SINGAPORE - Like many couples hoping to buy our first Housing Board flat, my partner and I have given up on getting a Build-To-Order (BTO) unit.

We applied four times in 2020 and 2021 - thrice for a Sale of Balance Flat and once for a BTO - but ended up with either balloted queue numbers more than double that of the flats on offer, or no number at all.

I turn 25 this year and my partner, 30. Naturally, we hope to start a new chapter of our lives together soon - fingers crossed, within the next three years.

Our plan includes: Get a home we can call our own, adopt a cat or two, settle into ordinary day-to-day lives and grow old together. But the first step is proving to be difficult.

"When are you getting married?" asked friends. "When are you getting a cat?" asked fellow cat lovers.

Our weary reply: We're trying to find a home first.

The BTO market is what it is, with the Covid-19 pandemic throwing uncertainties into the mix - supply chain disruptions and construction delays amid a period of strong demand for such flats.

These uncertainties have pushed us towards the equally uncertain HDB resale market, but for different reasons.

The resale market is booming, with prices rising for the 21st consecutive month in March, and were 12 per cent higher than in March last year.

Million-dollar flats are becoming increasingly common, with 83 such transactions in the first quarter of this year, up from 53 in the same period in 2021.

Property cooling measures were introduced in December 2021 to dampen the red-hot market - the loan-to-value limit for HDB loans was lowered from 90 per cent to 85 per cent, and the total debt servicing ratio tightened from 60 per cent to 55 per cent.

But these may not have a major impact on the HDB resale market, say industry observers.

The higher additional buyer's stamp duty targeting the private residential market may instead turn some buyers to the HDB resale market.

So how can first-time buyers be financially savvy when selecting a resale flat?

1. Use Grants Wisely

HDB offers a wide range of housing grants, but you should utilise them as you see fit.

The Enhanced CPF Housing Grant gives up to $80,000, depending on your average gross monthly household income, which my partner and I are not eligible for as our combined income exceeds the grant's threshold.

But we can get a $50,000 grant for a two- to four-room flat, or $40,000 for a five-roomer or bigger, under the Family Grant.

We would also get $20,000 under the Proximity Housing Grant if we chose a flat within 4km of our parents' homes. Those who want to live with their parents can get a $30,000 grant.

As resale prices for four-room flats we came across ranged from $500,000 to more than $600,000, getting at least a $40,000 grant is substantial.

But housing grants should not be the key determinant behind a couple's buying decision, said Ms Christine Sun, senior vice-president of research and analytics at real estate firm OrangeTee & Tie.

Other important factors to consider are how much you like the flat, amenities for future childcare and schooling needs, and the commute to your workplace.

"While most buyers will try to utilise as many housing grants as possible to lower costs, they may need to forgo some grants if they choose a certain location that better fits their needs," Ms Sun said.

ERA Singapore head of research and consultancy Nicholas Mak said: "It may well be worth it to spend a bit more to be near parents or in-laws in mature estates, even if the proximity grant is not enough to cover the price difference between mature and non-mature estates.

"When the couple have children, it is convenient to drop the kids off at their grandparents' place and have peace of mind."

Indeed, we are looking for a place near our parents' homes in mature estates - Tampines and Telok Blangah - so hopefully the grants will come in handy to dampen the price hikes in such towns.

But if we find an ideal home more than 4km away from our parents' homes, it may not be a bad idea to forgo the proximity grant.

2. Remaining Lease

Will your resale flat's lease cover the youngest owner to age 95?

If you are considering a flat that's within your budget and has the appropriate remaining lease, that's the best case scenario. Your HDB housing loan should be as expected.

You might be tempted by older flats, as they could be bigger, yet cost less than a BTO unit that only recently reached its minimum occupancy period.

But you might need to reconsider if the flat's remaining lease does not cover the youngest owner to age 95.

This may pose a problem for cash-strapped buyers as the HDB housing loan amount will be reduced by being pro-rated from the loan-to-value limit. So you will have to fork out more than the expected 15 per cent down payment.

You will also be subject to Central Provident Fund withdrawal limits, as usage of the CPF for monthly repayments is capped at a percentage based on the valuation limit, the property's valuation at the time of purchase or the purchase price, whichever is lower.

Once the limit is reached, only cash can be used to pay off the rest of your mortgage.

Mr Mak noted that older flats are typically bigger, while Ms Sun said those in mature estates tend to be well located and surrounded by ample amenities.

However, if the lease is short, you may later face problems selling the unit, said Mr Mak, as you may be excluding young couples in your pool of buyers for the reasons mentioned.

Ms Sun added: "There could be additional cash outlay for renovating, repairing and maintaining older properties. Price appreciation may also be slower."

3. Cash Over Valuation

When looking for a flat on websites such as PropertyGuru and 99.co, you should not take the listed price at face value.

Whether you can afford a flat may depend on its cash over valuation (COV), the amount a buyer has to pay in cash when a resale flat is sold above its actual HDB valuation.

The buyer's stamp duty will also be affected as it is based on the transacted price or valuation, whichever is higher.

When I inquired about a four-room flat in Tampines listed at $588,888, the agent said the estimated valuation was $509,000 to $530,000. "The owner rejected the last offer of $580,000," she said matter-of-factly. "But you can try to make the same offer."

We did not, and the flat was eventually taken off the market.

As it had about 61 years left on its lease, our HDB housing loan would be reduced, on top of having to fork out about $50,000 to $71,000 in cash to make up the difference between its valuation and transacted price.

To put this into perspective, HDB's payment plan calculator shows we would receive a loan amount of $369,400, based on the flat's estimated valuation of $530,000.

But for a flat with a remaining lease that covers the youngest owner (me) to age 95, the loan amount would be much higher at $450,500.

Even then, the COV could be a determining factor - it could stretch your finances too thin.

There could be a silver lining as Mr Mak believes the COV might drop this year, and could range from none to $50,000.

"The Government is increasing the supply of BTO flats this year, and many are attractive - well located and within walking distance to MRT stations," he said.

"This will help to cool prices in the HDB resale market, and the COV will gradually come down."

Checking the past transaction history in an area could also help in your decision-making.

For instance, a check on the Tampines block housing the four-room flat listed at $588,888 shows that similar flats were sold for much less - $488,000 to $490,000 - in the past year.

Mr Mak noted: "Some owners have sold their flats to take advantage of the growing HDB resale prices to upgrade to private housing."

Our BTO journey had been mainly long periods of waiting and hoping for a good queue number. In contrast, dipping our toes into the resale market has led to some complicated budgeting and number-crunching.

Still, armed with a calculator and our wits, we are ready to dive right in.

Credit: Straits Times