How low-income Singaporeans can afford a 2-bedroom flexi apartment

Housing affordability in Singapore has always been a key concern for citizens, especially millennials. This is nothing new. But the pandemic-led property boom has pushed up prices around the world, including in Singapore. And with other financial pressures like the impending VAT hike and rising fuel prices, even more Singapore households could fall through the cracks.

The HDB Fresh Start Housing Scheme, which aims to make it easier for households in publicly funded rental housing to purchase their own 2-room flexi flats, is all the more important in these economically uncertain times. Let’s find out what it entails and whether you’re eligible.

What is HDB Fresh Start Housing Scheme 2022?

The HDB Fresh Start Housing Scheme aims to support households to purchase a 2-room flexi flat. Buyers have the option to take a shorter lease of 45 to 65 years, provided that it covers all owners until they are at least 95 years old.

They must maintain a minimum period of occupancy (MOP) of 20 years before they can resell or rent the property.

Households receive the following forms of support:

Opportunity to purchase a 2 bedroom flexi apartment on a short term lease for a term of 45 to 65 years, provided all owners and spouses are insured until the age of 95.
Fresh Start Housing Grant from 50,000 US dollarsconsisting of:
35,000 US dollars Lump sum amount to be paid into the applicant’s CPF Ordinary Account (OA) immediately before the keys are handed over
Remaining grant of 15,000 US dollars will be paid into the applicant’s CPF OA over a period of five years after the handover of the keys
Resale tax capped at $30,000, which can be adjusted downward depending on the length of the lease
Access to concessional HDB loans is subject to a credit check
Priority allocation of up to 10% of 2-room flexi units in HDB’s BTO and SBF sales launches, facilitating successful allocation of a flat

Related articles: HDB HLE Application: 6 Important Things HDB Flat Buyers Need to Know

Who is eligible for the HDB Fresh Start Housing Scheme 2022?

Generally, the HDB Fresh Start Housing Scheme is aimed at families with young children who are moving into public housing for the second time and are currently living in public housing.

Second home households are households that have already received housing subsidy from the HDB. A household is considered to be a recipient of housing subsidy if it has purchased a flat directly from the HDB, such as a BTO flat, received CPF housing subsidies, or received other benefits from the HDB, such as through the Selective En Bloc Redevelopment Scheme (SERS).

Here are all the eligibility criteria for HDB Fresh Start Housing Scheme:

Application as a second-timer nuclear family
Applicants and spouses (if applicable) must be at least 35 and under 55 years of age
Applicants can be married, divorced or widowed
The family nucleus must include at least one parent who is a Singaporean citizen and at least one child who is a Singaporean citizen and is aged 18 years or less.
At least one applicant must have been in permanent employment for the last 12 months
Have lived in a publicly subsidized rental apartment for at least one year without having accumulated three or more months’ rent arrears in the previous 12 months
You have not received any government rent relief under relocation, home sale or rent-to-own programs.
Qualify for a Letter of Social Assessment (LSA) from HDB*
Undergo annual reviews by HDB to renew LSA until 5 years after handover of keys. Personal interviews or preparation of action plans may be required
The average monthly gross household income must not exceed $7,000.
You do not own any other real estate in the country or abroad and have not sold any in the last 30 months.

Related articles: 2-room BTO flat: Who is it suitable for and 8 alternatives to HDB resale flat you can buy

*To qualify for the LSA (valid for one year), the family will be assessed on the following factors:

How to buy a 2-room flexi flat with the HDB Fresh Start Housing Scheme

Let’s look at how much an applicant would have to pay to buy a hypothetical second hand 2 bedroom flexi flat on a 60 year lease.

Purchase of a 2-room flexi apartment with a 60-year lease
Selling price	120,800 USD
Resale tax	25,000 US dollars
Total costs (sales price + resale tax)	145,800 USD
Fresh Start housing allowance
Advance grant (paid into the CPF OA immediately before the keys are handed over)	35,000 US dollars
Remaining grant (will be paid into the CPF OA within five years of the handover of the keys, can be used to shorten the loan term)	15,000 US dollars
Total funding	50,000 US dollars

In our scenario, the sale price of the apartment is $120,800 and the buyer also has to pay a resale tax of $25,000 since he/she is buying for the second time.

Based on this, the buyer will need to budget a total of $110,800 in cash and CPF ($145,800 – $35,000).

This amount does not include stamp duty and the buyer’s legal fees and must also be paid by the buyer.

Now let’s assume the buyer wants to borrow the maximum HDB interest rate of 85%. Let’s see what amounts of money need to be paid.

When booking the apartment/signing the rental agreement
Resale tax – cash	25,000 US dollars
Deposit (15%) – Cash and/or CPF	18,120 USD
After handing over the keys and receiving a lump sum of USD 35,000 from the Fresh Start Grant
Monthly mortgage payment (25-year loan with an interest rate of 2.60% pa) – cash and/or CPF	$465.83

In summary, the buyer must pay the following amounts:

Resale tax of $25,000 in cash.
Deposit of $18,120 in cash and/or CPF.
Monthly mortgage repayments of $465.83 in cash and/or CPF. The Fresh Start Grant lump sum of $35,000 is paid upon handover of keys, at the same time the buyer begins repaying the home loan and can cover the loan repayments over 6 years.

Related articles: 9 Ways Singaporeans Pay Their Home Loans: HDB vs. Bank Loan, Cash vs. CPF and More

If the buyer can afford it, they can also choose to spend the $35,000 lump sum of HDB Fresh Start Grant immediately after disbursement to shorten the loan term.

The buyer will also receive $15,000 paid into CPF OA over a period of five years after the keys are handed over, which can be used to pay the monthly mortgage repayments or to reduce the loan term without penalty.

Would you like to apply for the HDB Fresh Start Housing Scheme? You can submit an online application via the HDB website.

Conclusion: Applying for the HDB Fresh Start Housing Scheme

The HDB Fresh Start Housing Scheme enables households to purchase their own home, eliminating the need to rent a flat under the Public Rental Scheme (which is different from the Parenthood Provisional Housing Scheme).

Monthly rents for 2-bedroom flats are tiered based on monthly household income and whether it is a primary or secondary residence. Successful applicants for the HDB Fresh Start Housing Scheme are likely to pay the highest rent of $205 to $275 per month.

A major disadvantage is the resale levy. Although the HDB Fresh Start Housing Scheme caps this at $30,000, the resale levy still has to be paid in cash, which may be too much for some households.

Households with enough cash to cover the resale levy may be able to pay for the flat almost entirely with CPF funds using the HDB Fresh Start Housing Scheme. This may be preferable to paying rent in cash through the Public Rental Scheme, as it leaves them with more money for daily expenses.

Related articles: How much to budget for a new home: A complete breakdown of payments