With the BTO construction delays brought on by the COVID-19 pandemic, HDB contractor woes, and long estimated completion times for newly launch BTO flats, you may be looking at other housing alternatives.
Sale of Balance Flats (SBF), open booking of flats, or resale HDB flats are options, especially if you have an urgent need for a home. So, which one should you pick, and what are the pros and cons of each? Let’s take a look.
|HDB flat type||In a nutshell|
|Sale of Balance Flats||Released twice a year, in May and November. New from HDB (fresh 99-year lease), but already completed or is undergoing construction, so shorter waiting time. Have to ballot for a flat like the BTO launches. More affordable than resale.|
|Open booking of flats||Flats under this exercise are available immediately and are based on a first-come-first-served basis, but unit choices are extremely limited. A fresh supply of flats was made available to view on 28 September 2022, 10am. The commencement date for online applications is 12 October 2022, 12am.|
|Resale flats||Available year-round and offers the shortest waiting time. Extensive range of choices and locations. However, they are typically more expensive despite having shorter leases and prices are subject to market conditions.|
What Are Sale of Balance Flats? Understanding the HDB SBF Exercise
HDB Sale of Balance Flats, or HDB SBFs, are unsold flats from previous HDB BTO exercises, Selective En-bloc Redevelopment Scheme (SERS) projects, or any flats repurchased by HDB. SBF exercises happen twice a year (in May and November), along with BTO flat launches in those months.
Unlike BTO flats, where construction usually takes three to four years to complete, flats launched under the HDB SB exercise are either already completed or have begun construction. Therefore, getting an SBF is quicker and is also a great option for those who don’t fancy a resale HDB flat.
Also, since HDB SBFs are unsold flats in past BTO sales, you have more areas to pick from as compared to BTO launches, which are limited to three to four areas each time.
Pros of Sale of Balance Flats (SBF):
- CPF Housing Grants available: SBF buyers are eligible for CPF Housing Grants, namely the Enhanced Housing Grant (EHG) (for first-timers; up to $80,000) and Step-up CPF Housing Grant (second-timers; up to $15,000).
- New flats with fresh lease: As with new BTO flats, HDB SBF flats come with a fresh 99-year lease. Since it’s new, you don’t have to worry about any damage done by the previous owner.
- Flexible downpayment: Besides CPF Housing Grants, there’s also the HDB’s Staggered Downpayment Scheme, which allows you to pay the downpayment of your flat in two instalments; the first when you sign the Agreement for Lease, and the second instalment will be paid once you collect the keys for your new flat. This option is great for those who don’t have lots of immediate funds or CPF savings.
- More loan-to-value (LTV) and CPF flexibility: Since the lease is fresh, you can expect to borrow a higher amount and also don’t have to worry about CPF withdrawal limits.
- More affordable: While SBF flats are slightly more expensive than BTO flats, they’re still subsidised by the government and are therefore usually cheaper than resale flats.
- Higher capital growth: Since SBF flats have a fresh lease and are bought at a subsidised price, there’s a chance for capital growth if you decide to sell it after the Minimum Occupation Period (MOP). If you bought a unit at a non-mature estate, your home would also likely fetch a higher value as the area develops further.
- Shorter waiting time for a new flat: As previously mentioned, HDB SBF flats are either already completed or have begun construction. So you can get a new flat quicker.
Cons of Sale of Balance Flats (HDB SBF):
- Harder to secure a flat: Compared to resale flats, which are widely available, there are fewer SBF flats up for selection. Hence, securing a flat is not only harder, but you would also have fewer unit choices to pick from as the ‘best’ ones are taken during the BTO launch.
- You don’t know what the flat looks like: While there’s more information compared to BTO flats, you still can’t pop by to view the actual unit. Therefore, it’s harder to tell what the flat is like, be it the house’s direction, your neighbours or how the unit looks.
- Limited amenities and transport options: Unless you manage to get an SBF flat in a good location, it’s likely that you would not get to enjoy the conveniences and amenities around such as eateries, schools, parks, malls and MRT stations.
- Takes longer to get a flat: While the process is much faster than BTO flats (you can get a flat as fast as three months), it’s still slightly slower compared to resale flats as you can collect your keys within two months.
What Is Open Booking of Flats?
If there are any leftover flats from SBF exercises, they would be pooled together and re-offered again via open booking of flats.
Previously, any unsold SBF flats were offered through the Re-Offer of Balance Flat (ROF) Scheme. Just like how SBF flats are leftover flats from BTO exercises, ROFs consisted of balance flats from previous SBF exercises.
Potential buyers also had to apply for a ROF during the specific twice-a-year window. If there were still unsold flats, then they would be available through open booking.
However, the ROF scheme was scrapped in March 2020 to make the process more efficient; unsold SBF flats would be immediately available for open booking. Buyers can apply for a flat online at any given time of the year and book a flat as early as the next working day.
A fresh supply of flats has been made available to view on 28 September 2022, 10am. The commencement date for online applications is 12 October 2022, 12am.
Pros of Open Booking of Flats:
- Shorter waiting period: Compared to SBF flats, you can apply for an SBF flat via open booking throughout the year and can book a flat as early as the next working day. This allows buyers to book and move into their new homes more quickly (as early as three months), and is especially helpful to those who are in urgent need of a home.
- CPF Housing Grants available: Like SBF flats, buyers are also eligible for the Enhanced Housing Grant (EHG) (up to $80,000) and Step-up CPF Housing Grant (up to $15,000).
- Flexible downpayment: Also like SBF flats, buyers may also use the Staggered Downpayment Scheme to pay for the downpayment (if eligible).
- Fresh 99-year lease for some flats: If you’re buying a new flat, flats that are under the open booking of flats come with a fresh 99-year lease.
Cons of Open Booking of Flats:
- Limited flat choices: As flats available under the open booking of flats exercise are the ‘balance flats’ of the ‘balance flats’, unit choices are even more limited. As such, you may not be able to select a flat that you prefer, such as the unit type or direction of the flat.
- You don’t know what the flat looks like: Like SBF flats, intricate details such as the direction of the unit, wind direction and how the unit looks like, won’t be available to you.
- Tighter ethnic quota restrictions: With fewer flats available, certain ethnic groups may find it difficult to get a flat if the Ethnic Integration Policy (EIP) quota is maxed out.
What Are Resale HDB Flats?
While SBF flats and Open of Booking Flats are new flats sold by HDB, resale HDB flats are sold in the secondary market by their previous owners. These flats have reached their 5-year MOP and are older.
Pros of Resale HDB Flats:
- More spacious: Older HDB flats may have more floor space and/or larger rooms compared to newer flats. This is largely due to changes in flat layouts over the years, such as the compulsory bomb shelter, hallways, and additional bathrooms.
- More flat types: Apart from their bigger, there are also more flat types to pick from in the resale market. From spacious jumbo flats and DBSS flats to two-storey maisonettes and HDB terrace homes, these flats are more suitable for bigger families who need more space.
- Higher CPF Housing Grants: Resale flat buyers are also eligible for CPF Housing Grants. In addition to the EHG, there’s also the Proximity Housing Grant (up to $30,000) and Family Grant (up to $50,000). In total, resale flat buyers are eligible for a maximum of $160,000 in grants, which is more than what you would receive from buying new/balance flats.
- Located in various parts of the country: Resale HDB flats are found in most areas, including in mature estates that already have amenities readily available.
- Shorter waiting time: Since resale flats are already completed, there’s no need to ballot and book for a unit, or wait for it to be built. The process of getting a resale flat is also faster as you can collect the keys as fast as two months.
- No income ceiling: Unlike SBF flats or flats sold under the open booking of flats which have a ceiling cap of $14,000, there’s no income limit for resale flats.
- You can visit the unit: It definitely helps that you can pop by the unit to get a sense and feel of the house, as well as the neighbourhood.
Cons of Resale HDB Flats:
- More expensive: Flats sold under the SBF and open booking of flats exercises are subsidised by the government, so they’re cheaper. Resale flats are sold by individual sellers who’re looking for capital gains and are therefore more expensive. On top of that, you may also need to pay cash-over-valuation (COV) for highly-desired units.
- Older: It goes without saying that resale flats do not come with a fresh 99-year lease and this will affect two things: 1) the amount of CPF funds you can use for the flat, and 2) the value of your property due to lease decay. Also remember that the older the flat, the more likely it will suffer from wear and tear.
- Tighter CPF and LTV limits: As mentioned, the flat’s remaining lease will affect the maximum loan-to-value (LTV) if you’re getting a loan. If the flat’s remaining lease isn’t enough to cover the youngest buyer till 95 years old, then the maximum loan that you can get will be pro-rated.
Additionally, unlike new HDB flats, the maximum loan amount you can borrow for HDB resale flats depends on the valuation or price of the flat (whichever is lower). Likewise, CPF usage may be limited. For a resale flat, the flat’s remaining lease must be at least 20 years; it should be enough to cover the youngest buyer till the age of 95, or it will be pro-rated.
- Higher renovation costs: Well technically, you don’t need to do any renovation (or just give it a small touch-up) if you’re happy with the condition of the flat, which will not incur much renovation cost. However, if the resale flat is old and in dire need of renovation, then it’s likely that you have to spend more to repair/replace existing fixtures and fittings or overhaul and remove previous installations.
- Ethnic quota restriction: If the EIP quota for your block is met, then you won’t be able to buy the unit, even if you offer the highest price.
- Cash over valuation (COV): When buying a resale flat, you may also need to cough up COV. COV is the price difference between the actual price you paid for the flat and the actual valuation by HDB. The amount typically ranges between $20,000 to $50,000 but can be up to $200,000.
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So, Which Home Is Right for You?
If your priority is to get a home as soon as possible, then resale flats are for you. Not only is the waiting time shorter, but you also don’t have to spend extra time and money renovating the house if it’s already in move-in condition.
Since resale flats are more spread out, there’s a larger pool of available flats and flat types, so you have more choices to pick from, including unique HDB flats that are no longer in production. Furthermore, you also have the option to live in an area that’s well-connected to amenities.
On top of that, resale flats have more CPF Housing Grants. If you plan to live close to or with your parents, then you up to $80,000 more in grants (in addition to the EHG), which would help to offset the price of the flat.
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On the other hand, if getting a brand new home matters more, or if you’re short on funds, then applying for a flat under the HDB SBF and/or open booking of flats exercises may be better for you. Not only will you get a flat with a fresh lease, but you have more flexibility to pay the downpayment. Other than that, there are also fewer restrictions on CPF usage and LTV limits.
While you may not get as many CPF Housing Grants compared to resale flat buyers, SBF flats and flats sold under the open booking of flats exercise are still typically cheaper.
Since you’re buying a new property at a subsidised price, there is also potential for higher capital gains if you decide to sell it in the future. This is especially true once connectivity and amenities in the area improve over time.
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