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Should you buy a BTO or resale HDB flat? What to consider if you're a first-timer

The classic newbie homebuyer's dilemma is whether to buy BTO or resale. Here's what to consider when making your decision.

The classic Build-To-Order (BTO) flat story goes like this: Boy meets Girl. Boy proposes. Girl accepts. They apply for a BTO together and get married in two to three years.

Why two to three years? Because that’s how long it takes for a bunch of flats to be built and become livable. Conventional wisdom says: Get engaged, live with your parents, and when your flat is almost ready, get married and then move in together and make lots of babies.

(Illustration: 99.co)

It’s a classic story for good reason. Every now and then, we get young 20-somethings asking us whether they should buy BTO or Resale.  Despite the fact that resale HDBs have their good qualities, BTOs are the most affordable option and definitely should be considered first. Here’s why.

Yes, generally resales are bigger. But they are also more expensive.

(Illustration: 99.co)

BTOs are always cheaper than resale flats, as they aren’t being sold by owners looking for capital gains. Almost every Singaporean expects to make money by selling their flat.

As a recent case illustrates, a BTO launch in Sengkang for a 4-room HDB flat was valued at S$252,000, while a comparable unit changed hands on the resale market for about S$400,000.

And yes, while older HDBs tend to be bigger and more convenient, they are also more expensive. 

If you want to check whether you’re getting value for money, it’s best to assess the property in terms of its price per square foot.

That said, even taking different apartment sizes into account, BTOs are still substantially cheaper than resale flats.

Sure, both of them have grants, but BTO still wins in cost.

(Illustration: 99.co)

For BTOs there is for instance the option to apply for the Additional CPF Housing Grant (AHG) and Special CPF Housing Grant (SHG), which together can come up to S$80,000.

Whether you can get the grant, and how much of it depends on whether you meet certain eligibility criteria. However, the ample choice of locations for resale flats gives you more options: You could live close to your parents and thereby attain the Proximity Housing Grant at S$20,000, or you could live near key amenities like top schools or your office.

The grants available for each, and your eligibility for said grants will have an impact on the price.

However, BTOs are still cheaper by a landslide.

If you can wait long enough, a BTO with a good location is only a matter of time.

(Illustration: 99.co)

Resale flats are sold on the market and can be located anywhere on the island, granting you ample choice in terms of location. 

For the location of a BTO flat, you are dependent on HDB launch sites. Generally speaking, BTOs tend to be launched in less mature estates. That’s mainly because the good spots have already been taken.

Still, as argued for in a related article, less mature estates, while often viewed as less appealing than their mature counterparts, do not necessarily have a worse location. Indeed, with the government set on extensively developing every inch of the island, your BTO area will sooner or later come to flourish. There’s also less traffic and noise pollution in less mature estates (quiet enclaves). So, you may very well be looking at some healthy property appreciation in the future.

BTOs will last you a lifetime. Resales might not (unless you die early).

(Illustration: 99.co)

Lease terms matter. Why? Because we are all homeowners, right? Well, kind of – or rather, kind of not. BTOs come with a 99-year leasehold. Older HDBs can easily have only 70 or 60 years left on their lease, and by any standard of logic that should – everything else being equal – make them worth less than newer BTOs with 99 years left.

While nobody may at this point be factoring it in, there will probably sooner or later be a point when the end-of-lease factor will be locked into our collective consciousness, and when that time comes, homes with little time left on their lease will see their value take a hit.

Here’s one way to look at it: Think of your HDB flats as rented apartments, and calculate how much you’re paying per month for rent.

For a hypothetical 5-room resale flat with 93 years left, costing S$600,000, that’s: S$600,000/93 (years left) / 12 (months) = S$537 per month.

For a hypothetical BTO flat with 99 years left, costing S$360,000, that’s S$360,00 / 99 / 12 = S$303 per month.

Also, it’s harder to resell your resale flat 10 or 15 years down the road – most Singaporeans want to be able to leave a home to their children. Based on this, BTOs always win.

Be prepared to pay more in renovations for a resale.

(Illustration: 99.co)

BTOs come in a vanilla state, unfurnished and without any decor. Good? Bad? If you see your new pad as your very own Singaporean Sistine Chapel, then a BTO can serve as your blank canvas.

If you do not mind other people’s tastes, or indeed cherish it, then resale flats may suit you more. You do not have to do all the designing yourself (or hire a pricey interior designer). You can simply pick a resale flat with an interior you like to begin with. But if you do intend to do some renovations, more often than not, resales will set you back more. You might have to hack away existing renovations as well as install new things.

So, why buy a resale?

(Illustration: 99.co)

Citizenship: If there’s no Singaporean Citizen (SC) in your family nucleus, then you have no choice. All PR families have to buy resale.

Income ceiling: Well, this one is pretty straightforward. You bust the income ceiling, you can’t buy a subsidised flat. Hey – earning a lot of money is a good problem to have.

Waiting time: With this one resale flats win, hands down. As soon as you make the deal, you can generally move in within a few weeks. With BTOs, not so much – as noted previously, most BTOs take around two to three years to be developed. There are two options here: Either stay with your parents or move into the rental market. The former will help you save money, while the latter will allow you to start an independent life with a new home.

This story first appeared on 99.co

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