For newly-married couples looking to buy a new home, they face the perennial question of whether they should get a new Build-to-order(BTO) flat or get a resale HDB. For those who think that there’s an easy answer, sadly, there isn’t. Both types of properties come with its own advantages and disadvantages, and we’d rather ask potential buyers to focus on their long-term objectives instead.
First, let us look at the key factors differentiating the 2 types of properties:
|Waiting time||Average waiting time to receive your new BTO flat takes between 2 to 4 years.||Once you’ve exercised your option to purchase, it will take a minimum of 3 months before you get the keys to your new home.|
|Location||BTO flats are typically located pretty far away in non-matured estates (eg. Sengkang & Punggol) from central Singapore, but you may find some nearer to central if you are extremely lucky.||Flexible – up to you to choose.|
|Cost||Definitely more affordable compared to resale flats. Indicative pricing for 4-room flat in Punggol is between $257k – $365K.||More expensive usually. A 4-room flat in Punggol is currently priced between $420,000 to $560,000.|
|Space||New flats are slightly smaller compared to older HDB flats. 4-room flats are currently around 90 sqm.||One reason buyers look for resale is due to the larger sizes compared to BTO. A 4-room resale flat would be around 104 sqm.|
|Amenities||Since most BTO are in new neighbourhood, amenities around might be less established compared to older neighbourhoods.||Generally more well-established.|
|Renovations||Since everything is new, you will need to budget for renovations and fittings.||Depending on the condition of the flat, you may or may not need to renovate. Older flats of more than 30 years typically need renovations, especially when it comes to piping and humidity issues. For renovated flats, the costs are usually priced into the purchase price.|
|Grants||· Additional CPF Housing Grant
· Special CPF Housing Grant
Total grant of up to $80,000 depending on average monthly household income
|· Enhanced CPF Housing Grant
· Additional CPF Housing Grant
· Proximity Housing Grant
Total grant of up to $110,000 depending on eligibility and average monthly household income
There is no doubt that resales and BTOs come with their own set of benefits and disadvantages. Before deciding, buyers should first identify what is their top priority when choosing a home – convenience in terms of location? Proximity to family? Do you plan to live there for a long time, or will the potential profit margin be a key deciding factor?
If you are looking for potential profit…
Thinking of gaining profit from your HDB isn’t always the best way to make a decision about the type of flat you get, because HDB is first and foremost, a home rather than an investment. However, because of how past generations have profited from sales of their HDB, it’s now hard to see buying a HDB as just that. If potential profit is on your mind, the lower capital output for a BTO definitely makes more sense compared to buying a resale.
Even if you get a resale HDB in a central location and are willing to pay a high price for it, note that the number of years left on the lease is always a time bomb compared to a new BTO. What’s more, the government has specifically mentioned that not all HDBs will be offered the Selective En Bloc Redevelopment Scheme(SERS), which means buying an old HDB will only see its value slide towards zero.
If you are looking for convenience…
Then a resale flat is a more probable choice as you have a wider range of location and access to more-established facilities. This may be a priority especially if you are looking to start a family – you will likely have access to more childcare facilities and schools around established neighbourhoods. What’s more, if you want to stay near your parents, you are also eligible for the proximity grant if you buy a flat near them.
If cost is a concern…
A BTO is more cost-efficient. Not only is the price lower, you can probably do with less renovations compared to an older resale flat. However, this point is subjective because you may be able to get a renovated resale flat which may save you time, effort and money.
Unless you are ineligible for a BTO, a BTO might be the smarter choice for the financially-prudent. Not only is it cheaper, you get a new lease and will likely enjoy a better profit margin when you sell later. The only major downside is the waiting time to get your flat.
Buying the flat is the first step, but remember not to neglect proper financing for your flat as well. Financing for any HDB flat hinges on passing Mortgage Servicing Ratio (MSR) and Total Debt Servicing Ratio (TDSR). Both ratios measure the amount you can borrow, which you must find out before committing to a purchase. Many continue to take on a HDB loan even if a bank loan offers a much better interest rate in the current economic environment. Your choice of HDB loan or bank loan depends on your circumstances.
Reach out to us if you need advise on home loans suitable for your HDB flat.
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