You can now appeal for BTO cancellation without penalties. But here's why you should not do so

Due to construction delays, the government announced in July that you can now appeal for BTO cancellation without incurring penalties. HDB will then assess your situation before waiving the forfeitures.

Applicable situations include having to buy a resale flat due to urgent housing needs (e.g. due to a baby on the way).

Typically, there are penalties for cancelling your BTO application.

What are the penalties incurred should you cancel your BTO?

It depends on the stage at which you cancel your BTO application.

But in general, those who cancel would usually need to forfeit their option fee ($2,000 for a four-room flat or bigger) or five per cent of the flat purchase price.

On top of the money you stand to lose, there's also the one-year wait before you can apply for subsidised housing again.

And this doesn't just include BTO, but also resale flats with grants.

Given the construction delays, the government has decided to waive these forfeitures if you're buying a resale flat to move into a new house urgently.

But if the reason for the BTO cancellation is not due to urgent housing needs, such as breaking up with your partner, you'll still have to incur these costs.

But should you cancel your BTO?

One major advantage that resale flats have over BTO flats is the waiting time.

With resale flats, you can literally move into the new house once the whole buying process is complete.

This makes resale flats an attractive option over BTO, especially if you can no longer wait to move out of your parents' or in-laws' house to have your own space.

So as a property portal, we should be saying, "Yes, you should cancel your BTO and buy resale!" After all, our listings include lots of HDB resale units.

(Check out our listings of flats for sale here.)

At the same time, even if you urgently need housing, we think cancelling your BTO to go for resale may not necessarily be the best option.

Why you shouldn't cancel your BTO application just yet

Before you jump into writing that appeal to HDB to cancel your BTO, here are a few things you want to consider.

And maybe hold on to your BTO first.

1. Resale flats are very expensive these days

It's widely known that BTO flats are cheaper than resale flats. They're sold lower than the market rate as the government heavily subsidises them.

That's why most young couples would usually go for BTO as their first home despite the long waiting time.

But here's the thing, despite the pandemic, resale flat prices have been increasing for 15 straight months.

In fact, prices have reached an all-time high in September, surpassing the previous peak in April 2013 by 0.8 per cent.

And there have been reports of more people paying for cash over valuation (COV), which is the difference between the transacted price and the actual valuation by HDB.

As the home loan can only cover up to a certain percentage of the valuation, you'll need to pay this difference in cash.

This year, one in three people have paid the COV, as compared to one in five last year.

So until prices start to drop, now may not be the best time to submit that BTO cancellation appeal to buy a resale flat, especially if buying one will stretch you financially.

2. You can't move into a resale flat immediately

From house-viewing, negotiations to finalising the resale application, the whole resale buying process is not that fast.

In fact, the resale completion stage itself takes around eight weeks to complete from the date HDB accepts the resale application.

What's more, if you end up with a resale flat that requires a lot of renovations, such as an old (and cheaper) flat, you won't be able to move in as quickly.

You'll need to do a more extensive renovation for it, and may even spend more to hack the walls and do some rewiring.

If you're lucky, you can move into your new home as fast as three months. Otherwise, it can take as long as one year.

3. There are other housing options available, such as renting

Instead of appealing for BTO cancellation, consider renting while you wait for your BTO.

Renting may not seem like an attractive option, especially since all that money could have been saved to buy the resale flat or used for other pressing needs.

But it can be a viable option if resale is not within your budget.

Plus, you can practically move in immediately if you rent a fully furnished unit.

Should you decide to rent, we recommend that you rent somewhere close to your upcoming BTO.

This allows you to be familiar with the neighbourhood, and get used to living with your partner as well.

What's more, renting allows you to pick up skills like budgeting and maintaining your own space, which are essential aspects of homeownership.

ALSO READ: What is the HDB income ceiling for BTO, EC & resale flats?

Properties for rent

But if renting through the traditional rental market is not within your budget, you can consider applying for HDB's Parenthood Provisional Housing Scheme (PPHS).

The rent can be as low as $600 for a three-room flat. You're eligible to apply for it as long as you:

• Have booked an unfinished HDB flat,
• Either be married, widowed or divorced with children, or engaged, and
• Meet the $7,000 income ceiling

Do note that if you're engaged, you'll need to get married within three months after collecting your PPHS flat keys.

Alternatively, you can use this opportunity to try co-living. In Singapore, there are generally two types of co-living.

One form of it allows you to share an apartment with another tenant, while the other is similar to living in a serviced apartment.

A key advantage that co-living has over traditional rental is that everything is inclusive.

With the furniture, utilities, internet and housekeeping that comes with the rent, co-living provides a fuss-free experience.

When BTO cancellation makes sense

If you need housing urgently but have a limited budget, cancelling your BTO to buy a resale flat makes more sense when prices have dropped.

So if you really want to buy resale instead, we suggest waiting a little longer for prices to drop first.

Or if you find that the extended waiting time of four to five years (caused by the delays) is just too long, and renting for such a long time isn't an option, then yes, you might want to cancel your BTO to get resale.

But if it's just one or two more years of waiting, we feel that you should just hold on to it first.

After all, you've managed to ballot for it (it's hard to secure a BTO these days) and have already prepared to wait for a few years for it.

What's one or two more years of waiting?

Frequently asked questions

Can I cancel my BTO application?

Yes, you can cancel your BTO application via the [email protected] platform.

What will happen if I cancel my BTO?

It depends on the stage at which you cancel your BTO application. Typically, you'll need to forfeit your option fee or five per cent of the flat purchase price.

There will also be a one-year wait imposed before you can apply for subsidised housing again.

Due to construction delays, HDB may waive off the penalties depending on your situation.

Can I buy resale while waiting for BTO?

Since you can't own more than one HDB, you'll need to cancel your BTO first before you can buy a resale flat.

ALSO READ: 5 ways the property market in Singapore has changed since your parents' era

This article was first published in 99.co.