Money Concerns for Singaporeans Choosing a BTO Site

There are many reasons for choosing a BTO site over another, but Singaporeans should think about these money concerns before making their final decision.

HDB continues to create new housing, despite worries of falling property prices. This is, of course, great for new home buyers.

This May, Singaporeans can choose a flat from these four sites  - Woodlands, Geylang, Bidadari, and Yishun. But before you start choosing a BTO site, take a moment to consider why you’re after this location and the long-term costs that it might involve.

Homebuyers Should Think Differently From Investors

Some sites are less built up than others. In particular, two of the new sites this May (Yishun and Woodlands) are in non-mature areas.

This means less accessibility. They are further from the trains, or the MRT stations for the area are not yet ready. There are also fewer shops and eateries. The pricing of the flats will reflect that. Buying a BTO flat in a non-mature area will almost always be cheaper, although we won’t know the exact prices until the launch.

Now, who would want to buy in such a location? There are two main categories. The first are homebuyers on a budget, who want to pay less on the housing loan. The second are those with an investor mindset. They may intend to stay only for five to 10 years, and use their first flat as a stepping stone toward a condo or a more central HDB flat.

If you’re an investor, it may be worth your time to buy in a less mature area. While it’s inconvenient to live there at first, you will be buying for a lower price. Over the next few years, more amenities - such as malls, coffee shops, supermarkets, etc. will spring up. This will raise the value of property in the area, so you may be able to sell your flat for much more than you initially paid.

If you’re a homebuyer who intends to stay there over the long term, you should think twice about the low price. While it’s cheaper, it will be harder for you to get work. You also have to think about the lifestyle of your family - it may take several years for you to get amenities others take for granted, such as a nearby grocer or cinema. If you can afford it, you may want to spend for a more comfortable living space.

Figure out which you are - homebuyer or investor - before you pick a site.

“Accessibility” is Subjective and Not Always Worth It

When a site or property is described as accessible, or central, certain assumptions are made. For example, the new BTO site in Geylang is probably the most accessible of the four, as it’s just around six minutes drive from the Central Business District (CBD).

However, this assumes that you need quick access to the CBD. If your office is nowhere near the CBD, or you are self-employed and work from home, you could be paying a heftier price for an advantage you don’t really need. Likewise, if you already have a car or a job that does not require frequent commutes, flats near MRT stations may not be useful for you.

An alternative to this is if you’re thinking as an investor. In such cases, you may want an accessible or central location even if it’s of no immediate benefit to you. Later on, when you rent out or resell the property, you can get a better price due to its location.

Also Read: When is an Amenity Not an Amenity?

Don’t Choose a Location Because of the School

Despite the Ministry of Education’s best efforts, Singaporeans do have biases toward certain schools. All schools are good schools in theory, but we know many parents will purchase homes close to a desirable school, as it raises the odds of their children getting in.

If you’re one of these parents, you should reconsider overspending just for improved chances at a particular school. Remember that, even if you live close by, that’s still not an absolute guarantee of getting in.

Also, you should consider the impact of living in the area for the long term. Primary school only lasts for six years, and Secondary school only for four to five years. Beyond a decade, will you still be happy to keep residing in the area?

Locations are Unpredictable Beyond the First Decade

While a particular site may seem great, remember that few things are predictable beyond the first 10 years.

While it’s a good general guess that amenities will build up, other things can pop up too. For example, your clear view may be replaced by the back of another property development. Or you may find new malls bring unbearable levels of traffic congestion (many residents near Toa Payoh Central or Serangoon Nex will be familiar with this headache).

You can look at the Urban Redevelopment Authority (URA) master plan, to get a glimpse of the area’s likely future. However, before you commit to buying a flat that pushes the boundaries of affordability, remember this risk: you can’t see into the future. Don’t stake too much of your hard earned savings on a bet.

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