We know, adulting is complicated.
What’s worse: you find yourself going from 0 to 100 real quick. One moment you’re just beginning to do your own laundry; and at the next, you’re trying to buy your own house.
For many of us first-time homeowners in Singapore, the most common option would be a HDB flat. But then comes the question: to BTO or to buy a resale flat?
We all know some of the most common pros and cons: BTO flats tend to be cheaper, while resale HDB flats let you skip on the waiting time… There’s actually a lot more than that! Here’s what you need to consider:
BTO vs Resale HDB Flat Guide
Are you eligible for a BTO/ resale flat?
To qualify for a BTO/ resale HDB flat at all, the first requirement is that if you’re buying as a couple, at least one of you must be a Singapore citizen, while the other must either be a Singapore Citizen or a Singapore Permanent Resident. If you’re buying as a single, you must be a Singapore Citizen.
BTO hopefuls, the next step is to match yourself against the other eligibility criteria for applying for a BTO flat. In comparison, the criteria for buying a resale HDB flat is more lax. For instance, some might be priced out of the BTO option if their income is too high. Yes, that’s actually a thing, you can earn too much money.
The table below summarizes the eligibility criteria:
Can you wait?
It’s no secret that one of the biggest drawbacks of getting a BTO flat is the waiting time. In comparison to resale HDB flats where it can take you as quickly as 8 weeks to seal the deal and move in, BTO involves a lot more patience, and a loooot more luck.
To begin with, you have to be successful in your BTO application. Some lucky ones hit the BTO jackpot on their first few tries, but for some others might still be unsuccessful after years.
From then, it takes 3-5 years for your new home to be built.
So, the question is: Can you afford to wait? Perhaps you need your own space because you’ve got a baby on the way (or, like, a crazy mother-in-law in the way).
Or in an even worse scenario, what if all that waiting is in vain? BTO projects are, more often than not, oversubscribed. Take November 2019’s BTO exercise for instance:
The application rate for 4-roomers in Ang Mo Kio was 16.2 i.e. there were 16.2 people competing for every unit; 4 and 5-roomers in Tampines were 14.9 times and 20.2 times oversubscribed respectively.
That leaves you with a very slim chance of successfully getting a BTO flat.
Of course, it also largely depends on the popularity of the BTO location. Non-mature estates tend to see fewer applications. In Tengah, the application rate was as low as 1.1, which means nearly every applicant managed to get a unit.
So if time is of the essence, or if you’re tired of trying for a BTO flat, opting for a resale flat might be a more feasible choice. Like we mentioned, once you find The One, the entire transaction can be completed in as quickly as 8 weeks.
Does the HDB flat suit your preferences?
Tip: Non-mature estates are residential areas that are considered less than 20 years old, namely: Bukit Batok, Bukit Panjang, Choa Chu Kang, Hougang, Jurong East, Jurong West, Punggol, Sembawang, Sengkang, Woodlands and Yishun.
If you only want a flat in a very particular neighbourhood, especially mature neighbourhoods, you could be waiting for a loooong time before a chance to get a BTO flat (only a chance, because remember, you’ve still got to ballot!). For instance, BTO flats launched in Bishan in August 2020, the first time since 2006. 2006!!!! That’s 15 whole years.
If you’re looking to buy a resale HDB flat, on the other hand, you’re free to look for homes anywhere in Singapore, even in mature estates like Marine Parade, that pretty much never have any BTO launches any more.
You’ve probably heard someone lament, “Aiyah, nowadays houses so small.” Many Singaporeans have the impression that new BTO flats are smaller than older resale flats in terms of overall size as well as the size of individual rooms.
And… That’s (mostly) untrue! Flat sizes have remained constant in size for the past 20 years.
So if you’re looking at buying an older HDB flat (by which we mean at least 30 or 40 years old), then yeah, you might get more floor area.
But here’s the other thing to look at: the design of the flat. Over the years, HDB flat layouts have changed to make it easier to maximise each space within the flat.
For instance, each HDB flat’s dining area has been incorporated into the living area to provide a more spacious overall common living space, which also gives you greater flexibility in styling your home.
How much is it?
BTO flats come heavily subsidised by the government, which explains why they’re often cheaper than resale flats.
Take for instance the price of HDB projects in the recent BTO launch this November 2019, compared to that of recently sold resale HDB flats of the same size in the same area:
- A 4-room BTO flat in Tampines costs $394,000, while the average price of its resale counterpart is about $420,000.
- In a non-mature estate like Tengah, a 4-room BTO starts from $302,000; the closest comparison would be a 4-room resale flat in neighboring Choa Chu Kang, which costs an average of $335,000.
That said, with some searching, you’ll definitely be able to find competitively-priced resale HDB flats. Bear in mind, though, that a deal you think is too good to be true… probably isn’t true. Consider how factors like how many years the flat has on its lease – an older flat might be much cheaper, but as we all know, HDB flats come with 99-year leases, so there are caveats too (More on that in a bit!).
CPF Housing Grants
Of course, the part about “free money”.
You’re actually entitled to more CPF Housing Grants when buying a resale HDB flat instead of a BTO.
For married couples, the maximum grant amount you can get for a resale HDB flat is $160,000, compared to $80,000 for a BTO:
And for singles, you’ll get a maximum of $80,000 for a resale HDB flat vs $40,000 for a BTO flat:
So let’s return to the example of the 4-room BTO flat in Tampines costing $394,000 vs its resale counterpart costing an average of $420,000. After taking the grants into account, the resale flat can cost as low as $420,000 – $160,000 = $260,000 while the BTO flat will cost $394,000 – $80,000 = $314,000. Resale wins!
Of course, that’s simplified example assuming you’ll get the maximum grant amount. The grant amount you’re eligible for depends on factors such as your income and the size of the flat you’re buying. Find out exactly how much you’re eligible for here:
With resale HDB flats, you’re able to negotiate for the price of the property.
Especially if it’s a buyer’s market – when there are more homeowners looking to sell their home than people looking to buy – you’ve got more bargaining power, giving you a better chance of successfully negotiating prices down.
That said, given property market situation in Singapore at the moment, things are looking up for sellers more than for buyers.
The July 2018 cooling measures tightened Loan-To-Value (LTV) limits by 5%, meaning buyers would have to fork out even more money as down payment upfront. This priced many would-be condo buyers out of the market.
Their next-best alternative? Buying a resale HDB flat. As such, there’s been a bigger pool of homeseekers looking to purchase resale HDB flats. While this hasn’t driven prices up, you probably shouldn’t pin your hopes on driving much of a bargain, given that sellers know that they’ve got the upper hand.
Home renovation is one huge aspect of home-buying that many overlook: all of the costs you rack up after you’ve bought your flat.
BTO flats come as a blank canvas, so most definitely expect some degree of home renovation. It’s up to you to do it up entirely, from installing flooring and built-in fixtures to painting the walls.
For resale HDB flats, you could technically not do any renovation at all, OR you might end up having to do even more renovation works than BTO flats require.
If you’re happy with the as-is condition of the flat, you might not have to do any renovation works at all. In fact, many homeowners choose to refresh their home with a fresh coat of paint or do some minor improvements just before selling their flat to improve its marketability, which means you as a buyer inherit a freshly spruced up flat! So your cost = 0. Score!
On the flipside, if you’re planning on redoing your resale flat, that’s when it gets a lot more expensive than just doing a BTO flat. For instance, before you even pay for the installation of new floor tiles, you’ll also have to fork out a good amount to hack away the existing ones.
How many years are left on the lease?
BTO flats come with a fresh 99-year lease, whereas resale HDB flats, depending on how old they are, have a limited period left on their lease.
The number of years left on your flat’s lease affects 2 things: how much your flat is worth, and how much CPF you can use to purchase your flat.
Let’s first talk lease decay: the idea that the lesser the lease left on your 99-year leasehold HDB flat (i.e. the older it is), the lesser value it carries.
When your HDB flat reaches the end of its leasehold life, it will be returned to the government at no cost, rendering the flat invaluable.
It follows, generally, that the older a home, the less it’s worth on the resale market.
The allure of older resale HDB flats
Things aren’t this straightforward, of course. There are also other factors that might increase the value of resale flats.
For instance, homeseekers who value the wider range of amenities in mature estates may be willing to fork out more money for a resale HDB flat in the area, even if it’s an older one.
In fact, older resale flats are getting more popular. A record number of 2,537 older HDB flats (i.e. those more than 40 years old) were sold in 2018. Let’s put this into context: Sales of older flats as a percentage of total resale transactions increased from 1.9 per cent in Q1 2009, to 13.9 per cent in Q1 2019, the highest percentage recorded.
If the flat can cover you* until at least 95 years of age:
If the lease doesn’t expire before you turn 95, you’re allowed to use your CPF savings to finance your flat up to the flat’s Valuation Limit (the current property value or the purchase price of the property, whichever is lower).
If the flat doesn’t cover you until at least 95 years of age:
You’ll only be allowed to use your CPF funds up to the Valuation Limit pro-rated according to the length of time the lease can cover you.
Use the CPF Board’s calculator tool (not the same as the one above!) to determine the limit.
But if the flat has less than 20 years of lease remaining:
You’re not allowed to use any CPF savings to finance your flat. Non-nego.
* “You” refers to the youngest buyer. For instance, if you’re 30 and your co-homeowning partner is 28, your partner’s age will be used in the calculation.
To BTO or to resale?
Pat yourself on the back, you’ve basically given yourself a BTO vs resale crash course.
If you’re leaning more towards applying for a BTO flat, the HDB website is a good place to start (You can apply online in 15 minutes!).