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How a shorter waiting period for a BTO flat can help engaged couples

The waiting period is set to be reduced to two to three years, from the initial three to four years.

Copyright: korkorkorpai / 123RF Stock Photo

The biggest joke of 2016 is turning out to be Josephine Teo’s remark about Singaporeans needing just “a very small space to have sex”. (See ways to enjoy yourselves in places other than the bedroom here.)

Amidst the outrage that Singaporeans are quite rightly feeling about this insensitive and clearly out-of-touch remark, there is one bright spot—the news that the waiting period for BTO flats could soon fall to two to three years, down from three to four years. (Sorry singles, it looks like this will only apply to married couples.)

While the ostensible goal of reducing the BTO waiting time is to raise the birth rate, there are other ways the shorter waits will benefit those who have balloted for BTOs. Here are two of the biggest advantages.

Fewer people balloting for flats prematurely and then breaking up

The government doesn’t draw attention to this negative effect of HDB policy, but it happens more often than we’d like to admit.

Couples ballot for a flat years before they’re even sure if they want to get married, simply because the waiting time is so long and they’re afraid they’ll lose out if they don’t do it now. Luckily or unluckily, they’re allocated a flat, which will be ready in four years. Four years later, it’s time to pick up the keys and ROM… except that their feelings have changed and they now no longer want to tie the knot.

And well, of course that’s happening! When people start balloting so many years in advance, breakups are bound to happen. The tragic thing is that on top of the trauma of ending a long-term relationship, these people also have to deal with the financial fall-out—they lose all the money they’ve invested in the flat up to that point, including the 10 per cent downpayment. Those unlucky enough to break up at a later stage lose even more money.

A shorter waiting period would mean couples won’t be so kiasu about balloting the minute they swipe right on each other on Tinder, and this will hopefully reduce the number of couples who needlessly lose their life savings to the HDB. (See also: three things to know about withdrawing your CPF for your HDB flat.)

Fewer people will overstretch themselves financially

It’s a well-known cliche—Singaporean couples sign up to buy the biggest flat they can afford, even if it’s expensive. (See also: buying your first home? 4 budget tips to note.)

It’s not uncommon for couples to select 5-room flats even when they don’t know whether they want to have kids or how many. Even if they don’t know for sure if they need so much space, they commit to the most expensive flat they can afford simply because in 4 years’ time, things might have changed. (See also: things to know - from BTOs to ECs.)

Come on, many of these couples aren’t even sure if they want to marry each other in 4 years’ time, so how do you expect them to realistically estimate how big a flat they need?

The BTO system enables couples to pay later rather then earlier, giving them more time to save up. For instance, couples who qualify for the Staggered Downpayment Scheme and are taking an HDB loan can get away with paying only 5% when they sign the Agreement for Lease, instead of the usual 10% downpayment. The remaining 5% can be postponed till they collect their keys.

In addition, while resale flat buyers have to start making their monthly loan repayments once the bank has disbursed the loan amount upon completion and collection of keys, for BTO flat buyers the process is a lot slower since they collect their keys years later.

There is also no need to worry about paying for renovations or furniture for 3-5 years, since the flat won’t be ready yet anyway. (But if you want to do some shopping beforehand, here are five online stores for stylish home decor.)

2014 survey showed that 5% to 10% of Singaporean mortgage holders were overstretching themselves and committing more than 60% their monthly incomes to loan repayments. (Here are the things to know about HDB flat home loans.)

Shorter BTO waiting times could mean couples need to fork out more money upfront, but if that makes them more prudent about how much flat they can afford, so much the better.

Do you think the shorter waiting period for BTOs will succeed in raising Singapore’s birth rate? Share your views in the comments!

This post appeared first on the MoneySmart blog. is Singapore's leading personal finance portal that helps you to maximize your money. Like us on Facebook to keep up to date with our latest news and articles. Compare and shop for the best deals on Loans, Insurance and Credit Cards on our site now!

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