I Nearly Cancelled My BTO

Naturally, as a millennial, I am very drawn to the notion of #earlyretirement and #passiveincome. I want to work smart, earn more money, buy an additional property, and rent it out for passive income. As opposed to most of the people in the previous generations before me, who kept their heads down and worked, buying a home and living there forever.

As we all know, or rather hear what others say, "property in Singapore is expensive", but how many of us actually know how expensive it is? So like most Singaporean couples, my partner and I performed the ritual of the "BTO proposal" in 2019 after seeing a BTO project launch in a relatively "good" area, and I felt that perhaps after MOP, the property could properly fetch me a handsome profit when I eventually sell it. Well, though the project timeline was an astronomical SEVEN years, it did not bother me. Seven years were the mere project timeline, pandemic or any kind of disruptions could easily extend that timeline even further.

I felt really good about the purchase until I joined PropNex in 2021, and met Kelvin Fong, our Deputy CEO, sat through his talks and had many one-to-one conversations with him about property which allowed me to learn the insights and intricacies of real estate investment. I literally regret my decision entirely. So to all my first-time homebuyers, or anyone who has ZERO notion about the property landscape in Singapore, I have a warning for you before you proceed. If you don't want to live with regret as I did, do not continue reading on as I also believe that ignorance is bliss.

1. First home just BTO lah, think so much for what?

   

   That was exactly me in 2019. As a salaried worker who wasn't raking in a five-digit salary monthly, isn't BTO the no brainer option for me? I dived right in without even knowing what other types of properties I could afford or were made available to me. The joke's on me because I eventually realised that my partner and I could actually afford a private condo, and when I shared it with my peers, they realised they could too. Here's how:

   I suppose the most important thing is to know your options, even if you eventually choose to BTO, but knowing what your finances entitle you is vital as you will find out in the later pointers. 

2. SSD vs MOP - Who's the Winner?

   

   If you are not living under a rock, you have probably heard about Seller's Stamp Duty (SSD) and Minimum Occupation Period (MOP). SSD is a duty on the sale of private residential properties if it is disposed of during its holding period of three years. And the MOP only applies to HDBs and ECs whereby the owner has to physically occupy their house for a period of at least five years before being able to sell it.

   So how does this correlate to my story? Remember the part where I told you that the project building timeline was seven years? So adding on the MOP of five years will bring me to eternity (12 years) before I can make any move in the real estate market. Whereas the median build-time for a condominium is three years, which easily fulfils your SSD requirements, you can easily make your move in three years if you buy a new launch.

   

3. The Race Between Private & Public Housing Segment

   

   All I ever thought of when purchasing my BTO was to ride on the "BTO lottery" effect, where I buy my BTO and pray that the profits are so colossal that I can easily move into an EC or a condominium next. But little did I know, the private property market actually moves a lot more exponentially than the public housing market. 

   Oh yes, and because I work in PropNex, I've access to exclusive data with our powerful proprietary app - Investment Suite.  So if you were to take a look at property prices over the last 20 years, the orange line represents the private property market and the blue line represents the HDB market, you'll see that private property in Singapore has grown by a whopping 246.9% while HDB prices grew by 149.3%

   

   Hence, my profits across the five years of MOP could possibly be a lot lower than if I chose the private property route.

4. Step-by-step Not so Daunting

   One of the most important things I've learnt on this journey that I was SHOCKED that I didn't know about at first was the whole concept about progressive payment. Let's take a look below to see based on a $1 million property, how much would have to fork out upfront and what's the monthly mortgage repayment like.

   

   

   Can you imagine for the first six months, you'll pay as low as $238 a month? Who would have known it was that low. And if my property appreciates in value, I could just sell it off after fulfilling the three-year SSD requirement and restart the process! If you want to find out more about exit strategies, I have just the article for you.

Everyone's a Genius in Hindsight

I suppose the main message here is to know all your options before jumping into any home purchase, there is no such thing as traditionally your first home has to be a BTO. It's all about aligning your financial goals in life and using real estate as a tool to get to your goals quickly.

For me, it's having the security when I finally retire and not worry about making ends meet. Whether it's generating passive income or relying on accumulated capital, there are different ways one can achieve and it ultimately starts with having adequate property knowledge or at the very least, a professional guiding you. 

Personally, being in the real estate industry, I get to receive FREE divine words from my boss Kelvin Fong, which led me to truly understand the phrase "time = money". The less time I am able to exit from a property equates to the faster I am able to materialise my profits and accumulate more wealth. That being said, I can only start my journey once my MOP is up, so if you are interested in retiring early or having a stress-free retirement, don't make the same mistakes as I did. 

Do stay tuned as I spill some of the divine words I've received from my boss Kelvin Fong! For those who are unfamiliar with Master Fong, watch this.