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First-time Home Buyers: BTO or Resale HDB?

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Having trouble deciding between BTO or a resale HDB flat? It’s the dilemma for most millennials. There’s a lot of information to soak in but we’ve got you covered by making it bite-sized and easily soluble for digestion. Find out what’s the best choice for you as you weigh the factors before owning your first home.

Factors to Consider When Buying a Flat:

1. Eligibility criteria

Citizenship

BTO: At least one person applying for a BTO Flats needs to be a Singapore Citizen (SC), the other can be an SC or Singapore Permanent Resident (SPR).

Resale: There’s no need for at least one person applying to be an SC. Two applicants need to be both SPR.

Income ceiling

BTO: The current income ceiling for a BTO flat is $14,000 per month. If both you and your spouse earn more than this, you do not qualify for a BTO flat.

Resale: There is no income ceiling for buying an HDB resale flat.

Age

BTO & Resale: For most HDB housing schemes, you must be at least 21 years old at the point of application.

Property ownership

BTO: You do not qualify for a BTO if you:

  1. Currently own other residential properties, either locally or overseas, or have sold them within the past 30 months.
  2. Applicants must also have only purchased up to one HDB, DBSS (Design, Build and Sell Scheme) or EC in the past. This is because SCs are only eligible for two subsidised flats from the government.

Resale: You still qualify even if you’ve recently sold your private properties and already bought two subsidised flats in the past.

2. Lease tenure

BTO: Comes with a 99-year leasehold.

Resale: Older HDB flats on average can have 70 to 60 years or less left on their lease.

If your children will inhabit the flat in the future, then a BTO would be a good choice for you.

3. Future market value

BTO: They have better resale value after its Minimum Occupancy Period (MOP) as compared to resale flats. Comparing a BTO flat in a mature estate like Tampines which is 5 years old and resale flat which is 20 years older, which do you think is a better investment? Surely it’s the newer BTO flat.

Resale: Buying a resale flat means competing in an open market against others who do not qualify for a BTO flat. They include 1) SPR, 2) Households with income exceeding $14,000 per month, 3) Those who recently sold their private properties and 4) Singaporeans who have already bought two subsidised flats in the past. Hence, this emboldens resale flat owners to boost their property’s value.

Do you intend to sell your BTO in the future? Or have no intentions of selling your resale flat? If your answer is YES to either question, you’re not at a loss. The value of a BTO would most likely appreciate and you could make money out of your sales while older resale flats could depreciate in value over time. This depends on market conditions, according to the Straits Times, resale prices dropped by 0.9% in 2018, so there’s a risk of making a loss in your CPF account.

4. Location

BTO: You may not get your most desired location as prime spots in Singapore have already been occupied a long time ago by existing developments. However, if the BTO launch is at a good location, luck has to be on your side as the launch will be heavily oversubscribed.

Resale: As long as HDB flats exist and there are upcoming developments, the options in the resale market are limitless!

It’s all about your convenience and preference. Always evaluate the amenities and surroundings of your future home, and prioritise your family’s needs.

5. Renovation cost

BTO: Picture yourself being presented with a blank canvas. It comes in a default form, at its purest state, in other words, there are no faults or damages to rectify, only endless choices in personalising your home. Need home renovation inspirations? Here are some popular home renovation styles!

Resale: The older the property, the more fixing required if there’s no proper maintenance. Thus, renovation works (extensive hacking to replace and rebuild existing features etc) may need to be done which would result in forking out more money. If the property is in tip-top condition, existing homeowners will highly likely set a premium price on it.

Your budget matters, so thorough financial planning is a must! Spend within your means, splurge within your limits.

6. Size

BTO: For a 4-room flat, they are usually an average of 90sqm but they cost less. Although recently, there were more options of bigger BTOs, such as the Housing Board sales exercise on 18 November 2019, where the launch will take place in mature estates of Ang Mo Kio and Tampines.

Resale: They are definitely bigger, about an average of 100sqm but may be more expensive.

BTOs are suitable for bachelors, couples and smaller families. They can get quite claustrophobic if you have a big family, so go for the resale flats if that’s the case.

7. Waiting time

BTO: You may have to wait for 2-5 years for your BTO to be completed.

Resale: You can easily move after eight weeks from the date of HDB’s acceptance of the resale application if the necessary documents are submitted accurately and promptly. This appointment is considered the Completion Date; the Seller is required to handover the key on the appointment date. Here’s an overview of the streamlined HDB resale process.

This boils down to whether you have the luxury of time to wait.

8. Grants

BTO: For flat applications received from Sep 2019 sales launch onwards, you may be eligible for the Enhanced CPF Housing Grant (EHG). Your average gross monthly household income for the 12 months before your flat application must not exceed $9,000.

Resale: You can apply for the Family Grant and EHG. Those who are buying a resale flat to live near or together with their parents can also apply for the Proximity Housing Grant. Your average gross monthly household income for the 12 months before your flat application must not exceed $9,000.

Families with lower household incomes will receive a bigger EHG grant amount.

9. Property Prices

BTO: Factors such as flat attributes (size, purpose of the flat, orientation, storey height) project location (proximity to city or town centre, accessibility, amenities) and timing (market conditions at the time of sale) determine the price of a BTO. For example, the cost of a 4-room unit at Punggol Point Crown is from $287k while Tampines GreenGlen is from $312k.

Resale: Older resale flats could cost more or even less. A 4-room resale flat in Tampines costs an average of $400k to $465k.

You ought to calculate the price per square metre (psqm), so you can consider how much space you’re getting for the price you’re paying. Sometimes, the difference isn’t vastly huge.

In conclusion, there are a handful of pros and cons for you to list out before making one of the biggest decisions in your life. Need professional advice from our trusted agents? We got your back!

Source: Business Insider

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