Friday 11 September 2020

The Truth About COE and BTO

Have you ever wondered why our COE (Certificate of Entitlement) for vehicles is based on auction (code for who got money gets) while our HDB BTO (Build-To-Order) is based on balloting (code for lucky draw)?

What would happen if they were switched?

What's the "true" market price for our HDB BTOs? 

Its the price for resale after the 5 years minimum occupation rule is up isn't it?

You know it; I know it. 

Its a substantial subsidy from big daddy. Period.

Yet there are those every once in a while will pretend, pretend complain HDB makes "obscene" profits and there's no subsidy at all... 

OK lor, let's change the HDB BTO balloting to the COE price auction model.


Two groups of HDB buyers would be most happy!

1) That's those who got no luck.

Try and try, can never get a ballot number for their preferred location in mature estates.

Give up, choose those "ulu" brand new HDB estates. OK. got ballot but the number they got is way at the end of the queue. Which means you get to choose what others have "discarded"...

For those who are very picky (property is location, location, location, no?), no choice have to "capitulate" and buy resale. 

Pay a lot more than your neighbours who got theirs direct from HDB, but hey, anything money can solve, its no longer a problem. Wink.

2) Then there's those sour grape "carrots" who aren't mobile, they'll be glad if HDB BTO has switched to the COE price auction model, there goes the 2 bites of the cherry windfall!

And here they are, worried sick what will happen to their HDB flats after 99 years....  

They are like the proverbial dog who sits on a nail and whines and whines, when the problem is easily solved by moving their butts. 

But no.

If I can't make money (by moving), then everyone should not too!



Now consider for a moment what will happen if we implement the HDB balloting system for our COEs?

First, we'll get the ridiculous situation where a billionaire will not get a brand new car if he's that unlucky? Never mind the COE now is "free" under the balloting scheme...

And people being people, once they spot a "lobang" (opportunity), everyone will start flipping cars!

You never wondered why 2nd hand used HDB flats would cost more than brand new virgin HDB flats? 

So what's so surprising about 2nd hand cars costing more than brand new cars fresh from the showroom if we go the balloting route?

Still don't believe balloting is a lucky draw subsidy?

If everyone and anyone can afford a car, what will happen?

No need to look far.

Just look at the major cities in Asia. 

We'll just switch from complaining cars in Singapore so bloody expensive to whining about why big daddy not doing anything to the maddening traffic jams we face everyday!!!??? 

Hello? They sleeping or what!? Earn so much some more!

Its heartening big daddy has many schemes to help the disadvantaged and those with few means to own their own HDB flats, never mind if its just a 2 room HDB flat. We need to start somewhere first.

That's perhaps why when interviewed by the media on the HK protest situation, big daddy pointed out its a housing problem. Wink.

And when we had the constant breakdowns in MRT and overcrowding in the buses and MRT, there's the 40/60 swing to the opposition, remember?

People can accept car ownership is not for anyone and everyone, provided we get the "promised" Swiss standard of living level of public transportation. 

But to be reminded you are "cattle-class" whenever you go to work... 






  1. Smol,

    Hdb is loss-making on mark-to-market accounting basis.

    But if treat SLA+HDB as one entity, then it's still very profitable on cost & actual cashflow basis. :)

    Govt made a conscious decision in the mid-1980s to move away from purely cost-recovery to "subsidised market-based" pricing. Or what Mah Bow Tan infamously termed market subsidy. Lol.

    It's a compromise solution, with additional grants for lower income as well as smaller flats.

    1. Spur,

      Yup. I much prefer this Robinhood approach.

      Instead of leaving too much money on the table by "under pricing" HDB BTOs with the cost recovery approach, might as well recover some of the funds and use it to support the lower income bracket to own their own flats.

      Its the same with GST.

      Increase, but give rebates to those with lesser means.

      The thumbs up respect move is we are able to "rob" the rich by lowering taxes and abolishing taxes like estate duty. I'm glad there's no capital gains tax in Singapore ;)

      Better this than some countries or US states that promise everything "free", but tax the rich to death...

      They forgot one thing...

      The rich are mobile.

      You smart; others not stupid ;)

  2. May be buy three or four room BTO sooner when income is lower and become free riders on govt goodies when income are higher.

    1. LOL! I'm pretty confident govt will attach more & more salary means-testing for all the goodies and ang paos. They need to recover the $50B (or is it $60B) hole in the reserves! Hohoho!

      Even now, there are salary checks for GST Vouchers, Medisave top-ups, the various Covid grants, and Workfare is subject to spouse salary check too, lol.

      So far HDB conservancy rebates & U-Save not subject to salary check (but got properties check).

      For us retail investors, let's hope populism doesn't result in capital gains tax or interest tax or dividend tax (interests and dividends used to be counted for income tax in the old days).

    2. CW,

      We can easily verify whether what you say makes sense or not by comparing with our cohorts who married "early" in their late 20s ;)

      成家立业 - that's the wisdom of our 5,000 years of Chinese wisdom.

      But no... We wait until our careers are stable first and only then we'll consider marriage... 立业成家?

      When we buy our HDB BTOs in our 30s, those who bought in their late 20s have already fulfilled their 5 years minimum occupation and is ready for their 2nd bite of the cherry. Now that's first mover advantage!

      And if career goes well and no need to invest to escape, after 2 bites of the cherry can leave our HDB heartlands and upgrade to private condo :)

      Who says we must invest or else?

      Marry early is another route. (Of course must be able to earn more as in career progression)

    3. Spur,

      Its times like these that I have a wry smile and sleep better at night whenever I read people voluntarily contributing to CPF ;)


    4. No point marrying early if a man marries the wrong woman. Few things can be more devastating in life for a man than an ex-lover-turned-enemy using the Woman's Charter to destroy him financially and emotionally. But if don't divorce, should he live in misery for the rest of his life with someone he hates?

      Many unhappily married man envy the single man. Every man envies the happily married man. Marriage is a risk worth taking, even though the wrong choice is devastating.

      Between the choice of financial freedom and marrying the right spouse, I will choose the latter all the time. I can't imagine how a rich man can be happy if he marries a woman he hates. On the other hand, it's easier for a not-so-rich man to be happy if he lives with a woman he loves.

    5. hyom,

      If marry the WRONG woman or man, it doesn't matter whether its early or late marriage ;)

      Not everything is about money.

      Nor is life one dimensional.

      Just like FIRE.

      Being financially independent does not mean one will be happy.

      Too miserly end up with few friends or no marriage partner also like that...

      Got money; no health? Bang head on wall...

      Retire early but discover now have no reason to wake up in the mornings?

      That's why living is about: My Life; My Pace.

      What's the point of goal setting if its just copy paste?

      Others do what, you follow blindly?

      Have you read bei kambings asking others how much they need to achieve FIRE?

      I go in my heart, "I think you need to read more literature..."


  3. Hi SMOL,

    That's how it is in some of the blue states. Billionaire left and tax revenue suffers a short fall. There are more and more of such cases. And I can't fathom why the populace cheers at the departure of "big baddie millionaires and billionaires." Some of them are responsible for job creation, no?

    1. Unintelligent Nerd,

      I was going to say there's a reason why big daddy "force" all A level students to take economics, but no, that's not the solution...

      We need more people to read Literature.

      We laughed who would be so stupid to kill the goose that lays the golden eggs!?

      Yet the socialist ideas of spending other people's money is ever so appealing that many are doing precisely that...

      Its fun and well until we ran out of other people's money :(

      I have a colleague at my workplace in his 60s who is glad to be receiving the Wuhan virus "ang baos" from big daddy, and wishes to have another lockdown so he can "rest at home" with pay all over again!?

      He and his kakis are sharing tips on how to tikum tikum "abuse" big daddy handouts... Even encouraging me to apply too... Free money, don't apply "lugi"...


      He have no inkling if this Wuhan virus thingy carries on, the retailer we working in would close shop for good...

      Then again, there's a reason why in his 60s, he is still a salesperson. Not a sales supervisor or manager.

    2. Unexpected one off "passive" income from Big Daddy and some naive are hoping for more rounds of "passive" income while their family members may be losing larger active income. Sigh!

    3. CW,

      I asked this colleague whether he reads the papers?


      Not surprising.

      People often focus on the differences between those who got money and those who don't. You elite this, you elitist that...

      I often use this verification technique to determine whether the person I speaking to is a "scholar" or "soldier" - I ask whether they got read the papers ;)

      See scholar speak scholar; see soldier speak soldier.

      I citizen of the world!

    4. Heheh Smol,

      I see no issue with claiming grants/handouts as long as it's legitimate. Landowners have been doing it for years. ;)

      Any issue is with the execution --- balancing genuine access & need against nefarious abuse.

      E.g. Hedge funds in the US obtaining billions in Covid aid that was enacted in the spirit to help SMEs, while the small businesses being made to jump thru hoops or simply blocked from getting small sums of that money.

      Here in Singapore, we get news reports praising some big firms & MNCs for returning millions in JSS. However, when I see the names of some of those MNCs, I have to grin at the tens or hundreds of millions they enjoyed & are enjoying from EDB, MTI, IRAS etc. ;)

      At the end of the day, while the actions (grabbing handouts) may be the same, the mindset is different:

      Landowners seek handouts to expand operations & increase profits.

      Soldiers or farmers seek handouts to avoid work. LOL!

    5. Spur,

      Agree on the same same but different part ;)

      MNCs do not receive "handouts" from big daddy. They extract "concessions" from big daddy. Its negotiating from a position of strength. (If other cities give better terms, they'll walk)

      People who receive "handouts" are entirely dependent on the generosity of their patrons. Another word for it is pity-fxxk.

  4. I thought it is scholar or farmer? Whether HDB earns or not, that is one question. But I know that HDB helps the government to accumulate CPFs. That is their main purpose. And how much CPF we have as a country has never been revealed!

    BTO is the best option if we can qualify. That is what I told my wife the other day, but she said, some decided to marry after a short "paktor" and they do not want to wait for BTO, because they need a place to stay in short time.

    1. Rolf,

      This blogger choosing the "Singaporean rental" route to home instead. I.e. Selecting an old but conveniently located HDB, bargaining down the price, & treating it as upfront rental with low prospects of reselling in future for any profit.

      Any property investment considerations, if desired, will be reserved for 2nd property.

      Works for some, not for most. :P

    2. Rolf,

      I was thinking along the line of our Chinese idiom: scholar meeting soldier - 秀才遇到兵 ;)

      LOL! If shotgun, cannot wait!!!

      Then again, when the right one comes along, can understand why some rather not take the chance by waiting for a BTO (夜长梦多), better slap a packet tissue on the partner's forehead, and let everyone know this one "chope" oredi!!!


    3. like the chinese idiom! :-)

      Shotgun cannot wait but can stay with parents and they can help take care of baby! hahahahaha!

  5. Agree Spur! That is what I did buying a very old resale HDB at a v central location and rented it out.

    1. Rolf and Spur,

      Love your real life, real people examples ;)

      When bei kambings now fear buying older HDB flats out of fear (more like ignorance), and pendulum swing to newer HDB resale flats, think about it, where you think savvy and financially literate buyers would likely to find better bargains?



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