Most people generally accept that Build-To-Order (BTO) flats are cheaper compared to resale flats in the same area. Thus, it’s usually advisable for first-time Singapore homeowners to apply for BTO flats as long as they can 1) wait for the flats to be completed and 2) find a location that they are satisfied with.
BTO flats also come with fresh 99-year leases, making it easier for these flats to retain their value over a longer time as compared to resale flats.
But how much do first-time homeowners save when choosing a BTO flat over a comparable resale flat in the same vicinity?
Before we make the price comparison, we need to point out that if you don’t need a home immediately (e.g. you are only getting married in 3 to 4 years), then applying for a BTO flat makes sense since the wait time isn’t going to be an issue for you.
Comparing Tampines Flat Prices For The August 2022 BTO Launch To Resale Flat Prices
The August 2022 BTO launch offers us seven different estates that are launching BTO flats. These include popular mature estates such as Ang Mo Kio & Tampines.
The Tampines BTO launch is good for our comparison. The estate, called Sun Plaza Spring, offers 4-room and 5-room flats with prices ranging from $381,000 – $438,000.
According to information provided by HDB, there are resale comparable HDB flats nearby that are about 94 years, which means these flats just hit their MOP. Prices for these comparable flats are currently between $580,000 – $635,000.
For 5-room flats, BTO launch price at Sun Plaza Spring is between $520,000 – $590,000. The resale comparable flats are currently selling between $720,000 – $760,000.
Source: HDB
Do note the HDB caveat that there are some differences in attributes between the resale comparable and the new BTO flats. For this article, we will just focus only on price.
Let’s compare the median flat prices of the BTO launch at Sun Plaza Spring against the median flat prices of the comparable resale flats.
|
|
Median BTO Flat Price | Median Resale Flat Price | Difference |
| 4-Room | $409,500 | $607,500 |
$198,000 |
| 5-Room | $555,000 | $740,000 |
$185,000 |
We can see that the difference between the median sales price of the resale flats and the BTO flats at Tampines is about $191,500 on average, with the resale flats naturally being more expensive. On top of that, BTO flats have a fresh 99-year lease upon owners receiving their keys, as compared to the resale flat, which is already five years old if you buy it in 2022.
With the resale flat, however, you can move in immediately while the Tampines BTO flat has an estimated completion date of 2Q2026, which means a waiting period of about three years.
Family Housing Grant
For first-time Singaporean buyers opting for HDB resale flats, they are eligible to receive a Family Grant of $50,000 for 2-room, 3-room and 4-room resale flats. Buyers of 5-room or bigger resale flats will receive a Family Housing grant of $40,000.
| 2-room, 3-room, 4-room | 5-Room or bigger resale flats, Executive Condominium | |
| Both Singapore Citizens | $50,000 | $40,000 |
| One Singapore Citizen, One Permanent Resident | $40,000 | $30,000 |
Proximity Housing Grant (PHG)
If we live within 4km of where our parents/child live, we will be eligible to receive the Proximity Housing grant of $20,000. If we intend to live with them, we will receive $30,000. This is only applicable for resale flats.
In other words, as a first-time buyer considering a resale flat, we would qualify for additional housing grants of between $40,000 to $80,000.
For comparison purposes, we are not taking into account the Enhanced CPF Housing Grant since this grant applies to both BTO and resale flat buyers.
Difference In Resale Flat Cost Once You Include In Resale Housing Grants
For our comparison, let’s assume first-time homeowners want to buy a 5-room resale flat at Tampines to live near their parents. In this case, they will be eligible for both the $40,000 Family Housing Grant and a further $20,000 Proximity Housing Grant.
As the average cost difference between 4-room resale flats and BTO flats is $185,000, the $60,000 grant will reduce the difference to just $125,000. Further examples are below.
| Median BTO Flat Price | Median Resale Flat Price | Difference | Difference With Family Grant & $20,000 PHG | |
| 4-Room |
$409,500 |
$607,500 | $198,000 |
$128,000 |
| 5-Room | $555,000 | $740,000 |
$185,000 |
$125,000 |
As you can see, with grants the difference between BTO flat price and comparable resale flats in the area is now about $125,000 for the Tampines launch. However, that’s not all.
BTO homeowners have to decide whether to opt for the Optional Component Scheme (OCS) for flooring, internal doors and sanitary fittings. For 5-room flats at the Sun Plaza Spring Tampines BTO Launch, this adds up to $9,240, thus reducing the price difference to about $115,760
Of course, homeowners can opt not to have the OCS but this means their renovation cost will be higher.
The OCS is far from a complete renovation, even if you opt for it. It does not include essential renovation work such as lighting, grills, kitchen cabinet and appliances. This means you will still need to spend more on your BTO renovation. In contrast, a resale flat comes with the renovation work that you may already need, thus potentially reducing the cost of your renovation.
That said, renovation is mostly a personal preference and if you buy a poorly maintained resale flat, you will still need to incur a significant amount of money with renovation work. However, given that these HDB flats only recently MOP, it’s possible that a home buyer can move in quickly with minimal renovation if they are not fussy, and can incur minimal renovation cost. This could potentially be a saving of about $30,000 to $50,000.
A BTO Flat Is Still Cheaper As Long As You Don’t Intend To Rent During The Waiting Period
To end off, it appears that HDB does sell BTO flats at a substantial enough discount such that even after we include resale housing grants for first-timers, the BTO flats are still going to be significantly cheaper. Ideally, you want to be able to tap on the Proximity Housing Grant, which would give you $20,000 or $30,000 more in grants. However, this means you must find a resale flat within 4km of where your parents live.
In addition, with all other things being equal, your BTO flat is likely to better retain its value as compared to resale flats. This is because if you sell it after the 5-year MOP, you will still have a 94-lease remaining on your flat, which makes it more attractive for future home buyers looking to buy resale flats.
Assuming you are satisfied with the location, the downside here for BTO flats is the wait. If you are intending to rent elsewhere during the 3 to 5 years waiting period when the flats are being constructed, then your rental cost will easily exceed the savings that you are getting in the first place. In such circumstances, you may be better off just searching and buying the right resale flat instead, and tapping on resale housing grants that you are eligible for.
Read Also: Buying A Resale Flat? Here Are 8 Things To Consider When Choosing Which Unit To Buy
This article was originally published on 17 August 2020 and we have updated it with the latest information.
The post How Much Can You Save By Opting For BTO Flats Over HDB Resale Flats appeared first on DollarsAndSense.sg.
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