BTO vs resale flats: a cost benefits breakdown

The two most common types of property available for purchase in Singapore are BTO flats and resale flats. So, how to choose between the two?

BTO vs resale flats: a cost benefits breakdown

BTO vs resale: what’s the difference?

The critical difference between BTO flats and resale flats is that BTO flats are flats which have not been built. BTO stands for Build to Order, and construction will only begin if a set percentage of the flats in the overall complex have been booked in advance. This cap is usually around 65-75% (the leftover flats are ‘balance flats’ that will later go to market) and if the goal is not met, the project will be cancelled.

By contrast, resale flats are HDB flats which are owned by an individual. It is already built and the owner of the home must have lived within it for the 5 year Minimum Occupation Period (MOP) before selling. Resale flats are therefore older than BTO flats and may have issues with dated appliances. However, resale flats are available immediately and moving into a resale flat is a much faster process than waiting for the construction of a BTO flat (assuming that enough flats are booked to begin construction).

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Resale flat vs BTO: Factors to consider when choosing resale or BTO housing

1. Price

As written earlier, BTO flats are significantly subsidized and are by far the cheapest option up front. Resale flats are more expensive as they are sold on the market and will reflect the market value fluctuations on downpayments and property charges. However, your specific situation might impact the overall price. If you will need to pay high rent throughout the waiting period of BTO construction – which can be upwards of 6 years – this will somewhat bridge the price gap between buying resale or BTO.

2. Eligibility

New HDB and BTO flats have specific eligibility income and citizenship requirements that you must meet in order to purchase them new. Can PR buy resale HDB flats? Yes, permanent residents can buy resale HDB flats with no eligibility issues. However, to purchase a BTO flat, at least one applicant must be a Singaporean citizen.

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HDB flats also have an income ceiling which will prevent those who earn above a certain amount (calculated monthly) from purchasing public housing. For BTO flats, the threshold for a two-room flat at a 99 year lease is a $7,000 combined monthly income. A short lease (fifteen years) for a two room flat has a gross monthly household income limit of $14,000. The cap for a three room flat varies from $7,000-$14,000 and the limit for 4 rooms or more is set at $14,000.

3. Wait time

Wait times for BTO flats are significantly longer, often taking multiple years. They are also varied and construction could be delayed, slowed or even cancelled. Resale flats will only have the wait time agreed upon by the seller and buyer during the negotiations.

4. Size

Generally, BTO flats tend to be slightly smaller than resale flats. The average size of a BTO flat is 968 square feet, while the average resale flat is around 1,119 square feet. This is also the case in DBSS vs BTO flats as DBSS flats are generally larger, ‘premium’ HDB flats.

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5. Lease tenure

BTO leases are almost always longer, with the majority of new leases lasting for around 100 years. By contrast, resale flats will have at least five years less than BTO flats (in accordance with the MOP. Often resale flats will have around 60 years left on the lease, because as a buyer you are taking over the preexisting lease and therefore some of the time has already expired.

6. Grants

Buying a BTO flat can be supported by up to $80,000 in housing grants for first time home-buying families.

Buying a resale flat offers much more, with up to $160,000 available in grants for the same demographic.

7. Location

There is more freedom of choice when it comes to location for resale flats. BTO flats are built in locations pre-determined by the HDB, while there are resale flats are available across a wider scope of locations.

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8. Renovation Costs

BTO flats are easy to renovate and will have up to date fixtures/appliances. Homeowners can choose to take advantage of the HDB’s Optional Component Scheme to save money on cosmetic renovations such as sanitary fittings and floor finishes. BTO flats are also a blank slate, so the homeowner has complete control over the renovations to be installed.

However, some resale flats will already be renovated and if you can find one that you like it can save you the trouble of ever needing to renovate.

9. Capital growth

The resale of your BTO flat is likely to turn a significant profit given the subsidized original price. Resale flats are less predictable and capital growth will depend on the market cycle at the specific time when the resale flat is to be sold again.

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So, resale vs BTO: which is better?

On the surface, many people favour BTO flats over resale. BTO flats are less expensive than resale flats. Because you purchase BTO flats directly from the HDB (as opposed to the open market), the price is heavily subsidized. This is not the case for resale flats as the seller is trying to make a profit with the sale. BTO flats are also newer and will appreciate in value more than resale. BTO flats have a 99-year lease, so purchasing them new will give you much more time in the flat and the opportunity to pass it down to your children.

However, there are also benefits to paying the higher price of a resale flat. For one thing, you get to know the exact details of the apartment you are purchasing. With BTO flats, you may not know the specific floor or unit you have purchased until construction is finished and it is close to move-in day. You also have more control over the location and can usually find resale flats available in highly competitive areas with few BTO options. Resale flats are also awarded higher grants for first-time home buyers – some grants provide more than twice the amount for purchasing a new flat.

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Resale flats are also ready to go almost immediately. This has become an even bigger draw in recent years since the pressure of the pandemic made it harder to find appropriate temporary housing. While typically couples or families would stay with their relatives to save renting money during the construction period of their BTO flats, the challenges of working from home have made such situations extremely difficult to navigate.

More than ever, Singaporeans need space and privacy in their homes for online meetings and productive workdays. This has led to something of a boom in resale flat purchases, because the move-in date could be merely a matter of months from purchase. By contrast, BTO flats regularly have a wait time of 3-5 years. This was made even worse during the pandemic as delays and foreign manpower restrictions frequently slowed construction. BTO waiting periods in recent times have climbed to 4-6 years, making resale flats a much more financially viable option when factoring the cost of rent over the waiting period into the overall price of a BTO flat.


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