Buying an HDB Flat: Why Size Shouldn’t Be Your Only Criteria
Have you weighed all these short-, mid- and long-term factors?
We can’t tell the future – but if you wish to invest in a home that holds its value, buying an HDB flat seems to be your best choice for now. In the face of the COVID-19 pandemic, prices for resale HDB homes have remained mostly steady in 2020 (and have in fact ‘inched up by 0.2 per cent’ in Q2 2020), which definitely bodes well for HDB flat owners.
That said, if you’ve got plans to purchase an HDB flat sometime soon, how can you ensure that it’s going to serve you well in the years to come?
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Some homeowners say that size is the most important criteria (because who doesn’t want a big flat to live in?), while others claim that it’s property price that you should be thinking about.
And for us? Because of different needs in the short-, mid- and long-term stages of life, we feel that it’s important to consider all of these factors below when planning your HDB flat purchase:
Start with short-term considerations: Location and budget (HDB grants)
When it comes to getting an HDB flat in your dream neighbourhood, things can get a bit tricky because it’s a toss-up between waiting for a Built-to-Order (BTO) project launch at the location you want or getting a resale flat in your estate of choice.
In this case, time usually plays a deciding role in your final decision: If you’re in a hurry to move into a home of your own, you might wish to begin your hunt for a resale home on the open market ASAP. Otherwise, biding your time for the proverbial ‘right place’ is a step that you can take – just remember to keep abreast of the latest upcoming BTO sales launches while you wait!
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Location aside, budget is definitely a top factor that’s on every homeowner’s list of considerations because the price HAS to be right, and it’s also likely that it’ll play a long-term role in your financial planning as well.
Based on HDB launches between late-2019 and Q1 2020, recent selling prices for new 2-room flexi, 3-, 4-, 5-room and 3Gen BTO flats for non-mature and mature estates are as follows:
BTO selling price for non-mature towns: Tengah and Sembawang
|2-room flexi||From $110,000||From $89,000|
|3-room||From $208,000||From $177,000|
|4-room||From $302,000||From $272,000|
|5-room||From $409,000||From $350,000|
|3Gen||From $442,000||From $355,000|
BTO selling price for mature towns: Tampines, Ang Mo Kio and Toa Payoh
|Tampines||Ang Mo Kio||Toa Payoh|
|2-room flexi||From $145,000||From $170,000||From $90,000 (40-year lease)|
|3-room||From $281,000||From $332,000||From $351,000|
|4-room||From $394,000||From $451,000||From $395,000|
All figures are from HDB’s BTO information page.
While the biggest point to be made about these figures is that the difference in selling price for BTO homes in mature and non-mature locations can be as much as 47.9% – or $82,000, if we’re comparing 2-room flexi flats in Sembawang and Ang Mo Kio – the more useful takeaway for homebuyers lies in the selling prices after grants are factored in.
BTO selling price for non-mature towns with grants: Tengah and Sembawang
|2-room flexi||From $30,000||From $9,000|
|3-room||From $133,000||From $102,000|
|4-room||From $242,000||From $212,000|
|5-room||From $365,000||From $305,000|
|3Gen||From $397,000||From $310,000|
BTO selling price for mature towns with grants: Tampines, Ang Mo Kio and Toa Payoh
|Tampines||Ang Mo Kio||Toa Payoh|
|2-room flexi||From $65,000||From $90,000||From $10,000 (40-year lease)|
|3-room||From $221,000||From $272,000||From $291,000|
|4-room||From $349,000||From $406,000||From $350,000|
With HDB’s grants – such as the Enhanced CPF Housing Grant (EHG) – and your average monthly household income (AMHI) coming into play, it’s possible to enjoy up to $80,000 in housing grants, which in turn translates into a lower home loan amount and possibly, a shorter time to pay off your mortgage.
And if you’re buying an HDB resale flat, your total grant amount be up to $160,000 (once again, depending on factors like your AHMI and desired flat size) with the Family Grant and Proximity Housing Grant.
If you’d like to know more about how these grants work, check out this article about HDB grants that you may qualify for or simply take a look at this table for a summary of the maximum amounts that you can receive from each grant.
|Enhanced CPF Housing Grant (EHG)||Family Grant||Proximity Grant||Total Grant Amount|
|Resale Flats||Up to $80,000||Up to $50,000 (4-room and smaller) OR Up to $40,000 (5-room and smaller)||$30,000 (Living with parents/child) OR $20,000 (Living near parent/child within 4km)||Up to $160,000|
|BTO Flats||Up to $80,000||N.A.||N.A.||Up to $80,000|
Do also note that you’ll need to have a valid Housing Loan Eligibility letter ready when booking your flat, if you’re applying for these HDB loans!
Think about mid-term considerations: Flat size and family planning
As much as buying a home is a major decision, having a family of your own is an even bigger, life-changing experience – and that definitely ties into your flat-buying plans as well; a 2-room flexi flat might be suitable for a bachelor (or even a couple), but it’s not the best option for handling the demands of a young household with children.
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Consequently, finding a flat that’s right sized for your loved ones is the key to ensuring everyone lives comfortably. But what if your ideal 3-, 4-, 5-room or 3Gen home is out of your budget? In that case, you might need to consider some trade-offs in your property choices , such as a BTO flat that isn’t located in a mature estate.
The proximity of your (potential) new home to your extended family might be another factor that you’ll also want to think about, especially if you need the occasional assistance from grandpa and grandma to care for the kids.
Finally, focus on long-term considerations: Retirement
Just like planning your renovation budget in advance, thinking about your finances before your silver years can go a long way in ensuring your retirement goes smoothly – and much of it has to do with your HDB flat choice as it’ll let you unlock the value of your home in different ways.
Rental income is one of the possible ways that you can receive additional monetary support in your old age, and you can either rent out a spare bedroom or even your entire HDB flat, if you’re planning on staying with your children.
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Alternatively, you can consider HDB’s Silver Housing Bonus (SHB) or Lease Buyback Scheme (LBS) to supplement your financial needs in retirement.
If you’re right sizing to a 3-room or smaller home, the SHB lets you receive lifelong monthly income through CPF Life and keep any balance proceeds as cash (up to $30,000) after CPF top-up; the same applies for the LBS, except that you get to continue living in your current home.
For more details about these HDB flat monetisation options and your eligibility, you can visit HDB’s website about renting, the Silver Housing Bonus, and Lease Buyback Scheme or take a look at this article on using your HDB flat to plan for your retirement!