For young Singaporeans just starting with their careers, purchasing an affordable HDB flat (at a good value) is by far the easiest way of stepping into property ownership. Among HDB flats, there are two main options. Build-to-Order (BTO) flats, which buyers purchase directly from HDB; and resale flats, which buyers purchase on the secondary market from other sellers.
There are a whole host of distinct features of these two housing options. These differences range from price and location to flat size and layout. In this article, we seek to clear the confusion by outlining 5 major considerations when deciding between BTO vs Resale flats.
1. Which are you eligible to buy: BTO vs Resale flat?
The eligibility for purchasing a BTO flat is much more stringent than for purchasing a HDB resale flat. It is thus crucial to check if you fulfil the various criteria for purchasing a BTO flat, which are spelled out on the HDB website.
Among the various eligibility conditions, perhaps the most notable is the income ceiling. This represents an upper limit on the combined monthly income generated by a household. If the total household income exceeds the income ceiling applicable for a particular unit type, the household is not eligible to apply for that unit type.
In September 2019, HDB revised the income ceiling for all unit types upwards, allowing more households to be eligible for BTO purchases. The current income ceiling ranges from $7,000 to $21,000. The lower figure applies to smaller-sized units (e.g. 2-room flexi flats), while the upper figure applies to bigger households (e.g. extended or multi-generational family buying 3rd Generation flats). For a standard 3-room or 4-room BTO flat, the income ceiling is currently at $14,000.
BTO vs Resale?
If you do not fulfil at least one criteria for purchasing a BTO flat, you are ineligible to apply for a BTO flat.
2. How much are you prepared to pay for a BTO vs Resale flat?
As Singaporeans, we all want to get the best value for anything we buy. More so for houses, given how huge the price tag can be. Aside from differences in purchase price, BTO and resale flats also differ in terms of the type of grants offered to allay the purchase price, and the estimated renovation costs for the flat.
The heavily subsidised BTO flats generally have a much cheaper purchase price as compared to resale HDB flats. Conversely, the purchase price of resale flats depend on good old demand and supply in the market. Thus, their prices may fluctuate from time to time. HDB has also explained why BTO and resale flats in the vicinity may differ in price. According to a very recent article from SingSaver, there is a sizeable price range difference between BTO and resale flats based on 2019 prices. Comparing between BTO flats in mature estates and HDB resale flats, the latter tends to command a premium of at least 30% across the various unit types (3-, 4- and 5-room flats).
Aside from purchase price, you should also consider the various grants you can tap on. Do note that for BTO and resale flats, there are different types of grants available, and different grant amounts based on the various criteria as stipulated on the respective HDB weblinks.
Solely for BTO applicants, the Special CPF Housing Grant (SHG) only applies to first-time purchases of 2-room flexi, 3- and 4-room flats in non-mature estates. There are various other criteria including employment, income ceiling, remaining lease of the flat and having no current or recent ownership or interest in property. The grant amount (up to $40,000) is dependent on household income.
For resale flats, due to the higher purchase price as compared to BTO flats, HDB has provided subsidies and grants, primarily for first-time buyers. The details of these are listed on the HDB website. First-time flat buyers can enjoy a CPF Housing Grant of up to $50,000 (for families) and $25,000 (for single buyers). Further grants also help to allay the purchase price for eligible second-time buyers (with effect from May 2019), as well as for buyers who would like to live near their parents or children.
Finally, for both BTO and resale flat buyers, the Additional CPF Housing Grant aims to help lower-income families with an income ceiling of $5,000, along with largely the same criteria as those for the SHG. Likewise, The grant amount of up to $40,000 is also dependent on household income.
According to an article by Qanvast in 2018, BTO flats are likely to require around 40% less in renovation costs as compared to a HDB resale flat. This is simply because BTO flats are newer and thus less likely to require substantial repair or renovation work. (Do note, too, that HDB has a 3-year restriction on replacing bathroom floor and wall tiles within new BTO flats.)
Resale vs BTO?
If you are planning to acquire a flat at the lowest possible cost, you should opt for a BTO flat. This is unless you are alright with going for a not-so-attractive HDB resale flat. Do note, however, that you should consult the HDB website or a property agent / professional to get a good sensing of which grant(s) you are eligible for. This helps you to get a more complete idea of the total discounts you can benefit from.
Another key point is that price and subsequent costs depend on a whole range of tangible and intangible factors. Thus, a careful consideration of each and every price point is ultimately essential to make an informed decision.
3. Are you planning to retain the flat for future generations?
New BTO flats sold have a fresh 99-year leasehold tenure. This typically means that three generations (you, your children and grandchildren) can enjoy the flat.
Conversely, the balance lease tenure for resale flats simply depends on when it was constructed. The earlier the flat was built, the earlier the lease commencement, and so the shorter the available lease remaining.
BTO vs Resale?
If you have long term plans to hand your flat over to your future generations, you should opt for either a BTO flat or a recently completed HDB resale flat.
4. Do you have any preferred locations for your flat?
More often than not, many upcoming BTO projects are located in non-mature estates. Such estates are developed during the past two decades or so. They are also generally in outlying areas on the edges of Singapore, further from the Central Business District (CBD). Given this, you should consider how far you are willing to commute to and from work every day, assuming you work in or near the CBD. Often-cited examples of non-mature estates include the existing towns of Sengkang, Punggol, and Choa Chu Kang, among others. Upcoming estates where development is underway include Bidadari and Tengah.
Additionally, non-mature estates also typically have a more modest range of amenities compared with mature estates. This is because new amenities are still in the process of development for non-mature estates. In view of this, you should consider if you are fine with taking a bus ride or short drive just to get to the nearest supermarket, the nearest polyclinic, or to your child’s enrichment class. This contrasts with living in mature estates where your flat is located within walking distance from these amenities.
New BTO flats, more often than not, are located in non-mature estates. This is because most of the land in mature estates have already been developed more than two decades ago. Among the 12 BTO launches of 2019, 8 projects (comprising approximately 79.5% of total units) are located in non-mature estates. We set out the breakdown below:
BTO project(s) in non-mature estates (9,086 units in total):
Estate Names of BTO project(s) Total units
Tengah Garden Vines @ Tengah 5,640 units
Garden Vale @ Tengah
Punggol Punggol Point Cove 2,724 units
Punggol Point Crown
Woodlands (South) Champions Green 722 units
BTO project(s) in mature estates (2,343 units in total):
Estate Names of BTO project(s) Total units
Tampines Tampines GreenGlen 1,306 units
Ang Mo Kio Yio Chu Kang Beacon 454 units
Kallang / Whampoa Kempas Residences 583 units
Resale vs BTO?
Location is inevitably a key attribute for residential property. Hence, many flat buyers prefer living in a mature estate closer to the CBD rather than an outlying, non-mature estate.
5. Do you need a flat immediately?
Applying for BTO flats can be a long-drawn and ultimately unsuccessful endeavour. Firstly, there is no guarantee of a unit for applicants for BTO units. This happens if a BTO project is oversubscribed, which usually occurs for projects in mature estates, which are sited in a popular or accessible location. Two very recent, and extreme, examples include:
- The 4-room flats at Kempas Residences, released in May 2019, were 15.6 times oversubscribed.
- The 5-room flats at Tampines GreenSpring, released in November 2019, were 20.2 times oversubscribed.
Even after you have succeeded in getting your BTO unit, there is usually a wait time of between 2.5 to 4 years after application for the BTO development to be ready for move-in, due to the construction process.
Conversely, closing a resale unit transaction guarantees that you will get the unit, and you can move in as soon as the transaction is complete, or when the previous occupant vacates the unit.
BTO vs Resale?
If you’re desperately looking for a unit with an expected move-in within months, don’t even consider a BTO unit.
Taking a decision on whether to purchase a BTO or resale flat can hinge on many things. It can be disorienting especially when it is your first ever home purchase. We hope that this article can remind you of 5 key considerations not to overlook, amidst your excitement, when you are thinking about whether to get a BTO or a resale flat.
Also, if you might be considering ECs, here are the ways to decide between resale flats and executive condos in Singapore.