Singapore Millennials’ Home Choices: BTO, Resale HDB, or Condo?

For those in their late twenties or early thirties who are happily about to step into the halls of matrimony, it’s time to consider getting a place of your own.

If you’ve been keeping an eye on Singapore’s property market, you’ll know that prices—for both HDB resale flats and private properties—have been soaring, and as an aspiring first-time homebuyer, you might be wondering about your housing options.

Case Study: Young Couple Looking to Buy Their First Property

Let’s say you and your partner have been working for a few years, each earning S$4,500 a month, and you’re looking to purchase a 4-room HDB flat.

Given your age, getting a Build-To-Order (BTO) flat (which is supposed to be the most affordable “starting point,” so to speak) isn’t very feasible. Completion times for recent BTO projects are typically four to seven years, and by the time you get your keys, you and your partner might be old enough to qualify for an HDB flat without having to go through the Registry of Marriages (ROM) process.

With that in mind, and assuming you’ve decided to move in together, here are your three options:

• Buy an HDB resale flat
• Buy a BTO flat but rent a place while waiting
• Buy a condominium

Based on the current state of Singapore’s property market, which is the best option? Let’s find out.

Should I Buy an HDB Resale Flat Now?

As mentioned above, buying a resale flat is the fastest way to get out of your current predicament. Most resale flats are in move-in condition, as they are largely occupied by current owners and/or tenants. Unlike BTO flats, which are only planned for specific areas each quarter, you can choose the location of your resale flat freely, as they are available all over Singapore.

The issue with resale flats is that even though they are cheaper than properties like landed houses and condos, their prices are constantly on the rise.

Pros and Cons of Buying an HDB Resale Flat

Selling Prices of 4 -Room Resale Flats in the City Fringe

Let’s say you prioritize accessibility to an MRT station, a short commute to the Central Business District (about a 20-minute ride on public transport), and/or proximity to various amenities. If these factors matter in your property choice, you might be looking for a property in a city-fringe neighborhood like Mountbatten/Dakota, Kallang/Whampoa, Potong Pasir, or Little India.

Anjia SG’s research shows that the cheapest flat in these areas (at the time of writing) is S$580,000, with asking prices mostly tending towards S$750,000. Some are even asking for as much as S$1,380,000, a price that could get you a decently sized condo in the Outside Central Region (OCR).

At this point, you might be thinking, “Alright, I can lower my expectations and settle for a 3-room flat.” But you’ll quickly find that the price drop for 3-room flats is limited—the most affordable 3-room flat on the market is priced at S$508,000.

Some may advise you not to be picky with your first property, while others will say that buying a home is one of the biggest expenses in life. So, we suggest you have the “right” to be “picky” about the location, but be prepared to lower your expectations if necessary.

Anjia SG’s Expert Advice

Let’s do a cost analysis. Suppose you find a resale flat for S$650,000 that meets all the above requirements. Next, let’s assume that as first-time homebuyers, you opt for an HDB loan.

With global interest rates at a high, the HDB housing loan interest rate of 2.6% (0.1% above the CPF Ordinary Account interest rate) is very competitive. Moreover, if you find a better mortgage deal, you can always refinance your home loan with a bank.

If you choose to use an HDB housing loan to purchase your home, you’ll need to pay a down payment of up to 20%, which is at least S$130,000. If you and your partner have enough CPF to cover the down payment and can afford the monthly repayment of S$2,359, this option is the most suitable for you.

However, from a financial perspective, a S$650,000 resale flat on the city fringe carries a high risk, leaving little buffer for a drop in income. Especially in these challenging times, it’s wise to think twice.

And don’t forget, the above calculations do not include stamp duty, legal fees, and the costs of renovation and furnishing.

Should I Buy a BTO Flat Now and Rent While Waiting?

The idea behind this option is to save money rather than getting deeper into the HDB resale market. You could consider buying a Build-To-Order (BTO) flat and renting a flat while you wait. BTO flats are not only cheaper than resale flats (in fact, they are cheaper than all other properties in Singapore), but they also have some investment potential. Although HDB flats in Singapore are clearly not built for investment, they are indeed the most profitable when sold on the open market after the Minimum Occupation Period (MOP) has been met.

Competition for BTO flats in certain areas (like Geylang) is fierce. Some couples have sacrificed their location requirements to seek larger properties in neighborhoods like Tengah. The rationale is that if they can’t get a place on the city fringe, they’ll look for a larger property and try to turn it into a sanctuary they won’t want to leave. After all, more employees now have flexible work arrangements and/or can work remotely.

However, after successfully balloting for a BTO flat, it means you’ll have to rent a place during the waiting period when rental prices are at an all-time high.

Anjia SG’s Expert Advice

According to the 2022 BTO application data, the lowest price for a 5-room flat in Tengah was S$428,000. Compared to most resale flats on the city fringe, BTO flats offer greater value—a good S$100,000 cheaper.

If you plan to rent while waiting for your BTO flat to be built, you’ll need to factor in another significant financial outlay. Renting a 3-room HDB flat will cost at least S$3,500 per month. If you want to rent a one-bedroom condo, the rent will be even higher, depending on the location.

Depending on how long you need to wait, this expense will add up. Assuming an average waiting time of 5 years, which is 60 months, you would spend S$210,000!

In this light, the absolute difference in expenditure is not that significant. Of course, a lot can happen in five years—property prices could rise or fall—so this is just a projection based on the current situation.

Should I Buy a Condominium Now?

The final option is to buy a condominium. The problem, however, is that there are very few condos priced at S$650,000. All are shoebox units of 500 square feet or less. Even a 3-room HDB flat is 69 square meters (743 square feet), which some people already find small. Moreover, condos at this price point are mostly located far from the city.

Buying a condo means you must take out a bank loan to get enough money for the purchase, which means a larger down payment and a higher interest rate.

Anjia SG’s Expert Advice

The days when you could buy something better than a one-bedroom condo in the Outside Central Region (OCR) for S$650,000 are long gone. Nowadays, even the cheapest shoebox units cost S$800,000—there are almost no condos below this price. So, it’s not surprising that condos in this price range are small and located in remote areas.

From a financial perspective, a bank loan does require a larger down payment and higher interest payments, but the monthly mortgage repayment is actually similar.

*Note: The bank loan interest rate is an estimate based on the lowest available rate at the time of writing (January 26, 2023). For the latest rates, please consult an Anjia SG mortgage advisor.

Conclusion: What Should I Do?

As you can see, there are no shortcuts. Every option involves a trade-off.

From a financial standpoint, the best choice is to keep trying for a BTO flat and wait for it to be built. Although renting an entire flat is expensive at the moment, you could consider sharing the rent with other tenants.

If you value privacy more, an HDB resale flat is your best option. Buying a condo is also possible, but if this choice worsens your financial situation, or if you feel “forced” to live in a small apartment in a neighborhood you don’t like, then this option is not for you.

For millennial couples in their late twenties or early thirties, and for anyone else who found this article valuable, we hope Anjia SG’s advice has been helpful (or at least given you some food for thought). If you need help with your home purchase, feel free to consult the honest and professional property experts at Anjia SG!

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