Resale vs BTO Flats: Which Is More Worth Your Money?

HDB flats comprise 80% of all household residences in Singapore. What’s more, these public housing apartments are also among the top choices for most prospective homeowners in Singapore.

However, buying a HDB flat isn’t that simple because you have one more choice to make:

1. Apply to purchase a Build-To-Order (BTO) flat that will only be ready in 3-5 years
2. Purchase a resale HDB flat you can move into immediately, barring any personal preferences regarding renovation

Before you make your decision, you’ll need to consider several different factors. After all, a home purchase requires a six- or seven-digit sum, not a small amount of money at all.

These factors you need to consider are the apartment’s purchase price, renovation cost, return on investment, and convenience.

Read on to discover which flat type comes out on top for the various factors and how these help you to make a more informed home purchase decision.

Purchase Price

When it comes to purchase price alone, BTO flats are cheaper than their resale counterparts in the same area. For example, the February 2024 BTO sales launch featured two projects in the mature estate of Bedok.

Here’s how much these flats cost and how they stack up against resale apartments located nearby:

As you can see from the example above, a BTO flat is significantly more affordable than a resale flat. You stand to save anywhere from S$200,000 to S$400,000, which is equivalent to the cost of another HDB flat.

This scenario isn’t exclusive to mature estates and the new Prime Location Public Housing Model, but for non-mature estates as well.

For example, a BTO flat in Woodlands ranges from S$119,000 to S$412,000 in the February 2024 sales launch. However, resale flats in the vicinity of the Woodgrove Edge housing project recently transacted at S$320,000 to S$718,000. In this case, BTO flats are cheaper by S$200,000 to 300,000 too.

Needless to say, this also leads to a world of difference when it comes to the interest you have to pay when taking up a housing loan, regardless of whether it’s from the HDB or a bank.

Although there’s something to be said for BTO flats generally being smaller than resale ones, one could argue that this doesn’t fully account for the difference in cost. To illustrate:

• 4-room HDB flats in the 1990s averaged out at 110 square metres
• 4-room HDB flats today are just above 95 square metres on average

A 15 square metre difference should not lead to such a drastic gulf in price.

Related: Best Home Mortgage Loans in Singapore

Renovation Cost

Most home buyers would have to at least consider renovating their new home before moving in. This is a necessary step for BTO flats, considering they’re built from scratch with only bare-bones interiors.

On the other hand, the need for a renovation project could vary greatly for resale flats. You could avoid the extra cost of renovation if you were to purchase a relatively fresh and well-maintained flat, but all things equal, renovating an older home could cost significantly more than what it would for a new BTO flat.

Again, the price difference between BTO and resale flats is significant. You save tens of thousands of dollars when you renovate a BTO flat as compared to a resale one. Furthermore, taking out a renovation loan to complete your project could widen the gap even further due to its interest and fees.

Given these high costs, you’d be wise to insure your home improvement project too, regardless of whether you’re purchasing a BTO or a resale flat.

Return on Investment

Because all HDB flats in Singapore start out with a 99-year lease, you’re potentially at a disadvantage on this front too should you decide to purchase a resale flat instead of a BTO flat. That’s because at least 5-10 years would’ve been shaven off its lease due to the minimum occupation period for the first owner.

What’s more, the first owner would most likely be selling their now-resale flat to you at a profit.

Along that line, all BTOs eventually become resale flats anyway, so homeowners can benefit from the price appreciation after a few years of moving in. Although it’s definitely possible for you to turn a profit on a resale flat, it’s naturally harder due to their shorter lease and greater sunk cost on your end.

For example, 4-room flats in the Telok Blangah ParcView BTO project in 2013 sold for between S$445,000 to S$561,000. Now that the project has been built and its minimum occupation period is over, the asking price for a flat there is between approximately S$600,000 to S$1.1 million.

Related: How to Determine the Value of Your HDB Flat

Convenience

BTO flats might have come out on top in every home purchase consideration factor so far, but convenience is where resale flats shine. Because you have the freedom of choice, you can pick out any flat in Singapore that’s up for sale. Of course, the only thing limiting you here is your budget.

Budget notwithstanding, you can easily purchase a resale flat in a matter of weeks if you settle all the paperwork promptly and accurately, if not days.

Conversely, applying to purchase a BTO flat is a lengthy affair. You must first obtain a HDB Flat Eligibility (HFE) letter, ballot for a flat in your preferred BTO sales launch, wait for the results, reserve an apartment, and sign the agreement for the flat’s lease. That’s not all, you’ll have to wait for several years while the housing project is being constructed.

As you can see, convenience is not a BTO flat’s strong suit. Compounding this problem would be the competition you face. When you apply to purchase a flat during a BTO project’s sale launch, it doesn’t guarantee that you’ll get a home. If the project is oversubscribed, you’ll have to see if luck is in your favour.

If you’re unlucky, you’ll need to apply for another project. This process has the potential to be a non-stop one, should you decide to opt for a seemingly popular project every time.

Related: Sale of Balance Flats vs Open Booking Flats, vs BTO Flats vs Resale Flats – Which Should You Get?

Conclusion

On the outset, it might appear that BTO flats are a no-brainer for prospective homeowners, given that they’re the superior choice regarding their affordability, lower renovation cost, and potentially higher return on investment.

However, do remember that you’re buying a home, not an investment asset. This is a highly personal decision, and finances might just take a back seat to convenience or even proximity to your family.

Also, with a BTO flat, you have no idea what your flat will actually look like when you make the decision to book a flat. Yes, the HDB does provide floor plans and sample illustrations, but it’s completely different from being able to walk around a resale flat in person before deciding whether to purchase it.

Lastly, there are BTO projects in areas that aren’t easily accessible at the moment, such as Tengah. You’ll need to decide if the financial payoff in the future is worth the daily hassle in the present.

Once you’re ready to purchase a loan, check out our comprehensive list of home loans and home insurance plans. We’ve compiled all the best home loans from Singapore’s top financial institutions and listed them in one convenient page. You can easily view each home loan’s pros and cons and request for the latest interest rates in the same page too.

Read More:

• Home Mortgage Loan Basics: How Much Can I Borrow?
• Average Cost of Home Renovation in Singapore
• How Much of Your Income Should You Spend on Housing?
• Buying a Resale Flat in Singapore? Here are 6 Things You Need to Check
• What’s the Average Cost of Housing in Singapore?

Cover image source: Unsplash