Whether you are buying a resale flat to stay near parents, avoid the long BTO waiting period, or just appreciate the quaintness of older HDB estates, there can be many reasons to buy a resale flat from the open market. HDB resale flats comes in all variety, from flat types that are no longer built, to new resale flats that are just out of their Minimum Occupation Periods (MOP).
Aside from the remaining lease, one consideration that potential buyers may face is whether to buy a well-renovated resale flat (which is priced higher) or buy a cheaper flat and paying more to renovate it.
Read Also: 5 Things You Need To Know Before Buying An Older HDB Flat With A Lease Of Less Than 50 Years
Pro #1 Move In Immediately
One key reason for buyers to consider resale flat over waiting for a BTO is the long wait time for BTOs. If pressing housing needs is the main reason why you are choosing a resale flat, a well-renovated resale flat may be more suitable for you. With a well-renovated flat, the electricals are likely to be upgraded (if it was an old flat), the built-ins and flooring are likely to be in good condition and the design style is likely to be contemporary enough to not look too dated.
Instead of spending time to source for an interior designer or contractor and waiting for the renovation works to be completed, you can move in and start enjoying life in your new home. This can mean a difference of a few months. In the best-case scenario whereby, your seller doesn’t require an extension of stay, you can move in immediately after the resale completion or about 8 weeks after HDB accepts the resale application.
Read Also: How Much Does It Cost To Furnish Your HDB Flat?
Pro #2 Less Chance Of Renovation Delays
One advantage of not having to carry out a renovation is cutting out the variability of managing renovation delays. As most people have experienced when moving and renovating a flat, timelines can be fluid when it comes to renovation. While major works such as hacking, building of built-ins, and electricals may have been completed, there may be minor touch-up works or last-minute installation of components or appliances that require more time. While these usually won’t derail the renovation handover, they could still significantly inconvenience your moving in.
Additionally, due to the pandemic border restrictions, interior design firms and contractors may have issues securing their needed manpower. While the recent opening of the VTL with Malaysia may have alleviated some manpower concerns, the pandemic situation can swiftly change and close the borders again.
Pro #3 Minimise Or Avoid Higher Renovation Cost
In most cases when you buy a well-renovated flat, you may have minor maintenance works to handle before you settle in. After all, the renovation would likely be around 5 years old; renovated when the seller first moved in. Thankfully, the cost and time taken for these maintenance work (like a fresh coat of paint or replacing door locks) is a fraction of the cost and delay of a full renovation. Quick touch-ups to a well-maintained well-renovated flat would likely take one week or less and cost less than a few thousand even if you are replacing doors and adding window grilles.
Additionally, renovation costs have also increased in response to the tighter manpower supply in the construction industry. The same renovation works which would have cost your seller $50,000 pre-pandemic is likely to be much more expensive now if you replicate the same exact renovation during the pandemic. Not only has labour cost increased, but material costs have also increased due to the global supply chain disruption and inflation.
The price premium you pay for a well-renovated flat could be well worth the savings you make by not carrying out a full renovation now when renovation costs are elevated.
Read Also: 7 Ways To Save Money On Your Renovation Cost
Con #1 Incur Higher COV
The most obvious con of buying a well-renovated flat is the higher price tag. After all, the previous owner would have likely spent a significant sum to renovate the flat to a standard that still feels up-to-date today and they would try to recoup their cost in the selling price.
Most likely, you would have to pay a price premium for opting for a well-renovated flat and this could contribute significantly to the cash over valuation (COV) you will have to pay. This could easily mean a few ten thousand premium over other flats selling in the same location.
If recent transactions among similar-sized HDB flats in the same area are happening at $550,000 or lower, then it may be challenging to get a valuation of $600,000 or more, even if that is the price that you as the buyer is happy to pay for the well-renovated flat. In this case, if the HDB valuation comes in at $600,000, you would have to pay a COV of $50,000 which has to be paid in cash and cannot be covered by a loan or CPF.
Read Also: What Is Cash-Over-Valuation (COV) And How Does It Affect (Or Not Affect) HDB Prices
Con #2 Limits On Loan Quantum And CPF Usage
Not only does the HDB valuation affect the amount of COV you have to pay, it also affects how much you can borrow. This is because the valuation limits the maximum loan you can take. Likewise, the valuation also limits the amount of CPF you can use.
In the case where you buy a cheaper flat that is at market valuation, you would be able to fully use CPF if you take a HDB loan or only set aside 5% as downpayment for a bank loan. There is no need to fork out extra cash for COV. Additionally, you also have the option to take a renovation loan to finance your renovation.
For the cash-strapped buyer, opting for a resale flat that doesn’t require COV may be a better option.
Read Also: What Happens When You Buy A Property Above or Below Valuation?
Con #3 Miss Out On Achieving Your Desired Renovation
Many people buy a flat not just a functional place to stay but also a place to express their individual preferences and styles. If achieving your dream home is key to your homebuying aspirations, it may not make sense to pay the premium to buy a well-renovated flat if your intention is to tear it all down.
Rarely would someone else’s design preferences perfectly match yours, there is likely something that you would want to change even in the best well-renovated flat. If achieving your dream home renovation is important to you, buying an already renovated flat could be a missed opportunity as most people will find it a waste of resources to completely redo a well-renovated flat. However, doing a complete renovation overhaul of a flat that is clearly aging would give you the blank canvas to express all your interior design dreams.
Buying A Home Is A Personal Choice
In the end, buying a home is a personal choice. For the cash-strapped, buying a resale flat that would not incur COV gives more options for housing and renovation financing. However, if your most pressing need is to find a place to stay, you like the existing renovations and you have the cash to pay the possible COV, paying more for a well-renovated unit may be your best option. You may just have to make sure that the premium you are paying is worth the value of the already done renovation.
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