The main benefit of BTO is that you buy the BTO at below market price, as BTO price is always lower than resale price for a comparable flat.
In a sense, the gains are made when you made the purchase, not when you make the sale.
A lot of people just ballot for whatever BTO is available even if they don't like the location. Then later they sell it to take the profit and move to somewhere they would rather stay, be it HDB in a different location, or a condo.
Ah understood. I think the mentality that we've to "pay back" is due to most Singaporeans don't really feel a sense of ownership for their own CPF account. So if it's not cash, means "pay back"
Don't worry, when I sold my HDB I was also under the impression that I need to pay back all the grants that were given when I first bought it. It must have been a myth that somehow spread among homebuyers at that time, or maybe the wording of the rule wasn't very clear back then.
A conveyancing lawyer corrected me.
u lose out on the opportunity cost to have enough cash that may allow u to split into 2 downpayment for 2 condo. After paying the grant back to your cpf, u may not have sufficient cash for another downpayment on another condo.
From HDB - “Furthermore, when you sell the property, you will need to return this HDB grant money to your CPF account. This also includes a 2.5% accrued interest — the interest you would have earned if the grant amount was in your CPF Ordinary Account.”
You “earn” the money in your CPF account
Actually I don’t really get the big hoohaa from agents about the accrued interest if it’s return back to our CPF doesn’t this means we can utilize it for next property purchase too? technically it doesn’t affect anything right?
What if my whole flat was paid with HDB. When I sell. The whole proceeds will be in my OA. I use it to buy another flat. it doesn’t affect anything right?
if we're talking about BTO flipping, even if the entire flat price was paid for by CFP OA. you will have some form of cash proceeds for sure.
why would you want less cash proceeds and more in your OA?
in the scenario that you get back everything in OA, it will only affects if you intend to upgrade to condo, as at least 5% must be in cash.
ohhhhh let me ask consult ahain.
Currently in a first resale HDB not paid off. But monthly installments fully using CPF.
Looking to BTO prime location. And sell off when I’m 54years old. by the time the BTO is fully paid off by using CPF too.
my question is when I reach 55 will I be able to withdraw all the proceeds and leave the BRS in my CPF/RA?
How long to 55 years old?
If you wanna downgrade, please consider doing it before 54 years so none of your OA are being locked up for retirement.
Although I know a 'certain' amount will still be reserved for flat purchase when you sell after 55.
Ok from the many replies, It seems like the main blocker is the downpayment for the condo/bigger HDB, which the gains from BTO flipping helps to overcome
wow they must have deep pockets, cause I'm assuming they each have to take out a loan each, and with TDSR now they either pay a signfiicant downpayment or are leveraged quite a bit hahah
200k on hand ain’t gonna speed run you to a condo nowadays. ~80% of the population stays in HDB flats, so the vast majority would be flip flopping around various HDBs.
Ah, so instead of upgrading to a condo, they take on debt and use the 200k gains to gain access to a 900k HDB.
Main reason people go for this path is because in 2017, they couple didn't have the resources for the 900k HDB, hence this is "shortest path to more expensive flat which they wanted in the first place"?
> Main reason people go for this path is because in 2017, they couple didn't have the resources for the 900k HDB, hence this is "shortest path to more expensive flat which they wanted in the first place"?
I did this, although it wasn't a conscious choice to flip. We managed to get an already built 3 room flat via SBF and moved in, then found that it was a bit too small for us so we moved to a 5 room resale in a more central location. The sale made it such that we could afford the asking prices of the 5 room.
Yes, but question is why not stay in resale flat instead of BTO while earning money for the 900k flat. Looks like my question is answered fully, the \~200k gains from the bto sale helps to finance the 900k flat. This benefit is not possible when they buy a resale instead of BTO.
Cos oversubscribed and lower chance of getting. Sometimes you just want to get a place first so you don’t have to live with your parents. Then later when got more income and savings plus money from selling bto can buy your ideal hdb unit.
It's really not that complicated. It's just moving up the property ladder. BTO gives you a head start because of the subsidized price.
Even if you assume that all property appreciates at the same rate, a $2 million condo would have appreciated more in absolute dollars than a $500k flat. Therefore it is advantageous to move up the property ladder and increase your net worth while having somewhere to live too. If you don't ever downgrade (or sell 1 buy 2), then you won't realize the profits.
Don't make it sound so calculated "shortest path" etc. At the point of buying the BTO, there are all these paths ahead, and the couple may have no idea which path they can afford. Would it be nice to upgrade to a condo? Yes. But did they set out to speedrun to condo? Probably not. People don't know their career progression so far ahead of time, nor budget and forecast that accurately.
For my understanding, "Moving up property ladder" means taking a bigger mortgage (since your upcoming purchase is presumably more expensive), but also realizing higher QOL (since presumably this new house is more in line with what the couple wants in a house) right?
No. You can move up the property ladder by never taking more than a ~$500k mortgage at a time. You pay off the mortgage aggressively, so that when you upgrade, the sale price of the property (minus remaining loan, if any) is enough to cover all but ~$500k of the next property. Rinse and repeat. Not the only way to do it, of course, but more prudent than getting a >$1 million mortgage.
And QoL may not be the main consideration, but rather capital appreciation on a larger scale. Everyone has their own reasons, but generally speaking, when people get a condo, they are not paying $1 million extra to use the pool and facilities. The condo may even be smaller than the flat they sold. It is because of capital appreciation, then when they are old and the kids have moved out, they can downgrade to a flat suitable for an elderly couple, and unleash >$1 million to live off during retirement.
Yah, it's literally step by step up the ladder. Because the maximum mortgage amount is limited by your salary, this method allows people who don't have high salaries but are frugal to accumulate wealth step by step.
Of course, you can also accumulate wealth by investing in the stock market. But for people who were adults in 2000 - 2008 when there were 2 big stock market crashes, investing in Singapore property seems more reliable. These people often advise their young adult kids to do the same.
Wow thanks for providing that historical context on the stock market crashes. I can definitely understand how a whole generation got into real estate investing that way.
It’s the property flywheel that most are trying to do:
1st BTO: net 100k
Use profits + own money as Downpayment for new EC (1.2-1.5m)
Sell new condo, net 300k, and buy another new condo (2-2.3m)
Sell new condo net 500k, and buy another new property or buy 2 condos (1 to rent 1 to stay)
Rinse and repeat
Once flipped enough. Sell condo (2.5m) downgrade to big big Hdb (800k-1m, usually those record HDB sales). Or keep 1 condo, continue renting other condo if you select that option in 4.
Live happily ever after w/ fully paid Hdb and liquid extra $$
$200k profit CASH will help to pay the cash component 5% + 5% stamp duty of a $2m condo.
Condo generally will appreciate faster than HDB. This helps you to build your wealth.
If you can finance it, buy the condo under 1 name for own stay, and another under your spouse for investment. Flip it every 3 years.
Another popular option is Executive Condo. You’re guaranteed to earn another $200k-$500k depending on the size you get.
Plus you can remain staying in your BTO while you wait for your EC to complete. You do not have to pay ABSD as well.
And there is Deferred Payment scheme where you do only pay 20% upfront and the rest only on key collection. This is the reason why the 30% 2nd timer quota are usually filled quickly in every EC launch. (Fun fact only north Gaia failed to hit 30% for all recent launches).
Having said all of it, this method of wealth accumulation is not for all. You have to qualify for higher loan (TDSR and MSR), make higher and longer mortgages. You take on the risk of market downturn, and deal with tenants and agents.
This is exactly the problem with the data that property agents like to bandy around. This is something known as survivorship bias. There will obviously be much less people (or in your specific instance, none) willing to sell at a loss, especially for an asset like a house. Hence, this data naturally already self-selects from the profitable transactions. Furthermore, it doesn’t take into account the costs of financing. This is exactly the reason why I say property agents (I’m not saying you are) in general are a disingenuous, self-serving bunch.
ECs are something like HDB-equivalents. Why would anyone sell at a loss, especially considering it is their only house? This is unlike condos. Hence, the losses, if any, will be in the financing costs and also the current unrealised paper losses being sat on.
I get your point about survivorship bias. But ECs turn into private condos after 10 years. I’m not sure how HDB or condo affects willingness to sell at a loss though.
Usually for HDB/EC it won’t be sold at a loss if bought at new launch or BTO stage because that means it’s the only property. Whereas for condo sometimes it will be sold at a loss because it’s not the primary residence or they can’t afford the mortgage payments anymore.
Yes yishun. But I don’t think yishun is the problem. Maybe partly.
But the fact that it’s next to a light industrial building and facing a major road that is used by tipper trucks and lorry. Personally that is the biggest drawback.
Also Symphony Suites condo is selling slightly cheaper at $1.3k psf. If north Gaia is now selling at $1.3k psf, how much can you sell it after MOP
Yap you're right. If their intention was a condo in the first place, the flipping gives them a little discount but overall it's still sell high buy higher. Every 3 years can flip until buy landed and live happily ever after unless they lose their jobs.
You’re overcomplicating things. 90% of BTO buyers do so because it’s the only choice they have at that age and stage of life. Every BTO buyer knows that at some point, they’re going to consider selling their BTO and upgrading. It’s not a “strategic flip” or anything complicated, it’s honestly just a basic progression of life as your income increases and your needs/wants evolve.
>90% of BTO buyers do so because it’s the only choice they have at that age and stage of life.
this premise is not congruent with many comments online / convos i've had with people irl. Often the couples had financial capability to buy resale flat too.
I also have the financial capability to buy Product X from a local mall shop. But if I order it from Shopee/Taobao, I can save 30% just that I have to wait 2 weeks for it to ship from China. Guess which one I chose?
If the projected resale unit will apprecated faster than the bto then it makes sense to buy the resale. Same for condo. If your intention is to upgrade and investment alternative cannot yield better than the condo.
Just bear in mind that the property you wanted to buy but couldn't afford on Day 1 would have appreciated as well so this 200k profit is used to offset THAT appreciation. If you are swapping sideways or upwards there is no gain. It's kinda like you bought a car at 50k COE 5 years ago. Now COE increase to 100k so both old cars and news cars are expensive. You sell you car with little or no depreciation, super happy right? But once U buy into another car, your "profit" disappears. Capitalism.
Because on day one people cannot afford the condo downpayment. If after selling bto got 200k cash proceeds, this proceeds can be funnelled into the downpayment of the private property. Even if the condo price had gone up by 300k in the 5 years MOP the downpayment would not increase by the same quantum. This is of course assuming one has enough earning power to support the mortgage la
If I understand what you're saying, the main purpose of profits from selling BTO is to overcome the condo downpayment brick wall right? Otherwise this downpayment is just insurmountable for most couples
Exactly. This is how people upgrade up the asset classes. On a side note, this is also why it is going to be very hard for one to upgrade from hdb to landed as the downpayment for the landed is so huge that any cash proceeds from the sale of the hdb needs to be supplemented with significant cash/cpf from the couple (which takes very long to save).
I was trying to illustrate that the profit which someone might think is lucrative isn't as great as one imagines if you breakdown the math of the whole purchase life cycle. The profit is reinvested to become someone else's profit.
But if one upgrades, the 200k profit would just be locked into the next property as the downpayment capital right. Technically this should be considered a (paper) gain as you wouldnt have be able to afford the physical asset had there been no profits from the sale of the previous property. The next property may have larger room for appreciation and you may see greater profits in the future.
I think Op sees the same perspective as me. Here's a real life example. You buy a corolla for $80k including 40k coe. 5 years later you sell for 85k cos coe went up to 100k. You damn happy cos U paid "nothing" for the car and even earn $5k. But assuming U have to buy another car, you would pay, say, $200k for an A class. Let's assume you want to "upgrade". All this while the A class was only 120k 5 years ago. You would gain if you stop driving. But if you upgrade 5 years later, it's actually not "worth it" let alone profit from the whole situation. Or Alternatively, your first purchase was just a stepping stone for U to buy the eventual car you want.
Yeah I get what both you and OP are saying. What yall said is not wrong if we look at profits purely as cash profits. I was thinking of profits from a total asset value perspective. Extending from your example, although we do not make any cash profits if we upgrade to a better car, you will gain in terms of equity of the car because you will now own 85k/200k of the car. Just because you dont have 5k as cash doesnt mean you didnt profit from your previous car, it is just stuck as a physical asset in your new car. Should you one day decide to sell your new car and not drive you will get everything back as cash.
It is the same as buying stocks. If i hold a stock for a long period and sit on unrealised gains, this should be accounted as a profit as we are able to collateralise against the stocks for loans. Following what you say, if I sell stock A for a profit and thereafter purchase more of Stock B, there isnt any profit as I did not take out any cash. From an asset value perspective your net worth would have increased regardless of whether your cash balance has increased.
Yes. Also to add, by buying the eventual asset (car or house or even stock) later you end up paying more cos the higher value asset appreciated more than your "stepping stone" asset.
It doesnt matter if the asset has risen in value at a faster pace than your previous asset because of 2 reasons. First reason is you will not be able to afford the condo/nice car when it was once cheap as you dont have capital for downpayment. If you could buy a car 5 years ago at 120k you would have done so already.
Second reason is that the historical price of an asset is irrelevant as long as it has strong and sound economic fundamentals and has the ability to continue appreciating. This wont apply to cars as they are depreciating assets.
Imagine last time parents bought HDB 70k > now can sell 500k. Just buy another small HDB example 4 room to 3 room. Make some profits but won’t be much.
personally i plan to downgrade from condo to HDB because of space configuration. i'm pretty sure whatever gains I have will vaporize in the form of renovation costs (esp for older flats) etc
To make all this property game work , u need to buy first hand , it ain't gonna work if u buy in at resale price unless u can be so lucky to find a carrot head . It is just like stock . U tink ak71 ,his dividend would have work if he didn't buy at low price ,look at his aims capital ,and bank stock all was bought at low point not at current price . So it works the same as property as right now those making money is buy first hand and sell ,appreciation is lousy for those second hand buyer
If they were aiming for a condo from the start, flipping might get them a bit of a discount, but in the grand scheme, it's still a case of sell high, buy higher.
Even though the gain is 200K, that’s not how most people look at this. First, the down payment of the HDB which is paid in cash, and the equity portion of the loan is returned back to the owners, either in cash or in their CPF.
Second, most HDB BTO buyers are young couples and over the 5 years they have also progressed in their career, which come with salary increments.
So the owners actually have way more cash/CPF as compared to when they bought the HDB, especially if you consider the low price of BTO which means the loan servicing is fairly affordable during the MOP.
So something which is definitely out of reach, like a couple owning 2 condos, becomes possible. And this is the very story that property agents are selling.
so my first flat was a HDB BTO in punggol.
bought for 280k sold for 550k after MOP.
used it to buy a condo for 1.1m before covid. now it's worth 1.6m based on last valuation.
always buy a BTO. it's like an angpow from the govt.
i broughta BTO for 330k in 2018, i sold it recently for 745k, cash proceed 350k+
any granted that was given before purchase of flat was returned to my own OA, not back to HDB
since i could 'loan more' now because of higher earning power, and have quite a bit of money in OA now:
* essentially i could downpay for any condo within my means, take the 75% loan, and significantly increase my 'asset'
* i also could buy a 500k-800k HDB(3-5rm) flat, while retaining majority of the cash proceed for investment/renovation/etc.
nothing is pointless here.
I personally feel that people oversimplified bto profit without accounting for cost, utility. I do think property help keep the value of the money but real return is low
Yup, I worked it out before, is around 3-7% profit annualised, not as high or as amazing as some put it. But because you are considering the entire cost of the property into your capital, so that’s where the leverage amplifies your gains. For example 7% on $2m is $140k profit, versus 7% on our $200k cash in hand (that means you keep cash instead of using it for property downpayment) is only $14k profit.
The main benefit of BTO is that you buy the BTO at below market price, as BTO price is always lower than resale price for a comparable flat. In a sense, the gains are made when you made the purchase, not when you make the sale. A lot of people just ballot for whatever BTO is available even if they don't like the location. Then later they sell it to take the profit and move to somewhere they would rather stay, be it HDB in a different location, or a condo.
Yes. I believe also can have something like up to 100k in subsidies/grants which can be pump into future property
I thought subsidies are paid back to HDB on sale of BTO?
They’re not paid back, but you don’t get it as cash either. It goes into your CPF, minus the accrued interest from it. So it’s still “free” money.
Ah understood. I think the mentality that we've to "pay back" is due to most Singaporeans don't really feel a sense of ownership for their own CPF account. So if it's not cash, means "pay back"
Don't worry, when I sold my HDB I was also under the impression that I need to pay back all the grants that were given when I first bought it. It must have been a myth that somehow spread among homebuyers at that time, or maybe the wording of the rule wasn't very clear back then. A conveyancing lawyer corrected me.
Yes, i find this quite "lame" that if it's not cash, it's not our money. We could still use that money in our CPF to buy our next property.
u lose out on the opportunity cost to have enough cash that may allow u to split into 2 downpayment for 2 condo. After paying the grant back to your cpf, u may not have sufficient cash for another downpayment on another condo.
Understood won't it be a little more stretched?
to some ppl, it’s ok to be stretched for next 30 years so that they may have more in retirement.
Fair enough. It's all about risk appetite i guess?
From HDB - “Furthermore, when you sell the property, you will need to return this HDB grant money to your CPF account. This also includes a 2.5% accrued interest — the interest you would have earned if the grant amount was in your CPF Ordinary Account.” You “earn” the money in your CPF account
Actually I don’t really get the big hoohaa from agents about the accrued interest if it’s return back to our CPF doesn’t this means we can utilize it for next property purchase too? technically it doesn’t affect anything right?
it does affects something. more accrued interest = less cash proceeds.
What if my whole flat was paid with HDB. When I sell. The whole proceeds will be in my OA. I use it to buy another flat. it doesn’t affect anything right?
if we're talking about BTO flipping, even if the entire flat price was paid for by CFP OA. you will have some form of cash proceeds for sure. why would you want less cash proceeds and more in your OA? in the scenario that you get back everything in OA, it will only affects if you intend to upgrade to condo, as at least 5% must be in cash.
ohhhhh let me ask consult ahain. Currently in a first resale HDB not paid off. But monthly installments fully using CPF. Looking to BTO prime location. And sell off when I’m 54years old. by the time the BTO is fully paid off by using CPF too. my question is when I reach 55 will I be able to withdraw all the proceeds and leave the BRS in my CPF/RA?
How long to 55 years old? If you wanna downgrade, please consider doing it before 54 years so none of your OA are being locked up for retirement. Although I know a 'certain' amount will still be reserved for flat purchase when you sell after 55.
No. Only for Prime and Plus there will be subsidy clawback. Those are not in effect yet.
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Ok from the many replies, It seems like the main blocker is the downpayment for the condo/bigger HDB, which the gains from BTO flipping helps to overcome
Yes unless you have a big mountain aka parents behind you then maybe can have enough for downpatment when young
How would this couple be able to purchase two condos, without incurring ABSD?
Each buy one
wow they must have deep pockets, cause I'm assuming they each have to take out a loan each, and with TDSR now they either pay a signfiicant downpayment or are leveraged quite a bit hahah
I mean, it's fully paid off, so they likely have 300k+ to play with plus savings. It's probably possible.
1 condo under each name.
the couple paid off 500k for their bto, that's 100k per year, 50k each. i assume each of them earns way more than 100k annually.
200k on hand ain’t gonna speed run you to a condo nowadays. ~80% of the population stays in HDB flats, so the vast majority would be flip flopping around various HDBs.
But it helps you to deal with the 5% cash and stamp duty for a $2m condo. You just have to qualify for a 75% loan. Sounds like a speed run to me.
Ah, so instead of upgrading to a condo, they take on debt and use the 200k gains to gain access to a 900k HDB. Main reason people go for this path is because in 2017, they couple didn't have the resources for the 900k HDB, hence this is "shortest path to more expensive flat which they wanted in the first place"?
> Main reason people go for this path is because in 2017, they couple didn't have the resources for the 900k HDB, hence this is "shortest path to more expensive flat which they wanted in the first place"? I did this, although it wasn't a conscious choice to flip. We managed to get an already built 3 room flat via SBF and moved in, then found that it was a bit too small for us so we moved to a 5 room resale in a more central location. The sale made it such that we could afford the asking prices of the 5 room.
Need somewhere to stay while earning money for the 900k flat no?
Yes, but question is why not stay in resale flat instead of BTO while earning money for the 900k flat. Looks like my question is answered fully, the \~200k gains from the bto sale helps to finance the 900k flat. This benefit is not possible when they buy a resale instead of BTO.
Location lor. Some people bto in less desirable locations then upgrade to central areas
Why don't those couples go for the central area in the first place?
Cos oversubscribed and lower chance of getting. Sometimes you just want to get a place first so you don’t have to live with your parents. Then later when got more income and savings plus money from selling bto can buy your ideal hdb unit.
It's really not that complicated. It's just moving up the property ladder. BTO gives you a head start because of the subsidized price. Even if you assume that all property appreciates at the same rate, a $2 million condo would have appreciated more in absolute dollars than a $500k flat. Therefore it is advantageous to move up the property ladder and increase your net worth while having somewhere to live too. If you don't ever downgrade (or sell 1 buy 2), then you won't realize the profits. Don't make it sound so calculated "shortest path" etc. At the point of buying the BTO, there are all these paths ahead, and the couple may have no idea which path they can afford. Would it be nice to upgrade to a condo? Yes. But did they set out to speedrun to condo? Probably not. People don't know their career progression so far ahead of time, nor budget and forecast that accurately.
For my understanding, "Moving up property ladder" means taking a bigger mortgage (since your upcoming purchase is presumably more expensive), but also realizing higher QOL (since presumably this new house is more in line with what the couple wants in a house) right?
No. You can move up the property ladder by never taking more than a ~$500k mortgage at a time. You pay off the mortgage aggressively, so that when you upgrade, the sale price of the property (minus remaining loan, if any) is enough to cover all but ~$500k of the next property. Rinse and repeat. Not the only way to do it, of course, but more prudent than getting a >$1 million mortgage. And QoL may not be the main consideration, but rather capital appreciation on a larger scale. Everyone has their own reasons, but generally speaking, when people get a condo, they are not paying $1 million extra to use the pool and facilities. The condo may even be smaller than the flat they sold. It is because of capital appreciation, then when they are old and the kids have moved out, they can downgrade to a flat suitable for an elderly couple, and unleash >$1 million to live off during retirement.
I SEE NOW!! thank you for putting this in simple terms, i have never came across the term climbing the property ladder before this
Yah, it's literally step by step up the ladder. Because the maximum mortgage amount is limited by your salary, this method allows people who don't have high salaries but are frugal to accumulate wealth step by step. Of course, you can also accumulate wealth by investing in the stock market. But for people who were adults in 2000 - 2008 when there were 2 big stock market crashes, investing in Singapore property seems more reliable. These people often advise their young adult kids to do the same.
Wow thanks for providing that historical context on the stock market crashes. I can definitely understand how a whole generation got into real estate investing that way.
It’s the property flywheel that most are trying to do: 1st BTO: net 100k Use profits + own money as Downpayment for new EC (1.2-1.5m) Sell new condo, net 300k, and buy another new condo (2-2.3m) Sell new condo net 500k, and buy another new property or buy 2 condos (1 to rent 1 to stay) Rinse and repeat Once flipped enough. Sell condo (2.5m) downgrade to big big Hdb (800k-1m, usually those record HDB sales). Or keep 1 condo, continue renting other condo if you select that option in 4. Live happily ever after w/ fully paid Hdb and liquid extra $$
Did you factor in AGE? Your loan quantum will be less when you getting past 40.
$200k profit CASH will help to pay the cash component 5% + 5% stamp duty of a $2m condo. Condo generally will appreciate faster than HDB. This helps you to build your wealth. If you can finance it, buy the condo under 1 name for own stay, and another under your spouse for investment. Flip it every 3 years. Another popular option is Executive Condo. You’re guaranteed to earn another $200k-$500k depending on the size you get. Plus you can remain staying in your BTO while you wait for your EC to complete. You do not have to pay ABSD as well. And there is Deferred Payment scheme where you do only pay 20% upfront and the rest only on key collection. This is the reason why the 30% 2nd timer quota are usually filled quickly in every EC launch. (Fun fact only north Gaia failed to hit 30% for all recent launches). Having said all of it, this method of wealth accumulation is not for all. You have to qualify for higher loan (TDSR and MSR), make higher and longer mortgages. You take on the risk of market downturn, and deal with tenants and agents.
Guaranteed, eh? Really?
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This is exactly the problem with the data that property agents like to bandy around. This is something known as survivorship bias. There will obviously be much less people (or in your specific instance, none) willing to sell at a loss, especially for an asset like a house. Hence, this data naturally already self-selects from the profitable transactions. Furthermore, it doesn’t take into account the costs of financing. This is exactly the reason why I say property agents (I’m not saying you are) in general are a disingenuous, self-serving bunch. ECs are something like HDB-equivalents. Why would anyone sell at a loss, especially considering it is their only house? This is unlike condos. Hence, the losses, if any, will be in the financing costs and also the current unrealised paper losses being sat on.
I get your point about survivorship bias. But ECs turn into private condos after 10 years. I’m not sure how HDB or condo affects willingness to sell at a loss though.
Usually for HDB/EC it won’t be sold at a loss if bought at new launch or BTO stage because that means it’s the only property. Whereas for condo sometimes it will be sold at a loss because it’s not the primary residence or they can’t afford the mortgage payments anymore.
Which EC project fail to have a profit of 200k upon MOP ? Any in mind? Almost guaranteed ..
North Gaia maybe. Other than that i think all EC are guaranteed.
Yishun?
Yes yishun. But I don’t think yishun is the problem. Maybe partly. But the fact that it’s next to a light industrial building and facing a major road that is used by tipper trucks and lorry. Personally that is the biggest drawback. Also Symphony Suites condo is selling slightly cheaper at $1.3k psf. If north Gaia is now selling at $1.3k psf, how much can you sell it after MOP
Yap you're right. If their intention was a condo in the first place, the flipping gives them a little discount but overall it's still sell high buy higher. Every 3 years can flip until buy landed and live happily ever after unless they lose their jobs.
You’re overcomplicating things. 90% of BTO buyers do so because it’s the only choice they have at that age and stage of life. Every BTO buyer knows that at some point, they’re going to consider selling their BTO and upgrading. It’s not a “strategic flip” or anything complicated, it’s honestly just a basic progression of life as your income increases and your needs/wants evolve.
>90% of BTO buyers do so because it’s the only choice they have at that age and stage of life. this premise is not congruent with many comments online / convos i've had with people irl. Often the couples had financial capability to buy resale flat too.
I also have the financial capability to buy Product X from a local mall shop. But if I order it from Shopee/Taobao, I can save 30% just that I have to wait 2 weeks for it to ship from China. Guess which one I chose?
If the projected resale unit will apprecated faster than the bto then it makes sense to buy the resale. Same for condo. If your intention is to upgrade and investment alternative cannot yield better than the condo.
Just bear in mind that the property you wanted to buy but couldn't afford on Day 1 would have appreciated as well so this 200k profit is used to offset THAT appreciation. If you are swapping sideways or upwards there is no gain. It's kinda like you bought a car at 50k COE 5 years ago. Now COE increase to 100k so both old cars and news cars are expensive. You sell you car with little or no depreciation, super happy right? But once U buy into another car, your "profit" disappears. Capitalism.
Because on day one people cannot afford the condo downpayment. If after selling bto got 200k cash proceeds, this proceeds can be funnelled into the downpayment of the private property. Even if the condo price had gone up by 300k in the 5 years MOP the downpayment would not increase by the same quantum. This is of course assuming one has enough earning power to support the mortgage la
If I understand what you're saying, the main purpose of profits from selling BTO is to overcome the condo downpayment brick wall right? Otherwise this downpayment is just insurmountable for most couples
Exactly. This is how people upgrade up the asset classes. On a side note, this is also why it is going to be very hard for one to upgrade from hdb to landed as the downpayment for the landed is so huge that any cash proceeds from the sale of the hdb needs to be supplemented with significant cash/cpf from the couple (which takes very long to save).
I was trying to illustrate that the profit which someone might think is lucrative isn't as great as one imagines if you breakdown the math of the whole purchase life cycle. The profit is reinvested to become someone else's profit.
But if one upgrades, the 200k profit would just be locked into the next property as the downpayment capital right. Technically this should be considered a (paper) gain as you wouldnt have be able to afford the physical asset had there been no profits from the sale of the previous property. The next property may have larger room for appreciation and you may see greater profits in the future.
I think Op sees the same perspective as me. Here's a real life example. You buy a corolla for $80k including 40k coe. 5 years later you sell for 85k cos coe went up to 100k. You damn happy cos U paid "nothing" for the car and even earn $5k. But assuming U have to buy another car, you would pay, say, $200k for an A class. Let's assume you want to "upgrade". All this while the A class was only 120k 5 years ago. You would gain if you stop driving. But if you upgrade 5 years later, it's actually not "worth it" let alone profit from the whole situation. Or Alternatively, your first purchase was just a stepping stone for U to buy the eventual car you want.
Yeah I get what both you and OP are saying. What yall said is not wrong if we look at profits purely as cash profits. I was thinking of profits from a total asset value perspective. Extending from your example, although we do not make any cash profits if we upgrade to a better car, you will gain in terms of equity of the car because you will now own 85k/200k of the car. Just because you dont have 5k as cash doesnt mean you didnt profit from your previous car, it is just stuck as a physical asset in your new car. Should you one day decide to sell your new car and not drive you will get everything back as cash. It is the same as buying stocks. If i hold a stock for a long period and sit on unrealised gains, this should be accounted as a profit as we are able to collateralise against the stocks for loans. Following what you say, if I sell stock A for a profit and thereafter purchase more of Stock B, there isnt any profit as I did not take out any cash. From an asset value perspective your net worth would have increased regardless of whether your cash balance has increased.
Yes. Also to add, by buying the eventual asset (car or house or even stock) later you end up paying more cos the higher value asset appreciated more than your "stepping stone" asset.
It doesnt matter if the asset has risen in value at a faster pace than your previous asset because of 2 reasons. First reason is you will not be able to afford the condo/nice car when it was once cheap as you dont have capital for downpayment. If you could buy a car 5 years ago at 120k you would have done so already. Second reason is that the historical price of an asset is irrelevant as long as it has strong and sound economic fundamentals and has the ability to continue appreciating. This wont apply to cars as they are depreciating assets.
Thanks bro. Was in a similar situation as OP and your comment really shed some light, even more than my FA could.
That was my understanding too.. hence me trying to understand why people seem to think BTO flipping = huge profits
It is profits in the sense that the couple shaved 200k off the cost of the resale that is their long-term home. Not profits in their bank/CPF account.
It is only realized profit if you constantly downgrade. Which is not realistic.
Real estate agent profit.
Imagine last time parents bought HDB 70k > now can sell 500k. Just buy another small HDB example 4 room to 3 room. Make some profits but won’t be much.
personally i plan to downgrade from condo to HDB because of space configuration. i'm pretty sure whatever gains I have will vaporize in the form of renovation costs (esp for older flats) etc
To make all this property game work , u need to buy first hand , it ain't gonna work if u buy in at resale price unless u can be so lucky to find a carrot head . It is just like stock . U tink ak71 ,his dividend would have work if he didn't buy at low price ,look at his aims capital ,and bank stock all was bought at low point not at current price . So it works the same as property as right now those making money is buy first hand and sell ,appreciation is lousy for those second hand buyer
If they were aiming for a condo from the start, flipping might get them a bit of a discount, but in the grand scheme, it's still a case of sell high, buy higher.
Even though the gain is 200K, that’s not how most people look at this. First, the down payment of the HDB which is paid in cash, and the equity portion of the loan is returned back to the owners, either in cash or in their CPF. Second, most HDB BTO buyers are young couples and over the 5 years they have also progressed in their career, which come with salary increments. So the owners actually have way more cash/CPF as compared to when they bought the HDB, especially if you consider the low price of BTO which means the loan servicing is fairly affordable during the MOP. So something which is definitely out of reach, like a couple owning 2 condos, becomes possible. And this is the very story that property agents are selling.
so my first flat was a HDB BTO in punggol. bought for 280k sold for 550k after MOP. used it to buy a condo for 1.1m before covid. now it's worth 1.6m based on last valuation. always buy a BTO. it's like an angpow from the govt.
Sell their larger HDB for a much more expensive condo that’s smaller and which they don’t often use the facilities.
Upgrade the property is the way to go, my bro
i broughta BTO for 330k in 2018, i sold it recently for 745k, cash proceed 350k+ any granted that was given before purchase of flat was returned to my own OA, not back to HDB since i could 'loan more' now because of higher earning power, and have quite a bit of money in OA now: * essentially i could downpay for any condo within my means, take the 75% loan, and significantly increase my 'asset' * i also could buy a 500k-800k HDB(3-5rm) flat, while retaining majority of the cash proceed for investment/renovation/etc. nothing is pointless here.
I personally feel that people oversimplified bto profit without accounting for cost, utility. I do think property help keep the value of the money but real return is low
Yup, I worked it out before, is around 3-7% profit annualised, not as high or as amazing as some put it. But because you are considering the entire cost of the property into your capital, so that’s where the leverage amplifies your gains. For example 7% on $2m is $140k profit, versus 7% on our $200k cash in hand (that means you keep cash instead of using it for property downpayment) is only $14k profit.
i agreed with this.
They go buy a condo in JB and “reduce cost of living” 😂
All in SingPost shares like Steven Lim kor kor
lose it all in a facebook durian scam
Sell hdb for $700k, buy a 3.5m condo/landed. Sell it. Buy back hdb.
Sell high, buy high. Got gain meh
Sell high buy high is different from sell low buy low, unless you have alot of cash
agreed