized price
Able to move in within half a year
Have to wait 2-3 years before moving in
Able to choose location and level of the unit to your liking
In non-mature estates only, unit choice depends on your ballot Q no (luck)
Furnishing done by self
Basic furnishing done up by HDB
No of lease years left depends on TOP of unit
Brand new 99-year lease left
Can buy up to 5-room
Only 1 bedroom & 1 living room



Buy if you can afford it but buying a property is a big commitment. It is worth spending some time to chew over which of the factors above do you want to prioritize the most before signing anything.

When we talk about COST, it can go beyond the property prices or what we call monetary terms. I have highlighted above the two main factors involving upfront costs. Whereas the number of lease years left would determine your flat's resale value, and upon retirement, the Lease Buyback Scheme value that you can get.

You could read my previous posts for more thoughts on them. For a step-by-step guide to BTO application, MoneySmart team has done an excellent post here so I won't dwell further into that.


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