BTO Flat Buyers Can Now Appeal To Cancel Their BTO Without Penalty: But Should You?

Unfortunately, the past year and a half or so have not been kind to Housing and Development Board (HDB) Build to Order (BTO) flat buyers.

Numerous BTO projects have been delayed for a year or more as the whole construction sector has been hit hard by the COVID-19 pandemic.

If you have been affected by the delays, I feel you.

Having to put your life plans on hold due to the prolonged waiting time must be pretty worrying.

But here is some good news.

The Ministry of National Development (MND) has recently announced that you can actually write in and appeal to HDB to cancel your BTO flat booking without penalty if you have been affected by the BTO delays.

This is subject to HDB’s approval based on an assessment of the flat buyers’ specific circumstances,.

But should you?

Here is what you need to carefully consider.

TL;DR: BTO Buyers Can Now Appeal to Have Cancel Their HDB BTO Application Without Penalty

• MND has recently announced that you can actually write in and appeal to HDB to cancel your BTO flat booking without penalty if you have been affected by the BTO delays.
• This unprecedented move by HDB was implemented to help flat buyers who have been affected by BTO delays with urgent housing needs.
• If the appeal is successful, the option fee and the downpayment (5 per cent of purchase price) could be waived.
• HDB will also waive the one-year wait-out period.
• But, this is not a decision to be taken lightly. There are certain considerations you have to take into account and a few alternative solutions to consider too.

If you decide to cancel your BTO flat booking for whatever reason, you will have to pay a heavy price.

Let’s use the example of breaking up after you BTO.

Here’s how much you will stand to lose if you cancel your flat booking prematurely at various stages, using 4-Room HDB BTO flat price (starts from $302,000) during the Tengah November 2019 HDB BTO Launch:

But according to the above mentioned MND reply to parliament on 6 July 2021:

Today, flat buyers who cancel their flat booking will either have to forfeit their option fee or five per cent of the flat purchase price (downpayment), and wait out a one-year period before they can apply for subsidised housing again, whether a new flat from HDB or a resale flat with grants.

Nonetheless, HDB recognises the challenges faced by flat buyers given the COVID-19 situation and will consider waiving these forfeitures based on an assessment of the flat buyers’ specific circumstances, including for flat buyers who have been affected by BTO delays and cancel their BTO flats to buy a resale flat due to urgent housing needs.

The waiver of the one-year wait out period will allow first-timer families with urgent housing needs to receive housing grants if they decide to buy a resale flat.

So if your HDB BTO flat has been affected by delays, you have urgent housing needs and you want to buy an HDB resale flat, there is a good chance that HDB will waive the option fee ($500-$2,000 depending on flat size) and the five per cent downpayment on the purchase price you would have paid after signing the agreement for the lease.

But the fees you would have incurred is dependent on which phase of the application you are at:

If your appeal is successful, HDB will also waive the one-year wait-out period.

In other words, applicants will be able to immediately apply for alternative housing options and even receive HDB housing grants for resale flats and new flats if they are eligible.

But a caveat, it is not guaranteed that your appeal will be successful. But, I would think there is no harm in trying if you have evaluated your personal situation and carefully considered your options.

Should You Cancel Your HDB BTO Application?

That is the million-dollar question.

Arguably, this is an unprecedented move by MND to allow BTO buyers to cancel their BTO applications without incurring any penalties.

But before you do so you should carefully evaluate your situation first.

BTO vs Resale Flat Price

Generally, BTO flats are cheaper than resale flats.

According to historical data from Stacked Homes, there has been a BTO to resale flat price gap for the past 19 years or so (4 room flats were chosen as they were the most common type of flat).

But a caveat, there are many other factors like location, flat size, remaining lease you have to take into account.

However, this graph is a good estimation of the general price gap between BTO flats and resale flats before grants.

If you average it out, HDB flats prices have been about 28 per cent higher than BTO flats in general for the past 19 years.

This is largely due to the fact that HDB BTO flats are sold by the Government who are not that interested in capital gains.

In addition, you have to remember that you are buying a brand new HDB flat with 99 years left on the lease when buying a BTO flat.

Not to mention that the value of BTO flats tend to trend upwards if the BTO flat is desirable due to a variety of factors.

Whereas for resale flats, most of them are generally less valuable compared to BTO flats due to lease decay as they have fewer years left on the lease.

Thus, if you have managed to secure a coveted HDB BTO ballot for a flat in a good location in a central area, you would generally be better off renting a place while you wait to move into your BTO flat.

But, you have to do the math as renting a place for an extended period of time while waiting for your BTO flat might mean you might have to pay more compared to buying an HDB resale flat outright.

On the other hand, if you really cannot wait due to personal circumstances and/or your BTO flat is located in some ulu (Malay for remote or deserted) neighbourhood, you might want to consider just getting a resale flat.

After all, grants like the Family Grant (FG) and Proximity Housing Grant (FHG) for first-time couple applicants buying resale flats help soften the blow of buying a more expensive resale flat..

But, do note that it will take anywhere from three to six months or more to buy a resale flat.

If you do not fall into that category, there is also the FHG for HDB resale buyers as well.

But beyond the financial angle, you have to consider that buying a resale flat provides intangible value as it is a more permanent housing solution that may give you and your family peace of mind amidst the pandemic situation.

Here are some of the more affordable options and an estimation about how much it will cost.

Renting a Flat Under The Parenthood Provisional Housing Scheme (PPHS)

If you are looking to wait things out further, there is the Parenthood Provisional Housing Scheme (PPHS) which we have previously written about.

You can rent a PPHS flat if you have booked an uncompleted, new HDB flat.

And belong to the following groups:

• Married couples or applicants under the Fiancé/Fiancée Scheme
  • You will need to submit your marriage certificate within 3 months of taking possession of your PPHS flat
• Divorced or widowed parent with children

You must also meet the following criteria:

• You must be a Singapore citizen with another Singapore citizen or Singapore Permanent Resident in your household
• You and the occupier must not own an existing HDB flat
  • If you currently co-own an HDB flat with parents or siblings, you can still apply for PPHS but must surrender ownership of the flat within 6 months of taking possession of your PPHS flat
• You and the other applicants for the PPHS must be listed in the sales application
  • You can only be listed in 1 PPHS application within the same month
• If you are sharing the PPHS flat with another eligible household, the maximum number of occupants must not exceed the cap
  • With the exception of additional occupiers from marriages or new births

If you’re wondering what the maximum number of occupants are allowed:

[Update] From 4 Aug 2021 onwards, applicants must have a household combined monthly income of $7,000 and below, based on the income in their sales application.

For households whose income have fallen to $7,000 and below since their sales application, please contact HDB directly.

PPHS Rental Cost

The rental rates for PPHS flats will range from $400 to $500 a month for a 2-room flat.

$600 to $900 a month for a 3-room flat.

And $1,500 a month for a 4-room flat.

But do note that competition for these flats is also very fierce.

Renting an HDB Flat

Alternatively, you could consider renting an HDB flat:

The HDB website provides quarterly median monthly rent prices for HDBs on the open market, which could be used as a guide when you look into rental prices.

HDB Flats Rental Prices 2921

The figures are based on rent declared in the application forms and rounded off to the nearest $10.

(-) Indicates that there are no rental transactions in the quarter.

* Indicates that the median rent is not shown because there are less than 20 rental transactions in the quarter for that particular town and flat type.

Cancelling Your BTO and Buying a Resale Flat

If you have decided to cancel your BTO you can write to HDB to waive the forfeit so you can buy an HDB resale flat.

But unfortunately, HDB resale flat prices have only gone up for the past 14 months since June 2020.

In addition, according to the SRX Property Price Index for HDB resale flats, HDB flat prices in August 2021 (flash estimates) are just about 0.1 per cent lower than the all-time high in April 2013.

More specifically, here are the median prices of resale flats for August 2021:

Tough.

But since prices are so high, you might want to consider buying an HDB flat without a property agent to save on agent fees.

Here is a step by step guide to the whole process: