In this chapter of Eugene Koh’s Property Guide, we explore the two main options when one is considering to buy an HDB flat.
Approximately 90% of Singaporeans own their homes. This figure is attributed to good public housing policies as well as pretty acceptable home loan interests. Often I get asked this question by my clients and their friend’s sister’s daughter’s friend’s husband’s friend, which option best suits them and their lifestyles?
I have to really dig before I give my solutions to their dilemma.
Like for example, those people who are known compulsive hoarders, I would suggest for them to buy HDB resale, as it is more spacious and near to amenities like shopping malls so that they can buy that Mcdonald’s hello kitty soft toy or the foot massager that they only used once, to store at home. For those people who act like they are suffering from mild obsessive-compulsive disorder (OCD,) I would recommend them to get BTO as they will not be able to sleep in peace at night, knowing that there is a small light-brown stain shaped of Africa on the wall behind the refrigerator.
So without further ado, here’s my take on why you should pick Build-To-Order (BTO) or Resale. Queue drumroll
For couples who wish to quickly move into their matrimonial home to finally consummate their marriage after the wedding, HDB resale is the best option. The waiting time is much shorter which means you can expect to collect keys within 4-6 months from the moment you have received an option to purchase.
BTO’s waiting time is much longer as the sales launches happen quarterly. You may find out the current BTO sales launch on HDB’s website. Buyers can use this time to save up for renovation, as well as take this opportunity to get to know their in-laws better, by staying at their house and pretending to be helpful at home.
When it comes to resale HDB, what you see is what you get. This excludes the seller’s movable pieces of furniture, personal belongings. You can get quite a huge amount of savings from getting a second-hand property, especially if the apartment you are considering is well-renovated. Common fixtures and appliances found in typical resale HDB flats which were previously bought in cash can now be included within the total purchase price; utilising the CPF funds that you have accumulated since your school holiday part-time job as a coal miner.
I would recommend resale HDB for those who are flexible with living conditions and do not wish to spend too much cash on the renovation works. When you collect keys to your BTO, it will normally be quite bare with only the basic infrastructures such as flooring, windows, toilets, wiring and piping in place.
Here is an example of how a BTO flat will look like before any renovation:
Depending on how deep is your pocket, renovation cost for BTO can typically range from approximately S$10,000 to S$30,000 for a 4-room flat. I do not recommend spending too much on customised carpentry or artistic interior designs if you have hopes that your flat will be worth a fortune in future because it won’t. Nobody else will want that rock climbing wall in your living room unless they are as crazy as you.
Size of HDB flats varies not just by their type, but also the year it is constructed. Older resale HDB flats are more spacious compared to newer BTO flats. The difference in size ranges can be from as wide as 83qm to 107sqm.
Since the implementation of the Civil Defence Shelter Act in May 1998, household shelters are required in HDB flats and cannot be altered. Older flats built before the ruling, have storerooms which can still be hacked to create space for that bar counter which you rarely use, as the stools are uncomfortable and also remind you of how much you wish you were at a real bar instead.
Older resale HDB flats are generally closer to the MRT and Shopping malls. I’ll give you an example, Tampines HDB Estate, which is one of the largest HDB estates in Singapore has over 68,000 HDB flats. There are MRT stations such as Tampines East and Tampines West. However, most residents will agree that green line Tampines MRT station is the most convenient because of the shopping malls close by.
This map shows you when the HDB flats are completed within the Tampines district.
If you are looking for Resale HDB, I would normally advise my clients to consider blocks built after the 1990s. E.g, if you bought a flat which is built in 1993, it would be 26-years old and after the mandatory 5 years minimum occupation period (MOP), it would be 31-years old, which is about the time when HDB will normally call upon residents to do home improvement programme(HIP)
HIP generally means the government will work on upgrading facilities within your HDB blocks; inclusive:
- Replacement of your main door and grille gate
- Replacement of refuse chute lid
- Replacement of waste pipes
- Repair of structural cracks
- Upgrading of toilets
These upgrades are heavily subsidised (up to 95% of the cost) by the government provided if you are Singaporean, sorry PR you are not eligible. The estimated cost payable for a 4-room flat is about S$945 while the government covers the rest of the at approximately S$11,655. A toilet with newly furnished floorings and wall tiles will definitely entice the next buyer of your flat when you choose to sell.
If you plan your timeline wisely according to what I have suggested, the value from the HIP will not only entice buyers who are CPF rich but also PRs who are solely eligible for resale HDB to take your unit into consideration. They will not have to spend too much on renovations, making it a win-win situation.
The following chart shows the side-by-side comparison of current BTO sales launch prices and median HDB resale prices for Jurong West Estate.
The difference is about $55,000 to $100,000. At first glance, the HDB resale price looks much higher. However, this is before utilising your first-timer grant which is up to $50,000. The first-timer grant is only for HDB resale buyers as BTO flats are already priced at a discount. After factoring in renovation costs, the difference is marginal. Yes, BTO will have a fresh start of 99-years lease but the depreciation from lease decay only comes later around the 65-years lease remaining mark. The depreciation between a new and older flat is caused mainly by the limitation of CPF usage and bank loan restriction which have recently been eased by new rules on CPF use on flats that are way old.
“Which is the better option, Resale or BTO?”
I will say HDB resale is better in my opinion if you intend to sell your house after around 5-10 years. The time horizon for acquiring a BTO flat is concerning, as you have to factor in the chance of not getting a successful ballot which will set you back at least 3.5 to 4 years before you collect your keys. This does not include”- the time you need to plan and renovate your new BTO flat. I have met with several cases of clients attempting multiple times but failed to get a unit during balloting because they are not aware of the popularity of the chosen district and the fact that priority is given to buyers with dependents. (More on that later)
Ultimately, for a property to have value in future, it is not based so much on the lease remaining but more on the fundamentals of property investment: timing and location. BTO does not allow you the flexibility of choosing mature districts have all the infrastructure and amenities in place, you will have to adjust your lifestyle when moving to an ulu area. Certain species of birds will have one look at your postal code and decide not to lay eggs there.
Feel free to contact my team and me for in-depth analysis of your financial situation and lifestyle choice in selecting the best resale unit for you.
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