Excited about buying your first home but realised you’ve exceeded the HDB BTO income ceiling? What other options are there for you then if you can’t buy a HDB flat? Should you look for in the HDB resale flat market, or try to afford a modest condo?
Here’s a classic sandwich-class case study:
Let’s say we have a Mr and Mrs Tan in their early 30s who are about to get married. They’re both earning a comfortable sum of $7,500 a month, which puts their combined monthly household income at $15,000.
This puts them in a tricky situation because they are considered ‘too rich’ to buy HDB flats directly from HDB (i.e. new flats like BTO and sale of balance flats), yet not exactly wealthy enough to drop millions on private property.
Based on their income, the Tans may have set a budget of $700,000 for their future home. With that amount, they still have a few choices they can go for — resale flats, executive condominiums (ECs) or private condominiums.
If you’re in the same boat as the Tans, this guide will compare the pros and cons of each option to help you decide which type of housing to go for given your ‘sandwich class’ earning power.
But First, What is the Current BTO Income Ceiling?
BTO flats are considered subsidised housing, which is why there is an income ceiling. The BTO income ceiling sets a $14,000 limit on your total monthly household income, which includes all those whom you’ve listed in your flat application.
Here are the details:
Type of HDB flat
Income ceiling (Average gross monthly household income)
4-room flat or bigger
$14,000; or $21,000 if purchasing with extended or multi-generation family
$7,000 or $14,000 depending on project
$7,000 for 99-year leases; or $14,000 for short leases (15 to 45 years)
If recent BTO launches are anything to go by, Singaporeans have been going for four- and five-room flats, with November 2020 BTO launches in Bishan and Toa Payoh Bidadari heavily oversubscribed, as well as the August 2020 BTO launches in Geylang and Ang Mo Kio.
Most average Singaporeans need not worry about exceeding the income ceiling because if you’re a young couple, chances are, your combined salary is not that high yet.
According to the Ministry of Manpower, median gross monthly income of full-time employed residents was around $4,500 from 2019 to 2020, $4,400 in 2018 and $4,232 in 2017. For a couple like that, their combined income would not be more than $10,000, making them eligible for most BTOs.
If you’re buying a flat on your own, the $7,000 for a three-room and $14,000 caps shouldn’t be too much of a problem either, unless you’re in a really high paying job.
The last time the income ceiling was raised was in Sep 2019 from a cap of $12,000 and the Enhanced Housing Grant was introduced to make housing more affordable.
But what if you’re like the Tans in the sandwiched class where you’re earning an above-average wage but are not that rich to buy a $2 million condo either?
Let’s explore your options.
Buying a HDB Resale Flat
You may not be able to buy a new BTO if you earn too much but the good news is that there’s no income ceiling for a resale flat. A quick look on PropertyGuru show many available resale flats for $700,000 such as 4-room units in Geylang, Upper Serangoon, Ang Mo Kio, Dakota, Bishan, Clementi, Bendemeer and 3-room ones at Dawson, Tiong Bahru and Queenstown.
Pros of buying a HDB resale flat
- Able to afford a premium resale flat
- Some CPF housing grants applicable
- Able to move in earlier
With $700k, the Tans have a variety of options for quite a ‘premium’ resale flat in many popular locations and mature estates. Resale flat buyers also get to choose from larger types of flats such as maisonettes, executive apartments, jumbo flats or even Design, Build and Sell Scheme (DBSS) flats, if there are any on the market.
Your salary also affects the type of housing grant you’re eligible for. Unfortunately, most CPF housing grants have the same income ceiling as BTO flats.
In the case of the Tans, their combined income of $15,000 means they are only possibly eligible for the proximity housing grant and CPF housing grant bonus of $50,000 for first-timers applying for a resale flat as a family.
Although this is much less than BTOs, it is still more than if the Tans were to choose private property – there is no such ‘discount’ for that.
Finally, the best part about getting a resale HDB is that you don’t have to wait the three to four years for the property to be built, and can move in as early as two months. There’s not much difference if you’re looking at a resale condo – since both are completed properties – but it is faster than getting a new launch condo.
Cons of buying a resale flat
- Not brand new
- Higher renovation costs
- Dwindling lease
Firstly, resale flats are ‘preloved’ properties, meaning they’ve been lived in by previous owners. Some property seekers may mind, and prefer a brand new home instead.
Buying a place where someone has lived in for a substantial number of years is a double-edged sword.
On one hand, the ‘old’ property will definitely show signs of wear and tear, so renovating a resale property may incur higher renovation costs. On the flipside, if you’re not fussy about the design, the resale flat may well be move-in ready with all the furniture and fittings you need.
Of course, one of the most talked-about disadvantages of getting a resale flat is the dwindling lease. If you buy a relatively new resale flat – e.g. one that has only recently reached MOP – then there is not much of an issue. However, if you’re eyeing older ones and intend to sell it in future, then the decaying lease may be a concern.
Buying an Executive Condominium (EC)
Executive condominiums or ECs are developed and sold by private developers but subsidised by HDB. Because they’re subsidised, they also come with a $16,000 income ceiling, but remain a popular option for many for having all the typical condo facilities such as a pool and gym.
Note: For this analysis, we are considering new ECs (i.e. bought from developer). Resale ECs are priced similarly to private condos, which we will talk about in the next section.
Pros of buying a new EC
- Look and feel of private property
- Cheaper than private condos
- Good value and potential appreciation
If you want to live in a private property, then ECs may be your best bet. ECs were specifically designed for the ‘sandwich class’ like Mr and Mrs Tan: middle-income Singaporeans who don’t qualify for a HDB BTO flats but find private condominiums too out of their reach.
ECs are cheaper and would be within the Tan’s budget – compared to private condos, they are 10% to 15% cheaper. Since ECs are designed for own-stay purposes (as opposed to condos which have shoebox units to cater to investors), ECs are usually bigger and start from three-bedroom units.
Many also see ECs as a good investment since once they reach the 5- and 10-year marks, they can fetch prices very comparable to private condos. This means a tidy profit for those who first bought the ECs at a subsidised price.
Although EC buyers may be able to apply for the Family Grant or Half-Housing Grant, there is an income ceiling of $14,000 too. So although Mr and Mrs Tan cannot apply, if you earn less, you may be eligible.
Cons of buying a new EC
- Few launches
- Usually in less accessible locations
- Bound by HDB rules for 10 years
ECs are a great option for Mr and Mrs Tan, but that’s assuming they can find a suitable EC launch at the time of their application. Compared to private condo launches, EC launches are far and few between. While there can be over 20 new launch condos, there are usually less than five EC launches per year.
They are also usually at far-flung locations such as Punggol, Woodlands, Sembawang, with little access to public transport. So unless the Tans own a car, don’t mind walking further or taking Grab every day, or work from home often, an EC may not be super viable.
As mentioned above, the 5- and 10-year marks are important to ECs. This is because ECs are considered HDB properties for the first 10 years. This means you have to follow the five-year MOP rule. In terms of eligibility, you also have to fulfil other conditions such as the property ownership rule and resale levy rule.
Related article: 7 Executive Condos (ECs) That Are Within Walking Distance (500m) To The MRT
Buying a Private Condominium
One of the 5Cs of Singaporean aspirations – Cash, Car, Credit card, Condominium and Country club membership – a private condominium is often seen as a mark of affluence. Naturally, condos are the most expensive option of the three.
The Tans, with a budget of $700,000, searching on PropertyGuru brings up mostly 1-bedroom units or studio apartments.
Pros of buying a private condo
- Well-equipped with facilities
- No income ceiling
- No renting and/or selling restrictions
For young working professionals like the Tans in higher paying jobs, staying in a private condo befits their status. They get all the benefits of living in a beautifully designed condo, with facilities like a pool, gym and BBQ pits, security and privacy.
In addition to having no income ceiling – anyone can buy as long as they can afford it – private properties are not bound by HDB restrictions to do with renting and selling. This is why many people choose private condos as investment assets. The Tans won’t have to wait five years if they want to sell or rent out their condo.
Cons of buying a private condo
- Smaller in size
If you can afford it, buying a private condo may seem like the best and most prestigious choice. However, it comes at a hefty price. With the Tan’s budget of $700,000, they probably can only afford very small one- to two-bedroom units in less accessible areas (like the Outside Central Region).
If you don’t consider the condo facilities and only compare the actual unit itself, this seems a lot less comfortable than say, a 4-room resale flat near the MRT, which you can get at a similar price point.
Conclusion: Which Should You Choose?
If you don’t mind public property and don’t need the prestige of living in a private property, a HDB resale flat may be the most cost effective option for you in terms of the price you pay for the larger space you get.
If you prefer to live in a condo, new ECs are a good option as they are still subsidised and cheaper than a private condo.
However, if your heart is set on a condo, you can probably still afford one, just that it’s likely to be very small and inconveniently located. This is not quite suitable for young couples planning a family.
For more property news, resources and useful content like this article, check out PropertyGuru’s guides section.
Are you looking to buy a new home? Head to PropertyGuru to browse the top properties for sale in Singapore.
Already found a new home? Let PropertyGuru Finance’s home finance advisors help you with financing it.
This article was written by Audrey A.. She can’t wait to move into her own place so she can finally get a cat (or two) and an espresso machine to fuel her love for flat whites. For now, she’s saving up and dreaming of her next trip.