In Singapore, men ready to settle down would subtly propose with the question, “Will you BTO with me?”—the unequivocal term for “Will you marry me?”.
However, in recent times, this question has become less straightforward. Long Built-To-Order (BTO) waiting times of between 3 and 4 years and couples marrying later in life have created a dilemma, forcing some to choose between a BTO flat and a resale HDB flat.
On one hand, the more financially savvy among us would argue for a BTO flat as a first home. It is not only more affordable than a comparable resale HDB flat due to government subsidies, but it also has better future upside potential. On the other hand, the more practical among us would claim that a resale HDB flat is a better choice as it allows you to start your married life sooner and save on the potential rental costs spent waiting for a BTO flat.
So, which is better? We attempt to find out which of these choices is more beneficial, taking into account the total cost of purchasing a HDB flat using these two options.
Assumptions Used:
Before we delve deeper, here are some assumptions used for our comparison:
- You are a first-time buyer in your early thirties and are unwilling to stay with your parents/in-laws after marriage.
- You earn a median salary and are looking to stay in a 4-room HDB flat at a non-mature estate.
- BTO developments used for comparison in non-mature estates are:
- Woodlands – Urban Rise @ Woodlands
- Jurong West – Jurong Arcadia
- We did not include any of the miscellaneous fees such as agent fees, cash over valuation, stamp duty, and renovation costs to simply the calculations between resale flats and BTO.
- For the HDB flat rental period, we assumed that you would be able to receive 1-2 months prior to the estimated completion period, though it is not guaranteed. Therefore, we did not factor in any additional time for renovation of the BTO flat before move-in.
Option 1: Rent While Waiting For BTO Flat
The first option is to apply for a BTO flat at a location of your choice and to rent a comparable unit within the same estate until it’s ready to move in (i.e., completion).
All eligible Singaporeans can purchase two BTO flats directly from HDB, with a resale levy payable on the second BTO flat purchase. As a first-timer, you have a higher chance of securing a BTO flat, as more units in the development are currently set aside for first-timer families. Furthermore, after two unsuccessful attempts in non-mature estates as a first-timer, you will receive one additional chance for each subsequent unsuccessful BTO application in those areas.
Based on the December 2023 BTO Sales Exercise, the cost of purchasing a 4-room BTO flat in the non-mature estates of Woodlands and Jurong West is as follows:
| Town – Project | Selling Price (Excluding Grants) | Transacted Prices of Resale Flats Nearby | Waiting Time For Completion |
| Woodlands – Urban Rise @ Woodlands | $337,000 – $468,000 | $530,000 – $604,588 | 51 months |
| Jurong West – Jurong Arcadia | $315,000 – $394,000 | $525,000 – $610,000 | 37 months |
Source: HDB – December 2023 BTO Sales Exercise
In other words, taking the midpoint of the indicative price range, a 4-room flat in Woodlands and Jurong West would cost $402,500 and $354,500, respectively. The waiting times for the two projects are between 37 and 51 months.
Assuming you are successful with your BTO application, here’s how much it would cost you in rent in the same estate until the completion of the flat:
Cost Of Renting While Waiting For BTO Completion
The median rent, based on 3Q2023 HDB Rental statistics, for an entire 4-room flat at Woodlands and Jurong West is:
| Estate | Median Rent (Per Month) |
| Woodlands | $3,000 |
| Jurong West | $3,200 |
Source: HDB Rental Statistics – 3Q2023
Assuming you wish to rent a similar-sized flat in the same estate, it would cost you:
Woodlands
$3,000 (monthly median rent) x 51 months (completion waiting time) = $153,000
Jurong West
$3,200 (monthly median rent) x 37 months (completion waiting time) = $118,400
Totalling the BTO purchase price and the rental costs, if you were to take Option 1-Rent while waiting for a BTO flat, it would cost $555,500 ($402,500+$153,000) for the Woodlands location and $472,900 ($354,500+$118,400) for the Jurong West location.
Option: 2: Buy Resale HDB Flat Immediately
The second option, a more practical choice if staying with your parents/in-laws after marriage is not an option, is to immediately buy a resale HDB flat as your matrimonial home.
Assuming you decide to purchase a 4-room resale flat in the nearby location of the above two BTO projects, it would cost you:
- Woodlands: $567,294*
- Jurong West: $567,500*
*We took the midpoint price based on the range of the resale transactions.
In addition to the Enhanced Housing Grant (EHG) that is granted to eligible first-timer families for the purchase of both BTO and resale flats, you can also apply for the Family Grant to help with the purchase of a resale flat.
The grant amount of up to $80,000 depends on the type of resale flat and the applicant’s citizenship.
| CPF Housing Grants for Resale Flats (Families) | ||
| Who | 2- to 4-Room Resale Flat | 5-room or Bigger Resale Flat |
| How Much | ||
| Both spouse are Singapore Citizens | $80,000 | $50,000 |
| One spouse is Singapore citizen, one spouse is Singapore Permanent Resident | $70,000 | $40,000 |
Assuming you and your spouse are Singapore citizens, you would qualify for $80,000 in family grant for the purchase of a 4-room resale HDB flat. If we were to deduct the grant amount from the median resale HDB price, the total cost would be reduced to as follows:
| Estate | Purchase Price (Excluding All Grants) | Purchase Price (Minus $80,000 Family Grant) |
| Woodlands | $567,294 | $487,294 |
| Jurong West | $567,500 | $487,500 |
While the use of the CPF Housing Grant for Resale Flats (Families) would be equivalent to losing your first-timer status, it can reduce the overall outlay required to finance the higher-priced resale flat.
Comparing The Two Options
| Renting While Waiting For BTO | Buying Resale HDB Immediately | |
| Woodlands | $555,500 | $487,294 |
| Jurong West | $472,900 | $487,500 |
Based on the table above, it is clear that there isn’t a consistently superior option based on total purchase costs. For example, the total cost of renting and purchasing a BTO flat is $68,206 more expensive than buying a resale HDB flat immediately in Woodlands. While the same strategy is $14,600 cheaper to execute at Jurong West.
The location of where you intend to reside can influence which option is more cost-effective. If you decide to rent first, you may move to a smaller sized flat (i.e., 2- or 3-room flat) at a lower price, as you may not need a large space initially when you start your married life. This could make renting a cheaper option.
Alternatively, if you bought a resale flat first, you could choose to rent out a spare room immediately to earn extra money. With this option, you not only finance your property faster but also get to run down your minimum occupation period (MOP) sooner. This could allow you to eventually trade up at an earlier age instead of renting first and waiting for the BTO MOP to be fulfilled.
Read Also: Which Is The Best Value For Money Resale HDB Flat Type In Each Estate?
Why Renting While Waiting For A BTO Could Be A Strategic Move
If we factor the upside potential of a BTO flat to comparative resale flat, then the choice might tilt toward renting while waiting for a BTO as the more strategic move.
For example, the BTO flats in Woodlands and Jurong West were $164,794 and $213,000 cheaper than the nearby resale flats. Assuming these BTO flats eventually catch up to a similar price range as the other resale flats nearby, homebuyers could stand to gain between $150,000 – $200,000 from their BTO flat. The profit in the long run will offset the cost of renting in the short term, while homeowners get to enjoy a newer flat with a longer lease balance.
On the contrary, a resale flat (depending on its lease balance and key attributes) may not have similar price growth potential as a BTO flat given the recent run-up in resale prices since 3Q2020 to 3Q2023. Furthermore, with HDB ramping up the BTO flat supply with 100,000 new homes from 2021 to 2025, it might curtail the current peak resale flat prices.
This, in turn, may also affect HDB rent prices, as supply might be greater than demand, pushing rentals back to pre-COVID-19 levels. Therefore, it might be cheaper to rent a HDB flat in the coming months, supporting the case to rent while waiting for a BTO flat.
Read Also: Pros & Cons Of Applying For A BTO Flat In Advance (Before You Are Ready To Settle Down)
Why Buying Resale Flats Immediately May Not Be A Bad Option
However, if you believe your first home to be your forever home, then your consideration might be more than just financial numbers. In that case, a resale flat may be a better option, as you can choose certain attributes of the flat (i.e., location, housing facing direction, unit number, floor level, etc), which you would otherwise not be able to with a BTO flat.
This is more applicable to couples who have preferences over where they wish to stay, such as near their parents, workplaces, or even primary schools to enrol their children in the future. Furthermore, the availability of family grants also helps to reduce the cost of resale flat prices, making them more affordable for home buyers despite the higher price tag.
Regardless of the option you choose, it is important to work out your affordability level to purchase within your means. Having a good, trusted broker like our friends at RedBrick can give you peace of mind, knowing that you will always get the best rates out there and enjoy unparalleled service.
The best part? The service is free for you since brokers like them receive their commissions from the banks. If you’re considering refinancing, feel free to get a non-obligatory quote and consultation.
Simply fill out the contact form, and an experienced Redbrick mortgage specialist will be in touch with you for a non-obligatory consultation. The best part? Their services are free for you, since it’s the banks that are footing the bill.
Read Also: Complete Guide To HDB Housing Grants In Singapore For Different Types Of Flats
The post Are You Better Off Renting While You Wait For Your BTO Flat Or Buy A Resale HDB Immediately appeared first on DollarsAndSense.sg.
0 Mga Komento