BTO vs Resale HDB? This is how you choose which is better for you
Resale volumes spiked dramatically in June and July 2020, shortly after the two month circuit breaker was lifted. If that tells you anything, it is that the demand for resale flats remains strong. And while the Covid-19 pandemic in 2020 has put the brakes on many areas of our lives, it has not been able to put a dampener on Singaporeans’ home aspirations.
Even the recent August BTO sales exercise by HDB was heavily oversubscribed. Christine Sun, Head of Research and Consultancy at OrangeTee & Tie noted that many good sites were released in the latest August HDB BTO exercise, which could have contributed to the high demand. “It has been a while since new flats were released in some of these estates.” She also pointed out that the November BTO flats will likely have even longer completion periods, “hence those who want a flat earlier would have applied during the August exercise.”
If you miss out on the recent BTO exercise, or are not eligible for them, there are still plenty of resale HDB properties available that might suit your needs. Here are some compelling reasons to consider them.
1. You get to choose the location of your flat
Unlike BTO sales, where the units are launched at specific locations during different exercises, buying a resale flat means you can specify where you would like to live and start your home search from there.
Some people prefer mature estates that allow them to be near their parents, have better amenities like popular hawker food stalls and good schools, and more developed transportation networks. Many stated that they had a preference for staying in the estates and towns that they grew up in and were familiar with.
Others prefer non-mature estates which are populated by younger families, and have newer public amenities.
If you are wondering how much more a flat would cost between a mature or non-mature estate, here’s how resale prices differ.
|Maturity||1 ROOM||2 ROOM||3 ROOM||4 ROOM||5 ROOM||EXECUTIVE||MULTI-GENERATION||Grand Total|
Source: Data.gov.sg, OrangeTee & Tie Research & Consultancy
For the seven months to July 2020, the median price for HDB resale flats was S$400,000 for flats in non-mature estates, while that in mature estates was S$430,000.
2. You can move into the flat within a few months, not years.
A big deterrent for buying a brand new HDB BTO flat is the extended expected completion times, due to the new safety measures being implemented at construction sites to curb the spread of Covid-19.
During the August BTO sales exercise, over 38,500 applications were received for the 7,862 units available. The launches were located in mature estates Ang Mo Kio, Bishan, Geylang, Pasir Ris and Tampines, and non-mature estates Choa Chu Kang, Woodlands and Tengah. The apartments ranged from 2 room flexi units to 5 room units, and prices started from $193,000.
What was worrying were the expected completion dates, which stretched from 2024 to 2027.
In comparison, completion times for BTO HDB flats previously ranged between 3 and 4 years pre Covid-19, but the 2 month circuit breaker that halted construction work and the continuing reinfections at worker dormitories is expected to delay construction work even further.
So completions for subsequent BTO sales exercises in November and February 2021 could go beyond 2027.
With a resale HDB flat, you would not need to worry about construction delays since the flats are already built.
3. You can purchase larger flat sizes that are not built anymore
If you are facing a space crunch at home after having children and needing a helper and/or a grandparent to help mind them, you would probably want to find a 5 room HDB flat or larger. In this aspect, the HDB resale market is your best bet, and not the BTO market.
New HDB projects currently offer 5 room flats with about 1,200 sq ft of built in area. On the other hand, older HDB projects had larger sized units, including point block 5 room units with over 1,400 sq ft of built in space. Two storey maisonettes, and jumbo flats are also exclusively available in the HDB resale market, and often located in mature estates.
If you are looking for these types of large resale HDB flats, you can try looking here.
4. You can purchase a resale HDB flat with no income ceiling restrictions
Buyers of brand new BTO flats or executive condominiums are bound by income ceiling restrictions, due in part to HDB’s mission to provide affordable housing to the masses. As such, BTO buyers cannot have a combined household income of more than $14,000 when purchasing as a family, and a personal income of not more than $7,000 when purchasing as a single. EC buyers’ cannot have a combined household income of more than $16,000.
In contrast, resale HDB flats are not limited by any income caps, so they are available to anyone who like their interior layout and location, and are comfortable with their listing prices.
5. You can still enjoy subsidies and pay with your CPF if you fulfil the criteria
Here’s something you should take note of when buying a resale HDB flat. Depending on your income level and other considerations like your proximity to your parents’ HDB flat, you may be entitled to various housing grants and you may also be able to pay for your flat with your CPF monies.
For instance, if you and your family are first time buyers and your household income does not exceed $9,000, you would be entitled to the Enhanced CPF Housing Grant of up to $80,000. If your household income does not exceed $14,000, you could also be eligible to the Family Grant of up to $50,000. Plus, if your purchased resale property is within 4km of your elderly parents’ or adult children’s flat, you could be entitled to the Proximity Housing Grant of up to $30,000.
As long as your purchased HDB resale flat has a remaining lease of more than 20 years, you would be able to use your CPF savings to pay for it in part or in full. If the remaining lease on the resale flat covers the youngest buyer to the age of 95, you will be able to fully pay for it with your CPF savings. If the lease does not cover the youngest buyer to the age of 95, then the amount of CPF savings you will be able to use will be pro-rated.
Upgrader sentiment is here to stay
The sustained interest in new and resale properties both in the public and private property markets amid the biggest economic downturn of our generation points to one continued trend: Upgrader sentiment is here to stay.
Sun observed that more and more Singaporeans are selling their flats within 8 to 10 years, with some choosing to sell immediately after fulfilling their minimum occupation period (MOP), and surmised that they were doing it use the money to purchase a condominium or upgrade to a bigger flat.
“Perhaps with higher education and better market knowledge, many young Singaporeans are also aware of the opportunity for wealth creation through real estate investment,” she added. “Many may also like to enjoy living in a condominium that is equipped with facilities that will be used by their young children.”
So how will resale HDB prices fare in 2020?
“At this juncture, a significant price correction is rather remote unless the global health crisis spirals out of control and our unemployment number creeps up significantly. Nonetheless, a supply overhang with many HDB flats reaching their five-year Minimum Occupation Period may continue to exert downward pressure on prices,” says Sun.
As such, for the full year 2020, Sun expects the change in overall resale prices to range between -2% to 1%.
At the same time, Sun advises property buyers to exercise financial prudence amid the ongoing economic and health crisis. “There are many undervalued properties out there that are worth exploring. From historical trends, we have observed many buyers making good profits when they bought properties during the previous downturns,” Sun says.
“Nevertheless, buyers should consider their financial health before making any property purchases.”