You’re eager to purchase your first house but realise that your income exceeds the HDB BTO income ceiling. What other choices do you have?
Should you try to find a condo unit at a more affordable price point instead of searching for HDB resale flats? Maybe instead of a condominium, should you go for an executive condominium (EC)?
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. Based on their income, the Tans may have set a budget of $700,000 for their future home.
This puts them in a difficult position because they are not quite wealthy enough to spend millions on a condo or landed property, but are not eligible to buy HDB apartments directly from HDB (i.e. new flats from the BTO and Sale of Balance Flats exercises).
With HDB resale flat prices at a record high and private property prices continuing to climb, the question remains: which is more bang for the buck? 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.
What Is the Current BTO Income Ceiling?
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 the project
2-room Flexi flat
$7,000 for 99-year leases; or $14,000 for short leases (15 to 45 years)
BTO flats are considered subsidised housing, which is why an income ceiling exists. 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.
Most average Singaporeans need not worry about exceeding the income ceiling because if you’re a young couple just starting out your career, chances are, your combined salary is not that high yet.
According to the Ministry of Manpower, the median gross monthly income of full-time employed residents was only $4,680 in 2021. For a couple like that, their combined income would not be more than $10,000, making them eligible for most BTO flat types.
If past statistics are anything to go by, our median gross monthly income will not be increasing exponentially in the coming years: MOM only recorded an annualised increase of 2.1% in median salary between 2016 and 2021.
But what if you’re like the Tans in the sandwiched class, earning an above-average wage but not that rich to buy a $2 million condo? Or maybe you have just given up on balloting for the upcoming BTO launches due to them being heavily subscribed. Let’s explore your options if you exceed the BTO 2022 income ceiling.
Option 1: Buying an HDB Resale Flat
High-income earners who may not be eligible to buy a new BTO will be pleased to know that there’s no income ceiling for a resale flat.
A quick look on PropertyGuru shows 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 an HDB resale flat
- Can choose a resale flat in your location of choice
- Some CPF housing grants are applicable
- Able to move in earlier
- More affordable than condominiums and ECs, can buy a larger space
With a $700,000 budget, the Tans have a variety of options for 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 executive maisonettes, executive apartments, jumbo flats or even Design, Build and Sell Scheme (DBSS) flats on the market.
Your income partially determines your ability to get certain HDB housing grants. Still, it’s worth mentioning that the income threshold for most CPF housing grants is identical to that of BTO units.
In the case of the Tans, their combined income of $15,000 means they are only possibly eligible for the Proximity Housing Grant (PHG) and CPF housing grant bonus of $50,000 for first-timers applying for a resale flat as a family.
Although the grants are significantly less than BTOs, it is still better 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 flat is that you don’t have to wait years for your home to be built and can move in within months. This is an important factor to consider, especially with ongoing BTO construction delays and longer completion times.
Cons of Buying an HDB resale flat
- Not brand new
- Higher renovation costs
- Dwindling lease
- HDB resale flat prices currently at a record high
Firstly, resale flats are ‘preloved’ properties, meaning previous owners have lived in them. Some property seekers may mind and prefer a brand new home instead.
Purchasing a home where the previous owner has resided for a significant period offers pros and cons.
On the one hand, the ‘old’ property will show wear and tear, so renovating a resale property may incur higher costs. On the flip side, 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, the dwindling lease is one of the most talked-about disadvantages of getting a resale flat. If you buy a relatively new resale flat – one that has recently fulfilled its Minimum Occupation Period (MOP) – then there is not much of an issue. However, if you’re eyeing older ones and intend to sell them in future, then the decaying lease may be a concern.
With resale flat prices at a current high, you may have to fork out more than you budgeted for. The good news is HDB resale prices are finally climbing at a slower pace and is expected to slow down even further, due to the introduction of the September 2022 property cooling measures.
Buying an Executive Condominium (EC)
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 the developer). Resale ECs are priced similarly to private condos, which we will discuss in the next section.
Pros of Buying a New EC
- Look and feel of private property
- More affordable 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 an HDB BTO flat but find private condominiums 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 with shoebox units to cater to investors), ECs are usually bigger and start from three-bedroom units.
Many people also view ECs as a smart investment since they can sell for prices fairly comparable to private condos once they reach the 5- and 10-year marks. This implies a sizable profit for individuals who first purchased 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. The most recent launch of Copen Grand EC in Tengah sold 73% of its units on launch day on 22 October 2022.
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 a taxi 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 must also fulfil other conditions such as the property ownership and resale levy rules.
Still thinking about buying an EC? Read our related guides here:
- Buying EC in Singapore: Income Ceiling Eligibility and How Much to Earn to Afford an Executive Condo? (2022)
- 7 Executive Condos (ECs) in Singapore That Are Within Walking Distance (500m) To The MRT
- Buying Resale Condos in Singapore (2022): Are Fully-Privatised ECs Cheaper?
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 having ‘made it’. 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 means they get all the benefits of living in a beautifully designed property, with facilities like a pool, gym and BBQ pits, and round-the-clock security.
In addition to having no income ceiling, 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
Buying a private condo may seem like the best and most prestigious choice if you can afford it. However, 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 a 4-room resale flat near an MRT station, which you can get at a similar price point. For $700,000, you can get a new-ish 3-room HDB flat on a high floor in a desirable, city fringe neighbourhood with money left over for renovation.
In terms of how long a new launch condo will take to build, we’re looking at a similar timeline to BTO flats. Construction delays brought on by pandemic-induced manpower and supply shortages means you’ll have to wait. But if you’re looking at a resale condominium, you can move in more quickly.
HDB Resale Flat, EC, or Condo: Which Should You Choose?
If you value having a larger space and already have your own gym membership, an HDB resale flat may be the most cost-effective option for you.
If you prefer to live in a property with condo facilities, new ECs are a good option as they are still a type of subsidised property and cheaper than most private condo units.
However, if your heart is set on buying a condo unit, 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, content and resources, check out PropertyGuru’s guides section.
Looking for a new home? Head to PropertyGuru to browse the top properties for sale in Singapore.
Need help financing your latest property purchase? Let the mortgage experts at PropertyGuru Finance help you find the best deals.