Are You Ready To Own A Home?

Fresh-faced and bright-eyed, you have just graduated a few years ago and managed to secure a dream job that pays the loans and bills somewhat decently. At the same time, you are in a stable and loving relationship with a partner whom you plan to settle down with. Life is smooth sailing and all is good, till your partner suggests that you both take the next step in your relationship – purchasing your first home together.

Moving out of your family home is not a simple process, in fact it is a rigorous rite of passage into adulthood for most Singaporeans. While it is a well-trodden path by most, the journey can be daunting for most first-timers. Here is a quick primer of the housing options available. Happy adulting!

Knowing Your Options And Understanding Them

There are several different property types in Singapore and it is important to know what are the options available, the eligibility criteria for buyers, and more importantly, their pricing.

HDB Public Housing

For the majority of first-timers, the most affordable option of housing would be public housing flats offered by the Housing Development Board (HDB). Public housing flats are highly subsidised and built to provide housing for the Singaporean masses. HDB flats are available across the island, in various HDB towns and estates.

The HDB estates can be categorised into mature and non-mature estates. Mature estates are mainly older towns with a well-established existing network of amenities and transportation, some examples of mature estates include Bukit Merah, Bishan, and Pasir Ris. Non-mature estates are towns which are relatively new and may not be as developed as the mature estates, some examples include: Punggol, Yishun, Bukit Panjang and Jurong West. Prices of flats in mature estates also tend to be priced higher than those in non-mature towns.

Eligible buyers may obtain HDB flats via two main channels: HDB’s Build-to-order (BTO) system or from the HDB resale secondary market. The key differentiating factors would be time-line and prices. Resale flats are move-in ready and are typically more expensive than BTO flats as they reflect open market values. However, first-timers can enjoy up to $160,000 in housing grants – depending on household income – which will go some way to fund the resale flat purchase.

Meanwhile, BTO units tend to be more affordably priced with government subsidies but could take 3 to 5 years to be built, or slightly longer if there are construction delays. Typically, flat owners are required to live in the unit for 5 years – also known as the minimum occupation period (MOP) - before they can resell or rent out the flat. Do note that BTO flats under the Prime Location Public Housing model have a longer MOP and other restrictions.

Table 1: Median Transacted Prices ($) of HDB Resale Flats of selected towns in Q1 2022

Source: PropNex Research, URA Realis

Based on median transacted prices as of Q1 2022 (see Table 1), 4-room resale flats in the mature estates have been trending above $500,000, while those in non-mature estates are ranging between $400,000 to $500,000.

If there is no pressing need to move in quickly, some couples prefer to go for BTO flats. Applicants may apply for a subsidised flat at quarterly BTO launch exercises, which typically feature four to six projects across various HDB towns each time. Applications will be subject to a ballot and those who have successfully balloted a queue number may pick their desired unit at the chosen projects.

In the last couple of years, BTO flats have enjoyed overwhelming popularity amongst young buyers aspiring to buy their first homes, with some projects being oversubscribed by more than 10 times. Owing to high demand, it is not unusual for applicants to apply several times before they are able to secure a flat.

BTO Flat

Executive Condominium (EC)

For would-be buyers who have busted the HDB income ceiling, you may consider purchasing an executive condominium (EC) - a hybrid class of public and private residential housing. Similar to public housing, buyers are subjected to a set of eligibility conditions, namely on nationality, family nucleus, and income ceiling ($16,000 in combined monthly household income, at the time of writing).

Most of the EC projects are located in heartlands and non-mature estate towns such as Sembawang, Yishun, Tampines and Sengkang. As of Q1 2022, median prices of new ECs are going above $1.3 million, slightly under that of new condominiums in the suburban regions.

Table 2: Median Transacted Prices ($) of Executive Condominiums (New sale and Resale)

Source: PropNex Research, URA Realis

Buyers will be subject to the same MOP rules as HDB flats, only being allowed to sell 5 years after the completion of the development. One key feature that sets the EC apart from public housing flats would be that the development will receive privatization status after 10 years from the time of completion, which means their owners would be allowed to sell their units to foreigners, with prices comparable to that of private housing in the area.

Private Residential

If you and your partner are above average income earners or if your budget allows, there are a myriad of options that you may explore in the private residential market – from new launch projects, resale condominiums, to even landed homes. Depending on the location and product type, prices will vary significantly.

The most common private residential property is a condominium, which offers its residents exclusive access to facilities such as a gym, swimming pool, tennis court amongst others. Buyers can either purchase units directly from a developer, which is an off-the-plan purchase – the buyer purchases the unit during the launch period, while the project is under construction, and move in 2 to 4 years later when the project is completed. An alternative would be to purchase a unit from the resale market and buyers can move in as quickly as 6 months after the sale and purchase agreement has been signed.

The private residential market can be divided into three geographical segments, the Core Central Region (CCR), the Rest of Central Region (RCR), and the Outside of Central Region (OCR).

Homes in the CCR are located close to the city centre and are seen as a proxy for luxury homes in Singapore. Many CCR homes are also nearer to lifestyle destinations in the central area such as Orchard Road, the central business district, as well as some prestigious schools. A brand new apartment in the CCR costs $2.3 million on average in 2022. For those with a more modest budget, the RCR and OCR provides more affordable options despite being further from the city centre.

There are no restrictions when it comes to buying a private home, especially for Singaporean first-time home buyers. However, foreign buyers will have to pay a 30% additional buyer’s stamp duty (ABSD) on their first home purchase, while an ABSD of 5% would apply to buyers who are Singapore Permanent Residents. In addition, foreigners are generally not allowed to buy landed homes on Singapore mainland, unless approval is granted by the authorities.

Table 3: Median Transacted Prices ($) of Private Non-landed New Sales, Resale Homes by region

Source: PropNex Research, URA Realis

For those who are considering a private condominium, buyers should brace themselves to pay monthly maintenance fees which can be quite hefty for some developments. The maintenance fees are usually based on the shared value of your unit, which is determined based on the size of your unit. In other words, the larger your home, the higher the maintenance fees.

Financial planning

Before you embark on scrolling through property listings and hunting down your dream home, do plan and work out your housing budget. Knowing what you can afford will help to set expectations and narrow down the search. Check out this article to find out more about how you can finance your very first home purchase.