Shoebox versus resale flat: Which is a better first home?

So you’re a “sandwiched Singaporean”, and earn enough to buy a small private home or a resale flat; but not a BTO. It’s a common conundrum for those who earn just above the income ceiling for new flats. Before you take the plunge, here’s some clarity to help inform your decision:

Shoebox vs. resale flat as a first home

*Average island-wide, as of January 2021. The following is the price for leasehold and freehold shoebox units, as well as 5-room resale flat prices across Singapore, on a psf basis:

As of January 2021, freehold shoebox units averaged $1,945 psf, while leasehold counterparts averaged $1,821 psf. The average price of a 5-room resale flat at the same time was $434 psf. To show you more accurately, we have broken down the shoebox prices by district below.

** While there is an EHG and Family grant of up to $50,000 and $80,000 respectively, you’re unlikely to qualify for these if you earn enough to buy a private property. The EHG has an income ceiling of $9,000 per month, while the Family grant has an income ceiling of $14,000 per month.

A note on financing your first home

It will be pointed out that you can use an HDB loan for a resale flat , whereas you can only use a bank loan for a shoebox unit.

The difference is that HDB loans can finance up to 90 per cent of the property, whereas a bank loan finances up to 75 per cent of a property. However, HDB will not necessarily grant you a loan just because you’re buying a resale flat.

If your income is high enough, you may be asked to take a bank loan, even if you’re buying an HDB property. For buyers who bust the $14,000 income ceiling to get a new flat (the reason they’re considering between these two options in the first place), there’s a good chance you’ll have to use a bank loan anyway.

As such, we will compare the required down payment and loan repayments using bank loans for both shoebox units and flats.

First, let me show you the average shoebox condo prices, sorted by the different areas.

Shoebox condo prices by area

Shoebox Condo Areas	Shoebox Avg. Size (sqft)	Shoebox Avg. $PSF	Average of Transacted Price ($)
ANG MO KIO	444	$ 1,536	$ 681,750
BEDOK	443	$ 1,419	$ 627,529
BISHAN	484	$ 1,622	$ 785,714
BUKIT BATOK	463	$ 1,378	$ 640,333
BUKIT MERAH	424	$ 2,006	$ 846,848
BUKIT PANJANG	465	$ 1,447	$ 672,667
BUKIT TIMAH	403	$ 1,354	$ 543,831
CENTRAL AREA	433	$ 1,854	$ 801,804
CLEMENTI	475	$ 1,494	$ 708,488
GEYLANG	440	$ 1,417	$ 623,932
HOUGANG	443	$ 1,337	$ 589,915
JURONG WEST	479	$ 1,366	$ 655,222
KALLANG	429	$ 1,551	$ 664,391
MARINE PARADE	402	$ 1,532	$ 614,436
PASIR RIS	469	$ 1,210	$ 566,088
PUNGGOL	469	$ 1,329	$ 623,500
QUEENSTOWN	447	$ 1,765	$ 790,000
SEMBAWANG	441	$ 1,251	$ 552,000
SENGKANG	451	$ 1,345	$ 605,923
SERANGOON	450	$ 1,423	$ 641,389
TAMPINES	471	$ 1,286	$ 606,500
TOA PAYOH	451	$ 1,579	$ 710,813
WOODLANDS	431	$ 1,178	$ 507,157
YISHUN	471	$ 1,196	$ 562,900

And for an easy comparison, here’s the table of prices showing the price gap between a condo shoebox unit and HDB prices within the area.

Price difference between condo shoebox and resale HDB flat

Note: A positive number refers to how much more the shoebox unit would cost over an x-room resale flat. A negative number refers to how much lesser it would cost.

Do also note that we are only accounting for shoebox units, which we define as <500 sqft. Other factors like tenure is not accounted for here.

Area	Condo Shoebox Prices	3-Room Price Difference	4-Room Price Difference	5-Room Price Difference
ANG MO KIO	$ 681,750	$ 386,455	$ 232,077	$ 26,887
BEDOK	$ 627,529	$ 338,307	$ 183,380	$ 47,551
BISHAN	$ 785,714	$ 448,116	$ 244,079	$ 36,158
BUKIT BATOK	$ 640,333	$ 377,686	$ 272,082	$ 116,741
BUKIT MERAH	$ 846,848	$ 465,997	$ 184,689	$ 86,798
BUKIT PANJANG	$ 672,667	$ 364,156	$ 259,957	$ 158,721
BUKIT TIMAH	$ 543,831	$ 151,142	$ (89,103)	$ (314,169)
CENTRAL AREA	$ 801,804	$ 394,195	$ 97,041	$ (141,806)
CLEMENTI	$ 708,488	$ 368,559	$ 143,833	$ (43,317)
GEYLANG	$ 623,932	$ 345,039	$ 76,664	$ (43,976)
HOUGANG	$ 589,915	$ 287,349	$ 172,135	$ 33,283
JURONG WEST	$ 655,222	$ 381,478	$ 277,651	$ 198,322
KALLANG	$ 664,391	$ 327,221	$ 122,230	$ (35,482)
MARINE PARADE	$ 614,436	$ 251,211	$ 138,092	$ (170,819)
PASIR RIS	$ 566,088	$ 188,486	$ 113,759	$ 48,691
PUNGGOL	$ 623,500	$ 260,799	$ 155,572	$ 89,427
QUEENSTOWN	$ 790,000	$ 419,501	$ 45,732	$ (70,777)
SEMBAWANG	$ 552,000	$ 247,304	$ 188,875	$ 137,664
SENGKANG	$ 605,923	$ 258,222	$ 171,443	$ 108,495
SERANGOON	$ 641,389	$ 327,079	$ 186,319	$ 62,064
TAMPINES	$ 606,500	$ 266,487	$ 156,019	$ 48,495
TOA PAYOH	$ 710,813	$ 439,840	$ 155,936	$ (17,601)
WOODLANDS	$ 507,157	$ 241,014	$ 154,288	$ 83,743
YISHUN	$ 562,900	$ 278,574	$ 190,563	$ 76,036

And finally, we’ve broken it down for you by the minimum cash down payment, rest of the down payment (cash/CPF), buyers stamp duty, and the projected monthly repayment at a 25-year loan tenure and an interest rate of 1.3 per cent.

Shoebox condo affordability details

Shoebox Condo Areas	Average of Transacted Price ($)	Min. Down Payment	Remaining Cash/CPF	Buyer Stamp Duty	Monthly Mortgage
ANG MO KIO	$681,750	$34,088	$136,350	$15,053	$2,663
BEDOK	$627,529	$31,376	$125,506	$13,426	$2,451
BISHAN	$785,714	$39,286	$157,143	$18,171	$3,069
BUKIT BATOK	$640,333	$32,017	$128,067	$13,810	$2,501
BUKIT MERAH	$846,848	$42,342	$169,370	$20,005	$3,308
BUKIT PANJANG	$672,667	$33,633	$134,533	$14,780	$2,627
BUKIT TIMAH	$543,831	$27,192	$108,766	$10,915	$2,124
CENTRAL AREA	$801,804	$40,090	$160,361	$18,654	$3,132
CLEMENTI	$708,488	$35,424	$141,698	$15,855	$2,767
GEYLANG	$623,932	$31,197	$124,786	$13,318	$2,437
HOUGANG	$589,915	$29,496	$117,983	$12,297	$2,304
JURONG WEST	$655,222	$32,761	$131,044	$14,257	$2,559
KALLANG	$664,391	$33,220	$132,878	$14,532	$2,595
MARINE PARADE	$614,436	$30,722	$122,887	$13,033	$2,400
PASIR RIS	$566,088	$28,304	$113,218	$11,583	$2,211
PUNGGOL	$623,500	$31,175	$124,700	$13,305	$2,435
QUEENSTOWN	$790,000	$39,500	$158,000	$18,300	$3,086
SEMBAWANG	$552,000	$27,600	$110,400	$11,160	$2,156
SENGKANG	$605,923	$30,296	$121,185	$12,778	$2,367
SERANGOON	$641,389	$32,069	$128,278	$13,842	$2,505
TAMPINES	$606,500	$30,325	$121,300	$12,795	$2,369
TOA PAYOH	$710,813	$35,541	$142,163	$15,924	$2,776
WOODLANDS	$507,157	$25,358	$101,431	$9,815	$1,981
YISHUN	$562,900	$28,145	$112,580	$11,487	$2,199

3-room HDB affordability details

Area	3 Room Avg Price	Min. Down Payment	Remaining Cash/CPF	Buyer Stamp Duty	Monthly Mortgage
ANG MO KIO	$295,295	$14,765	$59,059	$4,106	$1,153
BEDOK	$289,222	$14,461	$57,844	$3,984	$1,130
BISHAN	$337,598	$16,880	$67,520	$4,952	$1,319
BUKIT BATOK	$262,647	$13,132	$52,529	$3,453	$1,026
BUKIT MERAH	$380,851	$19,043	$76,170	$6,026	$1,488
BUKIT PANJANG	$308,511	$15,426	$61,702	$4,370	$1,205
BUKIT TIMAH	$392,689	$19,634	$78,538	$6,381	$1,534
CENTRAL AREA	$407,609	$20,380	$81,522	$6,828	$1,592
CLEMENTI	$339,929	$16,996	$67,986	$4,999	$1,328
GEYLANG	$278,893	$13,945	$55,779	$3,778	$1,089
HOUGANG	$302,566	$15,128	$60,513	$4,251	$1,182
JURONG WEST	$273,744	$13,687	$54,749	$3,675	$1,069
KALLANG	$337,170	$16,858	$67,434	$4,943	$1,317
MARINE PARADE	$363,225	$18,161	$72,645	$5,497	$1,419
PASIR RIS	$377,603	$18,880	$75,521	$5,928	$1,475
PUNGGOL	$362,701	$18,135	$72,540	$5,481	$1,417
QUEENSTOWN	$370,499	$18,525	$74,100	$5,715	$1,447
SEMBAWANG	$304,696	$15,235	$60,939	$4,294	$1,190
SENGKANG	$347,701	$17,385	$69,540	$5,154	$1,358
SERANGOON	$314,310	$15,716	$62,862	$4,486	$1,228
TAMPINES	$340,013	$17,001	$68,003	$5,000	$1,328
TOA PAYOH	$270,972	$13,549	$54,194	$3,619	$1,058
WOODLANDS	$266,143	$13,307	$53,229	$3,523	$1,040
YISHUN	$284,326	$14,216	$56,865	$3,887	$1,111

4-room HDB affordability details

Area	4 Room Avg Price	Min. Down Payment	Remaining Cash/CPF	Buyer Stamp Duty	Monthly Mortgage
ANG MO KIO	$449,673	$22,484	$89,935	$8,090	$1,756
BEDOK	$444,149	$22,207	$88,830	$7,924	$1,735
BISHAN	$541,636	$27,082	$108,327	$10,849	$2,116
BUKIT BATOK	$368,251	$18,413	$73,650	$5,648	$1,438
BUKIT MERAH	$662,159	$33,108	$132,432	$14,465	$2,586
BUKIT PANJANG	$412,710	$20,635	$82,542	$6,981	$1,612
BUKIT TIMAH	$632,934	$31,647	$126,587	$13,588	$2,472
CENTRAL AREA	$704,763	$35,238	$140,953	$15,743	$2,753
CLEMENTI	$564,654	$28,233	$112,931	$11,540	$2,206
GEYLANG	$547,268	$27,363	$109,454	$11,018	$2,138
HOUGANG	$417,780	$20,889	$83,556	$7,133	$1,632
JURONG WEST	$377,571	$18,879	$75,514	$5,927	$1,475
KALLANG	$542,161	$27,108	$108,432	$10,865	$2,118
MARINE PARADE	$476,344	$23,817	$95,269	$8,890	$1,861
PASIR RIS	$452,329	$22,616	$90,466	$8,170	$1,767
PUNGGOL	$467,928	$23,396	$93,586	$8,638	$1,828
QUEENSTOWN	$744,268	$37,213	$148,854	$16,928	$2,907
SEMBAWANG	$363,125	$18,156	$72,625	$5,494	$1,418
SENGKANG	$434,481	$21,724	$86,896	$7,634	$1,697
SERANGOON	$455,070	$22,753	$91,014	$8,252	$1,778
TAMPINES	$450,481	$22,524	$90,096	$8,114	$1,760
TOA PAYOH	$554,877	$27,744	$110,975	$11,246	$2,167
WOODLANDS	$352,869	$17,643	$70,574	$5,257	$1,378
YISHUN	$372,337	$18,617	$74,467	$5,770	$1,454

5-room HDB affordability details

Area	5 Room Avg Price	Min. Down Payment	Remaining Cash/CPF	Buyer Stamp Duty	Monthly Mortgage
ANG MO KIO	$654,863	$32,743	$130,973	$14,246	$2,558
BEDOK	$579,978	$28,999	$115,996	$11,999	$2,265
BISHAN	$749,557	$37,478	$149,911	$17,087	$2,928
BUKIT BATOK	$523,592	$26,180	$104,718	$10,308	$2,045
BUKIT MERAH	$760,049	$38,002	$152,010	$17,401	$2,969
BUKIT PANJANG	$513,946	$25,697	$102,789	$10,018	$2,008
BUKIT TIMAH	$858,000	$42,900	$171,600	$20,340	$3,351
CENTRAL AREA	$943,610	$47,180	$188,722	$22,908	$3,686
CLEMENTI	$751,804	$37,590	$150,361	$17,154	$2,937
GEYLANG	$667,908	$33,395	$133,582	$14,637	$2,609
HOUGANG	$556,632	$27,832	$111,326	$11,299	$2,174
JURONG WEST	$456,900	$22,845	$91,380	$8,307	$1,785
KALLANG	$699,874	$34,994	$139,975	$15,596	$2,734
MARINE PARADE	$785,255	$39,263	$157,051	$18,158	$3,067
PASIR RIS	$517,397	$25,870	$103,479	$10,122	$2,021
PUNGGOL	$534,073	$26,704	$106,815	$10,622	$2,086
QUEENSTOWN	$860,777	$43,039	$172,155	$20,423	$3,362
SEMBAWANG	$414,336	$20,717	$82,867	$7,030	$1,618
SENGKANG	$497,428	$24,871	$99,486	$9,523	$1,943
SERANGOON	$579,325	$28,966	$115,865	$11,980	$2,263
TAMPINES	$558,005	$27,900	$111,601	$11,340	$2,180
TOA PAYOH	$728,414	$36,421	$145,683	$16,452	$2,845
WOODLANDS	$423,414	$21,171	$84,683	$7,302	$1,654
YISHUN	$486,864	$24,343	$97,373	$9,206	$1,902

Factors other than the down payment

Some of the other key factors to consider are:

• An exit strategy
• Maintenance fees
• Ability to resort to rental in a crisis
• SSD versus MOP
• Do you like to meet your MP?

Finally, we will discuss the sticky issue of resale gains.

1. An exit strategy

One advantage to picking a 5-room resale flat is that, due to its size, you can reasonably expect to live there till the very end. If you decide to start a family a few years down the road, for instance, there’s no need to move.

A shoebox unit, on the other hand, has more limitations. Unless you’re a committed lifelong single, chances are you’ll have to move when you decide to get married, have children, etc.

As such, you may want to consider how you’ll sell and upgrade to a bigger property later; this may involve placing more emphasis on potential gains (see below).

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Another consideration is what your next property will be. It’s generally easier to move from a resale flat to a private property, than the other way around.

If you start with a resale flat, you can sell the flat and buy a private property whenever you’re ready (if you can afford the stamp duties and down payment, you can even choose to retain your resale flat after the five-year MOP, and buy a condo as a second property).

But if you start with a shoebox flat, your second property will have to be another private property – you can’t buy an HDB flat while still owning the condo. So if you want to upgrade to a bigger resale flat later, you need to make plans to sell the shoebox unit ahead of time. This often involves temporary accommodation.

In addition, if the second property you want to buy is a new flat, you must wait 30 months after selling the shoebox unit before you can apply.

2. Maintenance fees

First-time home buyers often underestimate the difference between maintenance fees and conservancy charges.

Most shoebox units have maintenance fees of around $250 per month; some luxury condos can have maintenance fees that are twice as high, even for very small 400+ sq.ft. units. These are usually paid on a quarterly basis.

On the flip side, even the full conservancy charge for a 5-room flat, without subsidies, rarely exceeds $80 per month.

Besides cash flow, home buyers should consider whether they’re getting their money’s worth. The reason you’re paying so much is for the common facilities, such as the 24/7 security, gym, pool, BBQ pits, and so forth. Not to mention, if your condo is heavily landscaped. If you’re not interested in these, you may want to consider a resale flat in the same general location instead.

3. Ability to resort to rental in a crisis

A major advantage of resale flats is that, in an absolute crisis, you have the option of renting out rooms (assuming you are single, or your family is able to accommodate this).

Note that you don’t have to meet the 5-year MOP to rent out individual rooms, you only need to meet the MOP to rent out the entire flat. In a pinch, it’s possible to rent out rooms for $400 to $500 a month; enough to pay the conservancy fees and offset a large part of the mortgage.

This isn’t usually an option with shoebox units; not unless you have the option to live with a parent, sibling, etc. while renting out the unit (see below).

4. SSD versus MOP

A resale flat imposes a five-year period, in which you cannot rent out the whole flat, or sell it on the open market. This provides less flexibility compared to a shoebox unit.

For condos, the main consideration is the Sellers Stamp Duty (SSD). This is 12 per cent for properties sold in the first year, 8 per cent in the second year, and 4 per cent in the third year. While costly, the SSD at least doesn’t outright prohibit you from selling if you want.

Also, while shoebox units are too small to accommodate both you and a tenant, the lack of MOP still has a rental advantage:

There are cases where a shoebox owner gets married, and their spouse is able to single-handedly purchase a property. These owners can then live with their spouse, while retaining and renting out their whole shoebox unit. Due to the lack of MOP, this can be done even within the first year of acquiring the condo.

5. Do you like to meet your MP?

If the answer is yes, you may want to live in an HDB flat. Ask any condo-dweller, and they’ll tell you they see their MP once in a blue moon. Some condos have never been visited, from construction to en-bloc.

This isn’t because of discrimination; it’s just harder to get permission to go door-knocking in condos.

(Some condo dwellers consider this an advantage. The same lack of access also prevents salespeople from knocking on your door to sell your kitchenware, insurance, cookies, etc.)

Finally, there’s the sticky issue of resale gains

One of the most common question is: which provides a better stepping stone: shoebox units or flats?

It’s quite common for first-time home owners to view either as a ticket to a more luxurious private home.

While it’s true that private properties tend to appreciate better than resale flats, shoebox units deserve different consideration from regular-sized condos.

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Shoebox units may have a lower quantum (meaning more room for appreciation), but these units also have a smaller pool of prospective buyers – it’s predominantly other investors who purchase these units.

HDB upgraders, who currently make up the bulk of buyers, generally don’t purchase shoebox units; they’re families, and these units are too small for them.

(In addition, we need to consider that the higher maintenance fees of a shoebox unit may counter its higher gains; especially if you buy in a luxury or prime region condo).

As such, we can’t make a universal statement on which of the two are better for gains.

This article was first published in Stackedhomes.