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.
So we’ll cut to the chase: to BTO or to buy a resale flat? Here’s what you need to consider:
BTO vs Resale HDB Flat Guide
1. Are you eligible?
2. Can you wait?
3. Does the HDB flat suit your preferences?
4. How much is it?
– Comparing prices
– Renovation costs
5. How many years are left on the lease?
– Lease decay
– The allure of older resale HDB flats
– CPF limits
Are you eligible?
BTO hopefuls, the first step is to match yourself against the eligibility criteria for applying for a BTO flat; in comparison, the criteria for buying a resale HDB flat is more lax:
Eligibility criteria for couples:
Eligibility criteria for singles:
Can you wait?
It’s no secret that one of the biggest drawbacks of getting a BTO flat is the waiting time.
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).
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. Once you find The One, the entire transaction can be completed in as quickly as 8 weeks.
Tip: Another option for couples is to rent a flat under HDB’s Parenthood Provisional Housing Scheme (PPHS) if you’ve successfully balloted for a BTO flat and are waiting for its completion.
Under this scheme, rental rates are heavily subsidised – you can rent a 3-room HDB flat for as low as $600 a month!
Does the HDB flat suit your preferences?
BTO projects tend to be in non-mature estates, or even in towns that kind of don’t even exist yet (we’re looking at you, Tengah).
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’re looking to buy a resale HDB flat, on the other hand, you’re free to look for homes even in mature estates like Bishan or Marine Parade.
Most Singaporeans generally know BTO flats to be smaller than older resale flats in terms of overall size as well as the size of individual rooms.
That would be true if you’re comparing a BTO flat today against, say, a 30-year-old HDB flat.
But flat sizes have remained constant in size for the past 20 years, so a HDB flat that’s just reached its 5-year Minimum Occupancy Period (MOP) probably wouldn’t be much bigger than upcoming BTO projects.
Another aspect to look at would be 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 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 February 2019, compared to that of recently sold resale HDB flats of the same size in the same area:
*Note: The table compares the starting price of BTO projects (i.e. the lowest prices) against the median price (i.e. average prices) of resale HDB flats. In reality, the price difference could be smaller.
Are there resale HDB flats cheaper than BTOs in the area, though?
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 it comes with its caveats too (More on that in a bit!).
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 at the moment, things are looking up for sellers more than for buyers.
The July 2018 cooling measures tightened Loan-To-Value 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.
Of course, the part about “free money”.
Contrary to popular opinion, you’re actually entitled to more grants when buying a resale HDB flat instead of a BTO.
Here’s the maximum grant amount you can get:
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:
This is one huge aspect of home-buying that many overlook: all of the costs you rack up after you’ve bought your flat.
Renovating a resale flats may be much cheaper OR much more expensive than renovating a BTO flat.
Ok, before you think, “You don’t say???”, we’ll explain:
BTO flats come as a blank canvas, so it’s up to you to do it up entirely, from installing flooring and built-in fixtures to painting the walls.
If you’re happy with the as-is condition of the resale flat, you might not have to do any renovation works at all.
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. You don’t just have to pay for, say, 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.
A record number of 2,537 older HDB flats (i.e. those morethan 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 you bought your flat before 10 May 2019:
Your CPF savings that can be used to finance your HDB resale flat – or whether it can be used at all – depends on the remaining lease left on the flat.
If the flat has less than 30 years of lease remaining:
You’re not allowed to use any CPF savings to finance your flat.
If the flat has 30-59 years of lease remaining:
If the lease doesn’t expire before you turn 80 (a simple way to calculate this is if your age and the remaining lease of the flat adds up to more than 80), you’re allowed to use a limited amount of CPF savings to finance your flat.
This amount is capped at a percentage of the purchase price of the value of the flat at the time of purchase, whichever is lower.
Use the CPF Board’s calculator tool to determine the limit.
If the flat has 60 or more years of lease remaining:
Go for it!
If you bought, or are buying your flat from 10 May 2019:
New rules on using your CPF funds to finance your HDB flat were introduced. With this, there’ll be a greater focus on your HDB flat serving as your home until a ripe old age:
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!).