Fewer home buyers requested to cancel their Build-To-Order (BTO) flat applications in 2020 and 2021, despite facing a longer wait for the flats, compared with pre-Covid-19 years.
The hot HDB resale market, which saw prices rise by about 15 per cent since the first quarter of 2020 to the end of 2021, could have been one of the key reasons for fewer cancellations as some buyers opted for the “safe and affordable” BTO route, property analysts told The Straits Times.
In 2020 and 2021, an annual average of about 3,640 buyers requested to cancel their BTO flat applications, which is lower than the annual average of about 4,020 requests received in 2018 and 2019, figures provided to ST by the Housing Board (HDB) show.
Of the requests received in 2020 and 2021, an annual average of 1,850 buyers eventually cancelled their applications, which is lower than the annual average of about 2,500 cancellations in 2018 and 2019.
Actual cancellations are lower than the number of requests as applicants may eventually decide to withdraw their requests, said HDB.
This comes as the average waiting time for ongoing BTO flats stretches to between four and five years, after taking into account Covid-19-related delays, up from the three to four years before the pandemic.
ERA Realty head of research and consultancy Nicholas Mak said while the decline in BTO cancellations may seem “surprising” at first glance, the uncertainty of the pandemic may have caused some buyers to stick to the tried and tested BTO route.
“Market convention suggests that when faced with longer waiting times for BTO flats, buyers will get impatient, cancel and turn to HDB resale flats,” said Mr Mak.
“But realistically, not everyone has the financial means to make the switch. Those who have the means may also not be willing to pay higher prices, such as the cash over valuation (COV) component, for an HDB resale flat,” he added.
COV happens when a resale flat is sold above its actual HDB valuation, and the difference can be paid for only in cash by the buyer.
Mr Mak also noted that the property market is “not a zero-sum game”, where an increase in demand for HDB resale flats – as it has been for the past two years – can be directly linked to a drop in demand for BTO flats.
Ms Christine Sun, senior vice-president of research and analytics at OrangeTee & Tie, said cash-strapped Singaporeans may find HDB resale flats less affordable, especially in sought-after mature estates where prices tend to be higher.
“Conversely, HDB has been launching more BTO flats in mature estates in recent years. Although the construction period is longer, some buyers may still find it worthwhile to buy these BTO flats and to take advantage of the housing grants available,” she said.
In 2020, BTO projects in mature estates made up about 55 per cent of overall launches, compared with 44 per cent in 2017.
Last year, six BTO projects were hit by further delays due to their main contractors going bust.
It includes five BTO projects that were formerly under Greatearth Corporation and Greatearth Construction, which wound up in September last year with a $70 million debt despite government aid.
The sixth affected project is Waterway Sunrise II in Punggol, which has had its completion date delayed for more than a year, making it the first project that HDB has to fork out compensation to buyers for delay.
About 4 per cent of the 1,850 people who eventually cancelled their applications in 2021 had bought flats from the six affected projects, said HDB.
As at end-January this year, the six projects made up about 6 per cent of ongoing BTO projects and 9 per cent of the currently delayed BTO projects.
“Hence the percentage of BTO cancellations from these (six) projects is not disproportionately high compared with other ongoing BTO projects,” said HDB.
On Feb 27, HDB said two of the five projects affected by Greatearth’s liquidation have been completed ahead of the revised deadlines, and owners have begun to receive the keys to their new homes.
There are currently more than 90 ongoing BTO projects.
Professor Sing Tien Foo, director of the Institute of Real Estate and Urban Studies at the National University of Singapore, said some buyers could have opted to hang on to their BTO flats as a “safety net” during the pandemic, particularly those who have selected their units, which may already be under construction.
First-time Singaporean buyers, who form the bedrock of BTO buyers, may also have had their marriage and family plans disrupted by the pandemic so the construction delays may not necessarily come as a big hit to them, added Prof Sing.
HDB told ST the main reasons cited by buyers for cancelling bookings in the last two years were similar to those in previous years. They include relationship break-ups and changes in housing plans or financial circumstances.
Swab administrator Mae Lim, 28, who is waiting for her four-room BTO flat in Waterway Sunrise II, said she had thought of cancelling her booking when she found out about the delay, but her family’s financial circumstances did not allow it.
Her husband works as a delivery driver and their combined household income is slightly over $3,000 a month.
The mother-of-three had appealed to HDB for interim housing help. Her family currently rents an HDB two-room flat in Punggol for $368 a month.
“We get to rent this Punggol unit because we are waiting for our BTO flat. If we give up our BTO flat, we won’t qualify to rent this unit and we can’t afford an HDB resale flat, which means we will have no home,” said Mrs Lim.
“If we could afford an HDB resale flat, we wouldn’t have applied for a BTO flat in the first place.”
Source: https://www.straitstimes.com/singapore/housing/fewer-home-buyers-asked-to-cancel-bto-flat-bookings-in-past-2-years-compared-to-pre-covid-19-years
