November brings forth a new batch of BTO flats and the gem among the list is 3 projects that are based in Toa Payoh.
I think it is the kind of 4D lottery if you manage to snag one.
Like Dawson and Duxton that comes before, here are some of my thoughts ranging from how I see it as a place to live, to your future considerations if you snag it.
Reasonable Good Location
The projects are very close to Woodleigh MRT and within the vicinity of Bartley MRT.
The location is good for working adults who are working in the city center, or whose career usually takes them close to the city center.
While classified as Toa Payoh, some may mistaken that it is close to the Toa Payoh station and that it is 3 stops away from Orchard.
It is probably 5 stops away from Dhoby Gaut station, a major interchange.
If you are not planning to own transportation, it may not considered close, from my point of view.
The benefits of shorter commute for City Workers
After travelling to work, taking an hours ride for 3 years across Singapore, one of the things that constantly enters my mind is the dread of a long commute.
That dread probably gets amplified when you are married and have children.
It is no wonder that folks settle their meals outside instead of cooking is because, in that time in commute you cannot do any cooking (unless you are a Sunday meal prep or slow cooker ninja)
Even the walk from the MRT station to the flat can be a drag if you come back from work at 9pm.
Close proximity to work place is a vital quality of life and likely to have a profound impact on your long term mental health.
It helps a lot for a project so close to the MRT station
Reasonably affordable for Emerging Upper Middle Class
Folks like the term ’emerging’ so I decide to use them more.
I am of the opinion that flats in Singapore is not cheap but affordable based on median income range.
(Ignore the last column due to cut and paste issue)
Bidadari is not the middle range BTO, but honestly I think it looks good value since it is so close to MRT.
While good location properties will suit most people, not everyone can wait for the flats to be build in 5 years.
Thus it is suitable more for the folks starting out work, whose income will eventually reach that level of affordability.
The 5 room 90% mortgage will come up to $2200/mth, the 4 room mortgage $1750/mth, and 3 room $1224/mth.
Although there are no restrictions on HDB BTO purchase due to TDSR of 60%, to be prudent, we should keep monthly mortgage servicing to below 30%.
Therefore the combine income to service these level of mortgage payment is:
- 5 room: $7333/mth
- 4 room: $5833/mth
- 3 room: $4080/mth
Both the 4 to 5 room looks to be affordable based on good performing fresh graduates earning $3000 to $4000 each.
The 3 room looks a good choice if one spouse eventually earns more, while still not a lot, such as $3000, but the other spouse earning less.
Current Resale Flat Prices in Same Proximity
The BTO looks more and more like a jackpot considering similar 5 room resale flats in the same area transact between $700,000 to $900,000 on average.
If you are unwilling to wait 5 years and want it now, you are looking to pay at least 50% more.
That may still be a good deal considering the quality of life close proximity to city center brings.
Growth Rate based on 2005 BTO Case Study
I just happen to see an article in Sunday Times talking about the growth rate of a 2005 4 room BTO in Toa Payoh.
It has been 10 years since then and the property appreciates 87% in that time frame, with Bishan doing 89%.
The edge of Singapore places like Seng Kang and Punggol did 75% and 61% respectively.
That looks a lot but 87% and 89% annualized over 10 years is 6.4%/yr and 6.5%/yr.
Recent property prices I believe is rising faster than the average, and perhaps in the future the growth rate will be tapered off.
If you missed it, its not too bad, considering Seng Kang and Punggol grew at 5.7%/yr and 4.8%/yr respectively.
Future Monetization plan: From outskirts to edge of Singapore
HDB should be first and foremost a dwelling to build up your family or a place to live, and less be seen as a form of retirement savings.
However, if the aim is to combined the two, purchasing an asset that have a better appreciation in value is a big consideration.
Whether such a good location has better appreciation remains to be seen. I felt the proximity close to an MRT station always commands a premium in the future.
If the couple, do not know of any other competency to build wealth, they may commit more of their income to buying a HDB that may seem out of reach for them, switching from balloting one at the edge of Singapore to this project.
The question in the couple’s mind might be: So live here for 20 years and my children have grown up, how do I get money out of it?
One way is to carry out a shift from a premium area to a budget area. The proximity to town carries a premium.
Over time, your goals and family’s living needs change such that having a close proximity to own may not be the highest priority.
Shifting to the outskirts free up the money to be deployed for retirement.
Future Monetization plan: Purchase a live in Condo and Rent out Bidadari BTO
The alternative plan is what I believe more would do. This would be to build up their cash holdings for downpayment of a future private housing.
Due to the close proximity to an MRT station, it makes the flat a good rental that may command a premium, or at least an in demand flat versus the competition in bad times.
The cash flow from the rental can be used to help alleviate the future cash flow of the private property.
Planning with the second BTO in mind
Each family have 2 bites of the cherry, according to a friend of mine.
And if you would like to do some detail planning, you might be able to secure a long term dwelling by paying less cash cost or principal.
The Bidadari BTO if it appreciates faster than the average BTO development, would be able to pay off the majority of the second BTO that you applied for.
The main gain is lesser cash principal that comes out of your pocket.
But also note that you are probably selling a better potential good location asset to move into one that is comparably less in demand.
This would mean that you have to be comfortable with living in the second BTO since that would not have as much ‘investment value’
My mom likes this area. She thinks that after the PAP won it back there might be some mispricing and I can buy the resale at good price.
I should tell her they cost a bomb, and if I get one, I will probably be spending 15 years servicing the debt or that I will have no retirement savings since I will be dumping all in.
That is not a doomsday scenario considering I still have some human capital.
HDB flats are important purchases that needs some planning, due to how much cash flow that will be sap away from you monthly, as well as whether you can comfortably afford it if a spouse is unemployed.
This project looks worth it, but don’t see this as a life and death.
The growth rate data above shows that yes, your net worth, might grow less, but its not comparatively that much worse off. You pay less for flats in outskirts of Singapore.
There are much cultural pressure to purchase a 5 room flat but sometimes, you have to weigh the benefits and have some sacrifices. You cannot have the best of everything if your human capital (your pay growth) is not progressing that well.
If you value the intangible benefits of living close to your work place, then work around some of these constraints rather than increasing your stress levels next time when you are having such a hard time servicing the mortgage.
Wish all of you luck.
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