Find the Cheapest Home Loans in Singapore
Given the pandemic-induced delays in the current crop of Built-to-Order (BTO) flats, homeowners seeking to buy property in Singapore would understandably be looking at other ways to buy a home.
The two main routes to home ownership are applying for a BTO, or buying a flat from the resale market. But there are actually two other lesser-known schemes that aspiring homeowners can try their luck with: the Sale of Balance Flats scheme, and the Open Booking of Flats scheme.
How are they related to the well-known BTO scheme, and what differences should you watch out for?
What Are Sale of Balance Flats (SBF)?
It may come as a surprise but not every unit offered in a BTO launch gets selected. Units that — for some reason or other — end up not being booked are put up for sale under the Sale of Balance Flats (SBF) scheme.
Also included under this category are surplus flats arising from Selective En Bloc Redevelopment Scheme exercises, as well as units repurchased by HDB.
SBF exercises are launched twice a year, usually coinciding with BTO launches in May and November.
What Are Open Booking Flats (OBF)?
If SBF flats are the “leftovers” from BTO launches, then OBF units are the “leftovers” from SBF launches. Units not selected during SBF are pooled together under OBF.
Interested buyers can view the units available on HDB’s online flat portal at any time. However, applications for OBF units only open twice a year, allowing time for fresh injections of new available units.
When no units are available, OBF applications are likewise closed. This means that you cannot reserve your place in the queue, and all applications are treated on a first-come-first-served basis.
Related: 3 Key Factors to Consider Before Buying a HDB Flat
Which Should You Choose?
When it comes to choosing between BTO, SBF, OBF and resale flats, it boils down to two major factors: availability and affordability. The following table sums up the key differences.
| Availability | Affordability | |
|---|---|---|
| BTO |
|
|
| SBF |
|
|
| OBF |
|
|
| Resale |
|
|
Availability of BTO, SBF, OBF and Resale Flats
BTO flats offer a fair amount of variety, but come with the longest waiting time. While you will be able to choose from the full range of units offered under the launch (subject to quotas and limits), you will have to pick from a smaller range of locations, as BTOs typically only cover two or three towns.
Also, BTO units require construction time ranging anywhere from three to five years, making them the flat type with the longest waiting time.
SBF and OBF flats, in contrast, offer significantly reduced waiting times for buyers, as these units are often under construction, nearing completion or already completed. While SBF and OBF units are drawn from across Singapore, your choices are tempered by the number of units actually available. In practice, this almost always means you’ll be faced with even more limited options.
Finally, purchasing a resale flat does not involve any construction or waiting time. The range of unit types and locations available is also the largest. Once you find a unit that you like, you can proceed to make an offer to the seller, and upon striking a deal, can move in in around eight weeks.
Affordability of BTO, SBF, OBF and Resale Flats
Now, in terms of affordability, you’ll find a big difference between BTO, SBF and OBF flats, and resale flats.
Generally speaking, BTO flats are the most affordable of the lot, as they are sold at subsidised prices. SBF and OBF flats, too, are pegged at subsidised flat prices, but their selling prices can be influenced by market trends. Overall, you may find SBF and OBF flats to be slightly more expensive than their BTO counterparts. But this is by no means a hard rule, and of course, exceptions abound.
Resale flats are, in comparison, much more costly. For example, Farrer Park Fields, an BTO project launched in Feb 2023 offers 3-room units for S$356,000 to S$449,000. Equivalent resale flats in the area are going for between S$450,000 to S$560,000.
But what about government grants? Strangely, buying a resale flat entitles you to three housing grants (Enhanced CPF Housing Grant, CPF Housing Grant, and Proximity Housing Grant), whereas the only grant available when buying a BTO, SBF or OBF flat is the Enhanced CPF Housing Grant.
Resale flat buyers, then, can access up to S$190,000 in housing grants across all three schemes, whereas those buying a “new” flat can only get up to S$80,000 in grants.
Still, this disparity, while seemingly large, may not make up for the inflated prices of the resale market. This is because 1) the actual subsidy you can qualify for depends on your income level, marital status and other factors, and 2) the Proximity Housing Grant only applies to those staying with or near their parents.
In addition, resale flat affordability may also be impacted two other ways. For one, if the sale price you and the buyer agreed upon turns out to be higher than the valuation of the flat, you will have to pay the difference in cash.
For another, depending on the age of the resale flat, you may be restricted in how much of your CPF monies you can use to pay for your flat. This, in turn, could mean having to pay part of your mortgage in cash, creating a strain on your cashflow.
Find the Cheapest Home Loans in Singapore
What Other Factors Should You Consider?
Renovation
BTO flats are brand new, and you can also opt for upgraded fittings and fixtures to be included when booking your unit, allowing you to keep your renovations to the bare minimum. You probably just need to get some furniture and appliances, and you can move in.
This also applies for new flats purchased via SBF and OBF exercises — however, note that there’s a chance that you may come across units repurchased by HDB that may be several years or even decades old.
Resale units (or the aforementioned repurchased units), meanwhile, have the greatest possibility of requiring renovation works, and pretty extensive ones at that. The fact is, such units would have undergone a fair amount of wear-and-tear which must be remedied for the sake of safety.
This means having to spend on renovation even if you’re lucky enough to find a resale unit that has been relatively well maintained.
Capital Appreciation
New units bought via BTO, SBF and OBF launches have a full 99-year period to undergo capital appreciation, at which point you (or your descendants) can liquidate them for a healthy profit.
Of course, this is by no means guaranteed, and very much depends on how the housing market goes in future.
In comparison, resale units have a diminished potential to realise meaningful capital appreciation, especially if they have a short lease remaining, or occupy unfavourable locations.
But that’s not to say that resale flats cannot make for good investments; rather, you may need to find other routes to unlock value, such as perhaps by renting out the unit to help fund your retirement.
Looking for the right package to finance your home? Find out what our experts had to say about the best home mortgage loans in 2023, or educate yourself about housing and property loans in Singapore so you can make a more informed decision.
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[The article [link url=”www.valuechampion.sg/sale-of-balance-resale-bto-open-booking-hdb-property-home-ownership-singapore-2023″]SBF, OBF, BTO or Resale – Which HDB Flat to Get in 2023? originally appeared on ValueChampion.
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