Imagine the classic story of Boy meets Girl, dated for a while – the Boy buys a ring to propose. Girl accepts. And the big question surfaces: Should they get a Build-To-Order (BTO) flat, and wait for at least three years before getting married?
Some of you maybe wondering why is there a need to wait for at least three years? Well, this is typically how long it takes for a few blocks of flats to be built and ready for habitation. In view of covid-19, the wait will now become longer due to labor crunch and the financial constraints faced by developers.
Every now and then, we get young couples 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 are some of the reasons:
BTOs are cheaper, but HBD resale pricing are not far from BTO
BTOs are highly subsided properties from HDB that are very affordable. Furthermore, they aren’t being sold by owners looking for capital gains. Almost every Singaporean expects to make money by selling their flat.
The recent BTO launch in Hougang for a 4-room HDB flat was valued at S$324,000, while a comparable unit changed hands on the resale market for about S$460,000. As you can see, HDB resale flats are more expensive than the BTOs – but in most cases, not by very much. Although older HDBs tend to be bigger and more convenient, they are also more expensive. Despite the value of the property lies with its price per square foot – BTOs are substantially cheaper than resale flats.
The flats with a larger price difference come from the more mature or “hotter” estates: Queenstown, Tampines and Toa Payoh. But for Yishun, Sengkang and Sembawang (all non-mature estates), the difference is less than $50,000.
Both BTO and Resale have grants, but Resale can get you more housing grants
So, if the difference between an HDB BTO and a resale flat in the same estate can be as low as (or less than) $50,000 – is this a significant amount? Well, the answer is yes!
This is because for first-timers there is a Family grant of $50,000. Hence if the resale flat you are interested in costs less than $50,000 more than a comparable BTO, that would mean the final price tag after the grant is actually lower than the BTO price. Furthermore, depending on your combined income, first-timer families are given the Enhanced CPF Housing grant up to $80,000.
HDB resale flats will qualify you for Proximity Housing Grant of $20,000 if you happen to be buying a flat within 4km of your parents. (There’s no such grant for BTOs – and applicants only get the priority during balloting.)
If you can wait long enough, a BTO with a good location is only a matter of time.
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.
BTOs will likely last you a lifetime – Resales might not.
Lease terms matter. Why? Because we are all homeowners, right? The idea of “Lease decay” that your 99-year lease HDB flat will have no more value when it reaches the end of its life is often the fear of Resale flat owners. 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.
The other thing is CPF restrictions on buying older flats. It was announced in 10 May 2019 that if your HDB resale flat has less than 60 years left on the lease, there are limits on how much CPF you can use to pay for it. Use of CPF will be pro-rated based on the extent the remaining lease of the property can cover the youngest buyer to the age of 95.
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.
Also, it’s harder to resell your resale flat 15 or 20 years down the road – most Singaporeans want to be able to leave a home to their children. Based on this, BTOs always win.
Still unsure of what works for you and your family? Speak to us now! At Storeys, we will be partnering with you and this could give you peace of mind. Simply mail us at firstname.lastname@example.org or call us at 8366 8383 for us to be part of your journey!