S$ 300,000 Profit! When should you sell your BTO?

There’s a reason why many Singaporeans equate balloting for Build-To-Order (BTO) flats to a lucky draw. It’s not just because there’s always almost an oversubscription of hopeful buyers to obtain their first or second HDB flat; rather, it’s because up until now, BTO flats have almost always been sold at a profit. This lies largely with just how subsidized the flats are in the first place – the government sells them way below market price.

Up until this point, this is all common knowledge; what we want to analyze is, when is the best time to sell your BTO flat to maximize its profits? We’ll explore this article in 3 parts:

1. BTO resale transaction over a 5 year period

Firstly, we’ll talk about the hard data regarding the average psf of BTO flats, and analyze, based on the trends of 8 BTO estates, when exactly BTO flats can be sold at its peak price.

2. BTO Hard Profit

Secondly, we’ll talk about when you should sell your BTO flat based on how you paid for your BTO flat in the first place.

3. The reasons why you may not want to sell your BTO flat, even for a large profit?

Thirdly, we’ll conclude by giving our opinions on why you may not want to sell your BTO flat, even if you can sell it at a profit.


1. BTO resale transaction over a 5 year period

Many Singaporeans tend to sell their BTO flats immediately after the 5-year Minimum Occupation Period (MOP) is reached. Let’s take a look at the following table that includes the sale transactions of 8 BTO flats to see if this decision is the correct one to maximize the sale profits of BTO flats.

Highlighted in red are the peak BTO sale transaction prices within 5 years after its MOP period. As we can see from the table, 6 out of 8 BTO estates saw the prices of their units peak either on the year of MOP, or within 1 year of that, with only Sri Geylang Serai and Treelodge@Punggol continuing to appreciate over the 5 years. We should note that for Treelodge@Punggol, its average psf increased only by $10 5 years after its MOP period; as for Sri Geylang Serai, its location is pretty much unmatched, and is definitely an outlier in the charts due to its location.

Sri Geylang Serai Source: Archnet

We can see that in most cases, maximum profit can be made when the BTO flat is sold early, right after it MOP. In any case, let’s zoom in on an actual example, highlighting the clear profits and how the exact calculations go down.


 2. BTO Hard Profit

Let’s assume you and your spouse or fiancée are fresh graduates who have been offered starting pay, and you work for about two to three years before deciding to apply for a BTO flat together. On average, your individual salaries would be between 3.5 to 4 thousand dollars each.

Enhanced Housing Grant(EHG) Source:HDB

In this case, couples would be eligible for a HDB Enhanced Housing Grant (EHG) worth 15 thousand dollars, that counts as Central Provision Fund (CPF) savings in their Ordinary Account (OA) when used to buy their BTO.

Based OnAmount in CPF account when purchasing BTO Flat
Average monthly income of household$ 62,100*
Money earned from EHG Grant$ 15,000
Grand total$ 77,100
*CPF was calculated as follows: savings from OA are 23% of wages; assuming both individuals earn 3.75 thousand dollars a month, the combined total moved into their OA per month is 1.725 thousand dollars per month. This amount is multiplied by 36 months, as we assume that the couple buys their HDB flat 3 years after they begin working.

With that out of the way, let’s calculate what happens after five years, when the couple is ready to sell their BTO flat. Assuming they use a HDB loan, and using Coralinus as an example.

HDB Housing Loan
Down payment made with CPF$ 19,162
Down payment made with cashNIL
Total amount to be paid off after 25 years$234,715
Hard profit earned after reselling flat right after MOP$ 303,245
Amount to be placed back into CPF OA account,
including accrued interest
$ 21,680
Final Profit Remaining$ 46,850

The final hard profit that a couple selling their BTO flat would earn in this case, is $46,850. Who wouldn’t jump at the chance to earn such a sum of money, in just a span of 5 years? The thing is, things aren’t always as simple as that. As such,


3.  The reasons why you may not want to sell your BTO flat, even for a large profit?

To answer this question, end goal plays a huge part. We’ll split this segment into three parts.

A. Large Condominium

Firstly, let’s say that your end goal is to upgrade to a large condominium that your entire family can live in. A property like that with a good location doesn’t come cheap – 10 or 20 years later, it’s probably only going to be more expensive.

The calculations come in if you choose to sell your property now for its maximum profit, and relocate to a resale HDB flat or a smaller condominium using that profit. Even if your BTO flat can generate profit, it doesn’t mean that your next property will. With how the resale HDB market has been looking lately. You may either just breakeven, or sell at a price lower than what you bought it for in the future.

In this case, it may benefit you to be a little more prudent and continue holding on to your BTO flat until you’re ready to upgrade to a condominium. Because like we’ve said before, it’s almost impossible for BTO flats not to be sold at a profit. In any case, maximizing your profits doesn’t just mean selling your property at the highest price possible. It can also mean maximizing the use of your profits.


B. Large Resale HDB Flat

Secondly, your end goal may actually be to live in a large resale HDB flat in a prime location, because of how affordable it is for its size and location, as compared to condominiums.

In this case, you may as well sell your BTO flat and immediately upgrade to the resale HDB flat you are eyeing, putting the entirety of your profits into your next resale HDB flat.

C. M.O.P Period

Lastly, your end goal might actually change after you’ve moved in to your BTO flat. 5 years waiting for it to MOP is a long time. In those 5 years, you may have started a family, made friends, or maybe your elderly parents have joined you to live in that particular estate.

Moreover, you have to factor in the fact that you have to spend about 4-6 years waiting for your BTO flat to even be ready. After waiting for such a long time for your flat, it is inevitable that you might feel some hesitation towards selling your flat after a measly five years. There have been some people that were content enough with their lives in their BTO flat that, even though they could have sold it at a profit, have chosen not to. In simple terms, money isn’t everything.


Conclusion

The question of when you should sell your BTO flat isn’t as simple as it seems. Sure, the simple answer is right after it MOP, but there’s a lot more financial calculations, future goals, and personal priorities that come with it.

At Home Quarters, we take all these factors into account before we advise you on how to sell your property, or what property we believe you should buy. We’d be happy to provide you with various analyses, advice, and any sort of assistance you may require, whether you’re a buyer or a seller. Leave your contact details and any queries down below, and we’ll contact you ASAP.


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