Is public housing in Singapore's resale market still within reach?

A headline in recent months screamed from property portals: a three-room HDB flat in Bidadari sold for a jaw-dropping $900,000.

Last year, more than 1,000 HDB flats were sold at $1 million and above.

These eye-watering figures throw into sharp relief the escalating costs of homeownership in Singapore, forcing many to question: Is the dream of an affordable HDB flat slipping away?

While the Build-To-Order (BTO) system remains the idealised entry point for aspiring homeowners, a number of aspiring homeowners are finding themselves locked out, turning instead to the increasingly competitive resale market.

For 35-year-old tech professional Hailey, who navigated the BTO ballot multiple times, the system felt like a lottery.

She and her husband submitted nine applications only to face repeated rejections.

"We were gunning for mature estates, which were competitive, so that didn't help our case," Ms Hailey told The New Paper.

Even with appeals to their MP, the couple were simply advised to consider less desirable locations.

In one instance, after finally securing a queue number, they were presented with limited, undesirable options: mostly low-floor units near the refuse chute.

After nine unsuccessful attempts, time was no longer a luxury for Ms Hailey and her husband.

The pressure to secure a home mounted as prices continued to climb. They eventually bought a resale flat in a mature estate, compromising on lease length but gaining more space than a comparable BTO would have offered.

The price difference was "around $50,000 or less", a premium they were willing to pay to avoid further delays.

Similarly, 34-year-old Roy faced similar frustrations, applying seven or eight times without success.

He and his wife eventually chose a resale flat in Ang Mo Kio, a familiar location between their previous homes.

The flat required minimal renovations and fell within their budget, accelerating their move-in timeline compared to waiting for a BTO.

He acknowledges the rising prices but remains optimistic.

"Property prices in Singapore have always been rising," he said.

"I believe that our generation can find our way, like previous generations did."

While the BTO system feels like a lottery to applicants, the Cash Over Valuation (COV) system in the resale market feels like tikam-tikam.

COV represents the difference between the actual sale price of a resale flat and its official valuation by HDB. This valuation is not publicly disclosed - only the buyer knows the COV amount after applying for a valuation.

This lack of transparency can make it difficult for potential buyers to gauge market prices accurately, said property consultant Esther Loh.

Factors like the location of the flat, particularly its proximity to private housing, and the type of buyer (for example, a downsizer from a larger property) can significantly influence the COV.

In the case of the S$900,000 Bidadari flat, the COV remains unknown, adding to the mystery surrounding such high-value transactions.

This also creates a ripple effect, pushing up prices for comparable flats in the area.

As Ms Loh succinctly put it: "If someone in your block sells at $900,000 and you are a higher-floor neighbour with a three-room flat, will you want to sell lower or higher?"

These rising prices can add to the financial worries of many aspiring homeowners.

Financial advisor Lin Jiateng sees the strain on both BTO and resale buyers.

Those earning more can't apply for BTOs, pushing them into the more expensive resale market.

Those earning less, even with grants, can find it hard to afford the initial costs of a BTO.

Couples with a combined earning of over $14,000 a month are ineligible for BTO flats, pushing them into the resale or private markets, where they face higher prices and market volatility.

This can mean steeper purchase prices, quicker down payments (compared to the staggered payments for BTOs), potentially higher and fluctuating mortgage interest rates (if they opt for bank loans instead of HDB loans), and fewer opportunities for future profits as they're not considered first-time buyers.

"All these will affect the couple's immediate savings, and also cash flow in the future as well," said Mr Lin.

He's seen BTO prices jump significantly over the last 10 years - 16.4 per cent in less central areas and 21.9 per cent in more central ones.

But Mr Lin added that even within these areas, prices can vary greatly. In 2022, prices per square foot ranged from $360 in less central areas to a whopping $700 in prime locations.

Prime Minister Lawrence Wong has affirmed the government's commitment to affordable public housing.

He emphasised the HDB's policy of pegging new flat prices to income levels, not the volatile resale market, supported by government subsidies.

While acknowledging the pressures within the resale market, he attributed the high prices partly to pandemic-related supply chain disruptions. He highlighted ongoing efforts to boost housing supply, though cautioned that the impact will take time.

PM Wong also noted a decrease in overall BTO application rates, suggesting improved odds for applicants.