2022 has been a crazy year for the HDB resale market. Across Singapore, HDB resale prices have risen in every town. Despite the introduction of the September 2022 property cooling measures, HDB resale prices continue to climb for the 29th consecutive month in November 2022.
It got us wondering: who are buying these flats? Why are they buying HDB resale flats when prices are at a record high? And how are they financing their HDB flat purchase, especially since interest rates for bank loans have been rising?
To answer these questions, we spoke to one such couple – Teh Tze Chee, 36, and his wife, Ng Poh Chen, 37 – who recently bought a 4-room HDB resale flat in Yishun.
Why Buy When HDB Resale Prices Are High?
In September 2022, the Singapore Permanent Residents (SPRs) managed to secure their flat.
Under HDB rules, an SPR can only buy a resale HDB flat with another SPR or citizen under the HDB Public Scheme or Fiance/Fiancee Scheme, among other criteria. In Tze Chee’s and Poh Chen’s case, buying an HDB flat as an SPR household also meant they were not eligible for an HDB-granted loan; a bank loan was the only option.
If you’ve been paying attention to the news, mortgage interest rates have been climbing. The high-interest rate environment translated to increased borrowing costs.
It didn’t help that the median price for a 4-room flat in Yishun was $473,000. Over the course of the pandemic, prices have shot up. To put it in perspective, the same flat type in the same neighbourhood was going for $360,000 in Q1 2020 – when COVID-19 first arrived on our shores. That’s a 31.4% increase!
So, why did they choose to buy when prices are red-hot? To enrol their three-year-old daughter into a primary school here and expand their family.
Considering children should be registered for Primary 1 in the year they turn six, Tze Chee and Poh Chen knew they were on a tight timeline. They had to secure a home – high HDB resale flat prices be damned.
Searching for a Home in Singapore
With a $430,000 budget, Tze Chee and Poh Chen began browsing the PropertyGuru website for a 4-room HDB flat that was in move-in condition. Other criteria included the flat sitting on a middle floor, having a squarish layout, and being close to eateries and amenities.
To narrow down their choices, they used the search and filter functions which allowed them to easily pick out their preferred listings. When they viewed their current place, they immediately knew it was “the One” and put in an offer of $450,000, slightly over their intended budget. No Cash Over Valuation (COV) was paid for the flat which had a remaining lease of 64 years and nine months.
Just like that, the couple became first-time homeowners in Singapore. The next challenge was figuring out how to finance their purchase.
Navigating the Home Loan Process With PropertyGuru Finance
Navigating the bank loan process was complex for the first-time homebuyers. They were unsure if their income and citizenship status qualified for various loans, and had trouble cross-comparing the interest rates across various banks.
Needing some help, the couple turned to PropertyGuru Finance to find a suitable home loan and sought out guidance from a PropertyGuru mortgage expert. That’s how they were referred to home loan advisor Hazel Lam.
“Hazel went the extra mile and was very helpful. We asked her a lot of questions about the HDB resale process and she answered all of them patiently. She even shared with us an HDB resale purchase timeline document for our reference,” Tze Chee said.
“Besides that, she went through the different types of bank loan packages with us and outlined the bank loan process. She also highlighted the additional costs, such as Buyer’s Stamp Duty (BSD) and Additional Buyer’s Stamp Duty (ABSD), assisted us in obtaining all the necessary documents, and secured our In-Principle Approval (IPA),” Poh Chen added.
In fact, Hazel was with them every step of the bank loan process. She even accompanied them to the bank and sat in as they were signing their Letter of Offer.
“I just wanted to make sure they had someone to ensure that all queries if any are being answered,” Hazel shared.
Financing Their HDB Flat With a Fixed Rate Home Loan
In the end, Tze Chee and Poh Chen went for a fixed rate home loan.
| HDB resale flat purchase price | $450,000 |
| Loan amount | $337,500 (75% LTV limit) |
| Mortgage package | 3-year fixed rate package with DBS (2.75% p.a.) |
| Loan tenure | 25 years |
| Estimated monthly instalment | $1,557 |
“As everyone’s needs are different, there is no one-size-fits-all solution when choosing a home loan. After speaking with Tze Chee and Poh Chen, I realised they have a lower risk appetite and preferred to have a stable monthly mortgage instalment. That’s why I advised them to take on a fixed rate package,” Hazel explained.
“I always place my client’s interests as the utmost priority. I want them to be comfortable with their monthly mortgage so they will not feel overstretched.”
“And when their lock-in period is about to end, they can consider refinancing to enjoy more savings on their interest.”
Lessons Learnt From Buying an HDB Resale Flat at Record High Prices
With Hazel’s help, Tze Chee and Poh Chen breezed through the home loan process. Now, the pair are in the midst of renovating their flat and hope to move in by March 2023. But if they could change one thing about their homebuying journey, it would be to buy their home earlier in 2021, before prices really took off.
For those who have urgent housing needs and are currently house hunting, Tze Chee offers this piece of advice: choose one that is best suited to your financial capabilities.
“If the property matches your budget, go ahead. And of course, you can engage mortgage experts from PropertyGuru Finance if you need professional assistance and unbiased advice!”
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