When it comes to buying their first home in Singapore, the majority of Singaporeans tend to opt for HDB flats. Singaporeans have two main options when it comes to purchasing a HDB flat. They can apply for new Build-To-Order (BTO) flat, or buy a resale HDB flat from the open market.
In this article, we will explore some of the key factors that you should consider when deciding between a BTO flat or a resale flat. If you are looking to buy your first HDB flat, this is the perfect article for you.
Find Out More
- Eligibility Criteria
- Lease Tenure
- Waiting Period
- Renovation Cost
- Size & Layout Of Home
- Future Market Value
If you are not eligible to apply for a BTO flat in the first place, the question of which type of flat you should choose wouldn’t even matter. Hence, the first thing you should check is whether you are eligible to apply for a BTO flat.
Here are some of the key criteria that you should know about.
Citizenship: At least one person applying for the BTO flat needs to be a Singapore Citizen and at least one other person applying (if applicable) needs to be a Singapore Citizen or Permanent Resident.
Income Ceiling: Probably the most sticky criteria for Singaporeans who have done well in their career, and who are getting married at a later age. The current income ceiling for a BTO flat is $14,000 per month. If you and your spouse (are fortunate to) earn more than this, you do not qualify for a BTO flat and will need to buy a resale flat.
This figure may rise up to $21,000 for the extended family/multi-generation family income ceiling, if you’re applying for a 3Gen flat. However, you need to take note of the method of calculations for this $21,000 ceiling. It can also fall to as little as $7,000 if you’re applying for a 2-room flat under the 2-Room Flexi Scheme.
Editor’s Note: If your income is slightly above $14,000, you could still opt to apply for an EC (Executive Condominium). The income ceiling for such properties is $16,000.
Age: You must be at least 21 years-old at the point of application.Under the Fiancé/Fiancée Scheme, applicants who are below 21 years-old but above 18 years-old can apply for a BTO with a written consent from the applicant’s parents or guardians.
Property Ownership: If you currently own other residential properties, either locally or overseas, or have disposed them within the past 30 months, you will not be eligible to apply for a new BTO flat. Applicants must also have only purchased up to one HDB, DBSS (Design, Build and Sell Scheme) or EC in the past. This is because Singapore Citizens are only eligible for two subsidised flats from the government.
It’s widely known that BTO flats are cheaper compared to resale flats in the same estate. HDB does take into account different locations and attributes when setting the sales price of its BTO flat.
According to HDB, here are some of the factors that determine the sales price of a BTO flat
While BTO flats are typically cheaper from an overall quantum point of view, it may not necessarily be cheaper from a price per square feet (PSF) calculation. This is because older flats tend to be bigger. For example, a 4-room BTO flat built today is usually about 90sqm (968 square feet), while older flats are about 104 Sqm (1,119 square feet).
Another way of looking at price is to consider how much you are paying per square feet.
|BTO Flat||Resale Flat|
(lowest priced flat in Tampines, Nov BTO’18)
(Median resale price, 4-room flat in Tampines, 3Q2108)
|Size||968 sqft||1,119 sqft|
Homeowners can consider how much space they are getting for the price they pay. Older resale flat, which may appears more expensive, could only be marginally more costly, or even cheaper, once you take into consideration the size of the flat that you purchasing.
When buying a BTO, you must be prepared to accept that the location you select may not be your most ideal choice. This is due to the simple fact that most of the space in “prime” Singapore have already been taken up a long time ago by existing developments.
If you are fortunate enough to apply for a BTO launch at a good location, be prepared for the launch to be heavily oversubscribed. Luck has to be in your favour.
When buying a resale flat, you can pretty much get any location that you want as long as there are HDB flats available in the estate. These include estates such as Tanjong Pagar, Marine Parade, Queenstown and Bukit Merah. Of course, you must also be prepared to pay a lot more to buy a resale flat in these locations.
HDB has also launched the Prime Location Public Housing Model to keep new public housing launches in prime locations affordable. However, the tradeoffs include the subsidy recovery and 10-year MOP.
This has become a hot topic of late, since there are older flats (in good locations) which have been built a long time ago, and now have a remaining lease which may be less than 60 years.
The key consideration for new homeowners to ask themselves is whether they will be willing to pay a high price for a flat today, which 20 years from now, would only have a remaining lease of 40 years. This isn’t to say that such a flat isn’t valuable (it still is) but the price you pay (today) should ideally reflect the fact that the remaining lease is shorter.
New BTO flats have a fresh 99-year lease. What this means is that your children are likely to be able to continue staying in the flat for the duration of their lifetime, if they want to, compared to older flats.
The average waiting time for a BTO flat to be built is between 2.4 to 5.3 years, with an average waiting time of 4.1 years. In contrast, if you buy a resale flat, there is no waiting period since the flat is already built.
To shorten your waiting period for BTO flats, you can consider applying through a Sales of Balance flat (SBF) or Re-Offer of Balance flat (ROF) exercise. Units available during an SBF or ROF launch are BTO flats that have been previously offered during past BTO launches, but are now available for selection once again because 1) the homeowners who selected the flats have chosen to give it up, or 2) these flats were never selected by applicants in the previous exercise. Open Booking flats are also an option but they tend to be quickly snapped up when available.
Some future home owners, particularly those who apply under the Fiancé/Fiancée scheme, may be happy to wait for their keys, since they are yet to be married. Others who are married and who may already have kids may be less inclined to wait.
Renovation works on resale flats tend to be more expensive due to extensive hacking and rebuilding of existing features within the flat that a new homeowner may not want. The average renovation spending for HDB resale flat is from $40,000 (3-room flat) to $79,000 (5-room flat), as compared to $38,500 (3-room BTO flat) to $52,000 (5-room BTO flat) for a new BTO flat.
For example, if you buy a resale flat and want the tiles to be replaced, you don’t just pay for new tiles and installation. You would also need to fork out for hacking and removing the existing tiles, increasing the overall work required and ultimately, cost.
Of course, this isn’t to say that renovating a resale flat will always be more expensive than new flats. If you buy a resale flat closely matching what your needs are, you could move in almost immediately with minimal renovation work required. Of course, any money you save on renovation works is likely be reflected in the purchase price as the existing owners will likely demand a premium price for a flat in such a great condition.
If you like to read up more about renovation cost, you can read this article about how much it cost to renovate a HDB flat, as well as other hidden cost that your renovation contractor may not tell you.
Size And Layout Of Home
One of the most overlooked factors that you should not ignore is the size and layout of your home.
As mentioned above, older HDB flats tend to be bigger as compared to newer BTO flats. So for a start, you get more space, even though the number of bedrooms remain the same.
The layouts of older resale flats are also significantly different from that of newer BTO flats. In our opinion, the standard layouts of new HDB flats are much better compared to the layout of the older HDB flats. For a typical 4-room flat today, you now have the living and dining space in the living hall alongside the kitchen, with a small walkway separating the 3 bedrooms thus providing more privacy. Having the common bathroom nearer to the bedrooms as opposed to being situated beside the kitchen also makes more sense.
However, not everyone may agree. Some home owners may prefer the layout of older flats, where you typically have a big open living and dining space in the middle of the home, a huge kitchen and the bedrooms around it.
Wide, open space of older HDB flats also provide more options for families that are intending to customise the layout of their homes differently. If you have a large budget and a good interior designer, you might be able to plan your space in a way that you prefer.
Future Market Value
BTO flats tend to fetch better resale value after its Minimum Occupancy Period (MOP) as compared to resale flats. Here are a few reasons why.
It’s newer. Take for example, a BTO flat in a mature estate (e.g. Pasir Ris, Tampines, Ang Mo Kio). Once it reaches its MOP and is available in the resale market, it will be “competing” against other resale flats which may easily be 15 to 20 years older. With all things being equal, this gives it an added advantage in the resale market.
Secondly, when you buy a resale flat instead of a BTO flat (even though you qualify for one), you are competing in the open market against other homeowners who may not be eligible to buy a BTO flat.
These include 1) Permanent Residents (PRs) who are not eligible to purchase a BTO flat, 2) families whose household income exceeds $12,000 per month, 3) those who recently sold their private properties and 4) Singaporeans who have already bought two subsidised flats in the past. The added demand from these would-be buyers push up the price.
Depending on whether you buy a BTO flat or a resale flat, there are different grants that you may qualify for. Since it ultimately affects how much you pay for your flat, you should take these grants into consideration. Do note that how much grants you receive is also dependent on your combined income.
For BTO And Resale Applicants
Enhanced CPF Housing Grant: The Enhanced CPF Housing Grant replaces both the Additional Housing Grant and Special CPF Housing Grant. It gives first-time homeowners, regardless of whether they buy a BTO or resale flat, additional subsidy based on their average household monthly income. You can receive up to $80,000.
For Resale Flat Buyers Only
Family Grant: The Family Grant provides first-time homeowners earning up to $14,000 and buying a resale flat a grant of up to $50,000 for 4-room and smaller flats and $40,000 for 5-room or larger flats.
Proximity Housing Grant: If you are buying a resale flat in the same town or within 2km of where your parents are staying, or are intending to stay with them in the same flat, you will be eligible for the $30,000 Proximity Housing Grant (PHG).
Did we missed out on something important? Drop us a message at [email protected] if you think there are any other factors that we should be including.
Listen to our podcast, where we have in-depth discussions on finance topics that matter to you.