HDB BTO Vs Resale: Is BTO Really A Lot Cheaper For A Young Couple?

With property prices soaring high, are HDB BTO flats still the cheapest option for young couples? Taking into consideration other factors like the long waiting time and rising income in fresh graduates, just how worth it is to purchase a BTO flat?

“Just apply for a BTO flat. It’s much cheaper”, said everyone. But if you take a look at the latest BTO prices these days, they are definitely not as cheap as you’ll think.

According to 99.co, the median starting price of a four-room BTO flat was S$272,000 in 2015, compared to S$381,000 this year. That’s a whopping S$109,000 increase in just 7 years. And we’re not even talking about just BTO flats in the prime area. 

What used to be a very affordable option in the past is now increasingly getting less affordable.

On top of that, BTO launches are extremely competitive these days. Take a look at the recent application rates for the August 2022 BTO launch on HDB’s website. Non-mature estate Tampines garnered outrageous application rates of 22.3 and 26.3 for 4- and 5-room units respectively, while mature estate Ang Mo Kio experienced lower rates of 12.6 and 17.5 for 4- and 5-room/3Gen units.

With the odds definitely not in our favour coupled with the exorbitant prices, are HDB resale flats the way to go?

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Increasing property prices

Singaporeans are no strangers to escalating property prices these days, especially in this high-interest climate.

As mentioned earlier, BTO flats are also experiencing a surge in prices, where prices jumped significantly back in 2015 to current. Property analysts told TODAY that it would only be a matter of time before Singapore sees its first million-dollar BTO flat.

According to Channel News Asia, the prices for non-landed properties increased by 3.6 per cent in the second quarter of 2022, compared to the 0.3 per cent decrease in the first quarter. Properties in the core region (CCR) increased by 1.9%, while those in the rest of the central region (RCR) rose by 6.4. As for properties outside the central region (OCR), prices increased by 2.1% in the second quarter.

Rental prices are no exception either. Rental prices of non-landed properties in the OCR increased by 7.7%, while properties in the CCR also increased by 7.7% in 2022Q2. Those in the RCR rose by 5.9%.

However, the government are not turning a blind eye to this. In hopes of suppressing the hot property market, they introduced new cooling measures on 29 September 2022. This included an increase in Total Debt Servicing Ratio (TDSR) and Mortgage Servicing Ratio (MSR) calculation, reduced Loan-to-Value (LTV) limit for HDB loans and a 15-month waiting period for property downgraders to non-subsidised HDB flats.

But when will the property market start to feel the effect of the cooling measures? The only thing we know is that the prices don’t seem to be going down anytime soon.

Price comparison between HDB BTO and HDB resale

So how much more expensive are HDB resale flats? Let’s take a look at different estates comprising mature and non-mature. We’re also only considering BTO projects that were launched recently to ensure fairer comparison.

Bukit Merah (mature estate)

*Prices are taken from PropertyGuru, and are accurate as of 24 Oct 2022

According to the prices of a 3-room and 4-room unit for both BTO flats and resale flats in the area, it seems like the starting prices are fairly similar, just that the higher price ceiling for resale flats is considerably higher.

If you’re looking for a home in Bukit Merah, a mature estate, the prices seem to be within a similar price range. 

See also:
HDB BTO November 2022 Tengah Review
HDB BTO November 2022 Queenstown Review
HDB BTO November 2022 Bukit Batok
HDB BTO November 2022 Yishun Review
HDB BTO November 2022 Kallang/Whampoa Review

Tampines (mature estate)

*Prices are taken from PropertyGuru, and are accurate as of 24 Oct 2022

Across the prices for a 3-room BTO flat and resale, the August 2022 BTO launch prices are slightly cheaper than a resale, though they are relatively around the same price range. 

However, if you compare the resale prices to the August 2021 BTO launch, you can see a significant disparity between the prices. One factor could be the launch date. Given that the prices have surged in recent years, maybe the prices for 2021 can no longer serve as a good comparison to the current resale prices in the market. 

There seems to be a similar trend going on for the 4-room flats as well, with the latest BTO launch being more similar in price compared to the past BTO launches in 2021.

Choa Chu Kang (non-mature estate)

*Prices are taken from PropertyGuru, and are accurate as of 24 Oct 2022

Unlike Bukit Merah and Tampines where the prices for BTO flats and resale do not differ that much, Choa Chu Kang estate seems to show otherwise. The resale flats across 3-room, 4-room and 5-room flats seem to be much more expensive compared to the latest August 2022 BTO launch.

However, since Choa Chu Kang only has one BTO launch to compare to (the November 2021 launch that had Choa Chu Kang consisted of only 2-room Flexi units), it could be an unfair comparison to just feature one BTO launch. 

Besides, the location of Keat Hong Grange doesn’t prove to be the most accessible since it is not close to any MRT stations, and its nearest LRT station would require a 10-minute walk. This could have been a factor contributing to the lower prices for the BTO flats at Keat Hong Grange and further widening the gap between the prices.

Yishun (non-mature estate)

*Prices are taken from PropertyGuru, and are accurate as of 24 Oct 2022

Similar to Choa Chu Kang, the resale prices across all room types seem to be significantly more than the past BTO projects in Yishun, though projects like Yishun Beacon have proven to be widely appealing because of its close proximity to MRT stations.

According to a report compiled by local data analytics school Hackwagon Academy, results have shown that Yishun resale flats displayed strong popularity and price appreciation alongside Bukit Panjang and Bukit Timah from 2017 to 2021. In contrast, Toa Payoh and Bishan showed a fall in prices over the same period.

This could be a reason why Yishun resale flats show a steep contrast to BTO flats, making them a viable option to consider.

Grants for BTO vs resale

Since BTO flats are already considered subsidised housing, there are more housing grants for HDB resale flats compared to BTO flats. Let’s take a look at the grants you can get:

As you can see, HDB resale flats have way more grants available as compared to HDB BTO flats, and with reason. HDB BTO flats are already subsidised, so more grants are available for homeowners purchasing resale flats. 

The maximum grant amount homeowners can receive for a BTO flat is S$80,000, while the maximum grant for HDB resale flats is double, at S$160,000.

However, now that the HDB BTO flats are only slightly cheaper than resale flats (of course many factors play a part in this too), is merely the EHG enough?

Assuming a young couple who have just graduated and have started working. They both earn a monthly income of S$4,196, which is the median gross monthly salary for an SMU fresh graduate in 2021. They now have a combined household income of S$8,392. This means that they are only able to get a grant of S$10,000.

However, let’s not forget that this is right after they graduate. Once their salary increases after a year or so of working experience, the grant that they will receive afterwards would be even lower, and once they hit the S$9,000 income ceiling, they won’t be eligible for a grant anymore.

See also: What Getting A House at 21 Years Old Has Taught Me

Additional costs for BTO vs resale

Temporary accommodations during the waiting period (BTO flats)

*Prices are taken from PropertyGuru, and are accurate as of 24 Oct 2022

The median waiting time for new BTO projects are about 4 to 4.5 years. However, in past BTO projects and you will realise that some launches can take up to 7 years to be built. 

Though National Development Minister Desmond Lee has said that the waiting time should come down a little in the next two years, we can all agree that it would still require a couple of years to be built, coupled with an extra few months of renovation.

For some families who don’t have the option of staying with their parents or in-laws and exceeding the income ceiling for the Parenthood Provisional Housing Scheme (PPHS), this would mean having to rent a house in order to have a roof over their heads.

But we’ve already established that rental prices are now crazy high across all estates. Depending on the location that you wish to rent, prices can vary drastically. 

Higher renovation costs (resale flats)

Renovations do make up a significant portion of your expenses when buying a home. Depending on your wants or needs, renovation costs can differ greatly from person to person.

On average, renovation costs for HDB BTO flats are about S$38,500 (3-room flat) and S$52,000 (5-room flat) compared to HDB resale flats which are approximately S$40,000 (3-room flat) and S$79,000 (5-room flat). It is also a common understanding that renovation costs for BTO flats cost about 20% to 30% less than their counterpart resale flats of the same size.

Why is that so? Resale flats have already been stayed in and owned by previous homeowners, meaning that they have already done their fair share of renovations, regardless of the extent of it. So unless you are willing to just accept the state of the house as it is, it will cost more if you need to hack down walls, tear down built-in furniture and start from scratch.

However, if you’re lucky enough to secure a unit that was just renovated, is well-maintained and suits your aesthetic, you won’t really need to spend too much on the renovation as you’re essentially just taking over the unit as it is. But there are some renovation works you shouldn’t skip on if required, like the repair of pipes, electrical wiring, and water faucets.

But for BTO flats, you’re essentially working with an empty canvas, which can save you a lot of money when you start your renovation works from scratch. 

If you want to save money, you can also opt-in to HDB’s Optional Component Scheme (OCS) that equips the unit with flooring, internal doors and sanitary fittings depending on which you’ll want to buy. This already helps you cut down on costs that you would have to pay extra for, should you choose to get these extra add-ons by yourself.

COV (resale flats)

COV is the difference between the sale price of a resale HDB flat and its actual valuation by HDB, and this applies when a buyer overpays for the unit. This is an example of how it is calculated:

Since 2014, the prices of flats have been negotiated among buyers and sellers first before the COV is made known. Once a price is agreed between both parties and the buyer pays the Option to Purchase (OTP) fee, the official valuation by HDB will take place.

The difference between the offered price and the actual valuation becomes the COV. Say the offered price is S$20,000 above the valuation. This would mean that the COV is S$20,000 and it means that you’ll have to forfeit the S$20,000. But if the actual valuation is S$20,000 above the offered price, you saved that S$20,000 and got a good deal!

But the catch is that COV can only be paid in cash, without the help of CPF, grants and a home loan. So while COV is not an extra cost per se, it has to be taken into consideration for resale flats because it could significantly increase your cash outlay.

More on this topic:
How To Minimise Cash Over Valuation (COV)
How To Save Money When Buying A Resale Flat
7 Important Things to Look Out For When Buying a Resale Flat
HDB Resale Flat Price 2022: Cheapest and Most Expensive Estates
HDB BTO, SBF Or Resale: Which Should You Pick?

Potential appreciation — BTO vs resale

There’s no surprise here as to which option will give you higher appreciation — BTO flats are known to appreciate more and give you a higher profit margin because of their longer remaining lease.

Because you’re purchasing a brand new BTO flat, you’ll be able to enjoy a fresh 99-year lease. As for resale flats, the unit has probably already gone through multiple home ownerships, making its remaining lease a lot lesser.

According to this diagram, you can see how an HDB flat’s value drops significantly depending on the number of years left on the remaining lease. The biggest drop happens at the 35-year mark, because there are various restrictions put in place on home loans, which could affect the purchasing power of a homebuyer.

The potential appreciation for a home could be a huge factor to homeowners who are looking forward to profiting after selling their BTO flat and then possibly upgrading to a bigger home or a private property.

So it really all comes down to your needs since homeowners looking for a forever home

HDB BTO vs HDB resale — which is more worth it?

So it comes down to the biggest question of all time — is a BTO flat or a resale flat cheaper? There is no clear answer really, because it also depends on the specific unit you choose and which grants you are eligible for.

While BTO prices still prove to be a cheaper option than resale flats in the same area (whether by a huge or small margin) and have higher appreciation potential, there are more grants to offset your resale flat price, if you are eligible for them, that is. Let’s also not forget the rental prices you have to factor in while waiting for an HDB BTO flat, if you can’t stay with your in-laws.

We can’t help you decide on which is a better option for you, as it all boils down to your needs. Are you looking for a forever home? Are you looking to make profits? Are you planning on upgrading in the future? Is location an important factor? 

All these questions play a huge role in helping you decide which is a better option for you, so it’s best you set out your priorities and decide for yourself.

If you want to reduce costs, here are the best home loans in the market to compare against and find the best one for you.

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