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PROPERTY: Singles and BTO HDB Flats

By Stella Thng

As any home buyer in Singapore will know, property regulations here go through many changes. In 1990, the Singles Housing Policy was launched to allow Singaporeans who are at least 35 years old to purchase a resale HDB flat on their own. However, they were restricted to three-room or smaller flats outside the central area. The rules were tweaked in 2001 so that they could buy in any location they wish, and in 2004, to buy flats of any size.

Last July, singles who qualify (minimum 35 years old with a monthly income of no more than $5,000) were finally allowed to apply for new Build-to-Order (BTO) HDB flats, but only for two-room apartments in non-mature estate. The two-room BTO flats came in two sizes: 375 sqf and 485 sqf. Buyers also benefit from up to $30,000 in extra HDB subsidies if they apply on their own, or $60,000 if two or more singles buy the flat together.

The 519 two-room flats drew 8,200 applicants. In September, the HDB released another 400 units of two-room flats for singles, which attracted 8,100 applications. To meet the strong demand, the recent November BTO sale exercise offered 450 units in Bukit Batok (from $85,000) and Woodlands (from $75,000). Come 2014, singles can look forward to 5,000 tworoom units to choose from.

While this is great news for singles who want an affordable nest of their own, not every singleton is keen on the tiny flats. If you’re thinking of joining the singles’ BTO queue, here are some points to mull over.

PRO:  BTO FLATS ARE MUCH MORE AFFORDABLE THAN RESALE FLATS
The biggest draw is the low price, of course. The cheapest unit launched in July 2013, and located at Vine Grove @ Yishun is $76,000, and will cost just $16,000 if the applicant qualifies for the highest amount of government subsidies. (They have to register as a family nucleus or come under the Joint Singles Scheme and earn no more than $1,500 in monthly household income, in order to benefit from the maximum Additional CPF Housing Grants and Singles CPF Housing Grants of $60,000.) In comparison, a 431sqf resale flat at Toa Payoh was recently marketed at $265,000.

Administrative assistant Josephine Sun, 40, lives with her married brother and his family nearby in a three-room flat. “I’m currently sharing a room with my seven-year-old nephew while his four-year-old brother still sleeps in his parents’ room. Allowing singles to buy BTO tworoom flats will finally let me afford my own home and the kids can get their room back.” She is waiting eagerly to check out the BTO offerings in 2014. “Of course, the location will not be as convenient as Toa Payoh. But Singapore is a small country and once more MRT lines are running, everywhere will be accessible enough.”

PRO:  SMALLER HOME = LOWER EXPENSES + MORE GOVERNMENT SUBSIDIES AND TAX BREAKS
Private tutor Cai Xuanying, 34, is considering applying for a BTO two-room flat when she turns 35 next year. “A two-room flat is good enough just for me. Besides being cheaper, it also qualifies me for more tax breaks and government subsidies than if I’d bought a three-room resale flat.”

Indeed, all one- and two-room HDB owneroccupiers did not pay any property tax in 2013 as their property’s annual value was below $6,000. In 2013, two-room flat owners received $260 in the GST Voucher – Utility-Save (U-Save). Three-room flat owners got $240 while executive flat owners, just $180. This can offset about three to four months of their utility bills. Service &

Conservancy Charges are just $28 for a two-room flat, compared to $39.50 to $84.60 for a threeroom to executive flat under the management of Jurong Town Council.

Also, even though it isn’t a major pull factor, Xuanying likes the idea of living in a neighbourhood with other singles such as herself. After all, 30 per cent of the two-room BTO flats in every BTO sale exercise are set aside for singles. “Friends who live in young towns like Sengkang and Punggol tell me that they enjoy the camaraderie with the pioneer batch of neighbours as they’re all mostly yuppies or parents with young kids,” notes Xuanying. “Living in a new estate with other singles may also offer me a chance to socialise and get to know more people.”

CON:  LIMITED SPACE FOR FAMILY EXPANSION
Singles we spoke to agree that a living space of 375sqf or 485sqf – similar to shoebox apartments in the private property market – is enough for one. “But if my elderly parents decide to sell their home and move in with me, or if I get married later, it could mean a potentially expensive and troublesome move to a bigger flat,” notes Ken Teo, 36. “Even if I can afford to upgrade, I still need to meet the Minimum Occupation Period (MOP) of five years before I can put my flat up for sale.” He has decided to shop around for a resale flat instead. “I’m also eager to finally move out into my own space instead of waiting a few more years for it to be built!”

CON: LONG WAIT = OPPORTUNITY COST
IT executive Julian Ang, 34, has been renting a HDB common room for $600 monthly, for the past year. “At first, I was interested in the West Ridges @ Bukit Batok BTO two-room flats as I’m familiar with the area. It’s affordably priced at just $85,000 (before government subsidies). But it will only be ready in February 2019, which means I have to rent for the next five years,” says Julian, adding that he would rather spend the cumulative rental of at least $36,000 on financing his own property.

He is also inspired by his friend, who bought a resale four-room flat once she turned 35 last year. She rented out the master bedroom and a common room for $1,400 while she occupied the other bedroom. “It covers her entire housing loan and even the utilities bill,” says Julian.

Now that the resale market is softening, Julian hopes to buy a three-room flat “preferably at zero or under $10,000 Cash Over Valuation (COV), and near food outlets and public transport so that it’s easier to attract tenants”. A resale flat is more expensive, but he will still benefit from the $15,000 CPF Housing Grant for Singles.

Pointing out that HDB does not allow two-room flat owners to lease out common bedrooms, Julian says: “I may not rent out a room right now but I feel more secure if I have a spare room that can be a source of income should I get retrenched or suffer a pay cut.” He also thinks that a three-room flat will be easier to sell off and fetch greater capital gains, since having two bedrooms will attract families and couples, too.

“My friends who invested in shoebox units tell me that they’re easy to rent out but hard to sell as they’re too small. I reckon selling a two-room flat in the future may face the same problems.” At the end of the day, remember that buying a home is, primarily, about putting a roof over your head. It is also about buying yourself peace of mind. Whether you opt for a two-room flat in a non-mature estate so that you can pay off a loan quickly, or splash out on a roomier, better located resale apartment with a bigger mortgage, remember this: Unlike couples who share the housing loan burden, you will be financing your property alone. Make a decision that you are most comfortable with.

Did You Know?
If you’re thinking of buying a two-room HDB flat and renting it out in the future, do note that you are not allowed to rent out common rooms in a one- or two-room flat. However, you can rent out the entire flat after you fulfil your five-year MOP, subject to HDB’s approval. Your two-room flat can be rented out to a maximum of four people.

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