You busted the HDB income ceiling. Now What?

Talk about #firstworldproblems. Singaporean couples wanting to settle down and “BTO” could suddenly find themselves locked out of an affordable first-home option, simply because they are earning too much and their combined salaries have exceeded the HDB income ceiling!

In fact, if you and your life partner together earn more than $12,000, you won’t be eligible for a BTO flat, period. Some BTO flats even have a $6,000 income ceiling:

Why exceeding the HDB income ceiling sucks

via GIPHY

Given that BTO flats are sold below market value, it’s understandable why you might be feeling disappointed at exceeding the HDB income ceiling. (“There goes the easy profit we could’ve earned down the road!”)

Golden goose aside, we also recognise that ceiling-busters may well have legit, urgent issue on their hands: what property to buy. The truth is that, when homebuyers realise BTO flats are no longer an option for them, they start to fear they might go on to purchase the wrong home and sabotage their future plans.

Not to worry, though; here’s where we break it down for you so you can make the best decision when it comes to your all-important first property:

Option 1: Buy a Resale HDB Flat

Although resale flats are the logical option for anyone exceeding the income ceiling for BTO flats, they are also commonly seen as the less-than-ideal choice, given their lower remaining lease and relatively higher prices.

In some areas like Bedok, we’re seeing newer four-room flats at Linear Green @ Bedok transact at an average of $650k, whereas BTO four-room flats that were launched at Bedok Central in November 2016 were sold at an average price of $500k, about 25 per cent cheaper.

At 99.co, however, we like to say that comparing HDB resale to BTO flats when you’ve exceeded the income ceiling is like crying over the fact that your high school crush just got married, or not having bought Bitcoin in 2016.

Those ships have sailed. What you need to focus on are two things:

• Deciding if buying a resale HDB flat is the best option to take right now
• Finding the right HDB resale flat that suits your long-term needs and goals

So resale HDB or condo? A good litmus test is that, if you have no choice but to make dramatic lifestyle changes to afford a condo (e.g. no more overseas holidays, skipping your dental appointments, lying to friends you are overseas on their wedding dates so you can siam the ang bao), your interests are likely best served by buying a resale flat.

You can find out more about getting a resale flat it in our next article, Three Principles to Consider When Buying Resale Flats.

Option #2: Buy a Resale Condo

As a rule of thumb, for properties in the same town and the same number of bedrooms, the cheapest 99-year leasehold resale condos go for at least 2.5 times the price of a BTO or resale HDB flat in a similar location. Compare condo units with one fewer bedroom, and the price difference is lower: about two times (check out the example of Tampines below).

You should take your income growth potential into consideration. If you’ve exceeded the HDB income ceiling, and you expect your combined salaries to increase by, say, 50 per cent in the next five years, a condo may prove to be the best choice for a first home. No doubt this is music to the ears, for career-minded couples in jobs and industries with good income trajectories.

[Check out the 99.co affordability calculator.]

Option #3: Rent

This is by far the least considered option for most couples who’ve exceeded their HDB income ceiling, but it could be the best decision they will ever make.

As long as you and your spouse aren’t remotely sure whether to buy a resale HDB flat or a condo, renting should always be on the table.

Not only will you avoid having in-laws getting in your face every day, renting helps you work out what you both really need, including how much space, preferred layouts, and whether a condo is your best option when you buy.

At an early stage in your career, it’s likely the years ahead could be an upheaval for better or for worse. If your high paying job sucks, don’t convince yourself to buy a condo just so you can soak your stress away in the pool and convince yourself that it’s all worth it (it doesn’t work, and neither does staycations).

Or you could be self-employed taking on risks now that may translate into big gains soon. In these cases, renting gets you the best of both worlds: a space to call your own with your spouse, and the possibly of being able to afford a bigger (or more atas) first home in the near future.

Renting when you’re not quite ready to buy (especially when the BTO option is suddenly off the table) lets you have breathing space to focus on your career and personal matters better.

Feeling down? Don’t be. 

If you think rationally about it, busting the BTO ceiling income is actually a good problem to have.

Some people would kill to have your ‘problem’.

The next time you get upset about it, just do any of the options above – all of them are worthy and reasonable solutions.

What would you do if you bust the HDB income ceiling? Voice your thoughts in our comments section or on our Facebook community page.

Looking for a property? Find the home of your dreams today on Singapore’s largest property portal 99.co! You can also access a wide range of tools to calculate your down payments and loan repayments, to make an informed purchase.