BTO Flats in less mature estates sold for more

Punggol Northshore, one of the latest BTO (Build-to-order) HDB flat offerings in Punggol, proved popular with young families and couples. The response may have been surprising 10 years ago, when the area was still underdeveloped and considered far-flung. But now, as the amenities have built up over the years, those who have bought units in Punggol and Sengkang in the earlier years are reaping the ripe profits.

Punggol HDB EstateMost of the resale HDB flats which sold in these 2 HDB estates have tripled their original purchase prices. Four-room flats in Sengkang once cost $205,000 but now they can sell for as much as $566,880 in average on the resale HDB flat market. The lowest recorded sale was $410,000, double its original price tag. Property analysts have placed the HDB price index at a 90-per-cent increase since the launch of the system in 2002.

Once costing buyers $178,000 at its highest in 2003, prices of these BTO flats have since appreciated over the past 10 years. Most BTO flats take 4 years to be completed, and buyers have to fulfil a 5-year MOP (minimum occupation period) before being allowed to list their flat in the resale market.

It was once thought that older flats in mature estates were able to fetch higher prices, but these newer BTO flats are beating them at their odds; mostly due to the young age of the flats which means they will also be in relatively better condition, have more years left in their lease, and possess a higher potential for growth in terms of property prices once the less mature township is developed.

HDB flat prices – New versus Resale

Do prices of BTO HDB flats rise in parallel to resale units? No, says the Singapore Government.

In line with their aim to keep new flat prices affordable for first-time buyers, National Development Minister, Khaw Boon Wan, has emphasized that BTO flat prices are in no way linked to the market prices of resale HDB flats.

Tampines Court BTO HDB flats, part of HDB's latest January 2013 launch. Photo by HDB.

Tampines Court BTO HDB flats, part of HDB’s latest January 2013 launch. Photo by HDB.

Addressing concerns that BTO prices may be dancing hand-in-hand with resale HDB flats, which have been on the rise for the past few quarters, Mr. Khaw promises to provide abundant and affordable housing to match the projected 6.9 million population of 2030. He says that as long as ‘property remains hot’, the new pricing policy of de-linking BTO flats to resale HDB flats will continue. It looks like this policy may have to stay for quite some time yet, as market feedback shows that prices are still going strong and have barely shown signs of letting up.
Industry players are not expecting the new HDB flats to take too much away from the resale flat market. SLP International’s head of research Nicholas Mak says that low prices of new flats may ‘effectively slow down the resale market but will not stop or reverse rising trends yet’.  However, Mr. Khaw did mention that although BTO prices will be priced differently from resale flats, there will be differences within its own category. He says HDB will not be pricing its new flats ‘haphazardly’ but instead, buyers can expect prices of BTO flats in mature estates to be up to 40 per cent more than those in outlying suburbs.

This keeping of prices low does come at a price. Taxpayers are essentially paying for the gap between new flats and resale flats. Because HDB purchases land from SLA (the Singapore Land Authority), land prices are based on the prices of resale flats in the vicinity, thus if resale flat prices are rising, land is more expensive, but if new flat prices are still kept low, the amount difference is made up by government subsidies, which indirectly comes from the taxpayers’ coffers.