Sale of Balance Flats (SBF) vs Build-to-Order (BTO): 5 things to note before choosing SBF

For young couples in Singapore, asking your partner “want to BTO?” is essentially akin to a marriage proposal, albeit an utterly unromantic one. Build-to-Order (BTO) exercises have always been the medium through which countless Singaporean couples have obtained their first home, and this will probably continue to be the case well into SG500. However, there is another option home-seekers can consider besides BTO and resale flats: Sale of Balance Flats (SBF).

What are Sale of Balance Flats (SBF)?

SBFs can be unsold flats from a previous BTO exercise, repurchased flats or surplus Selective En bloc Redevelopment Scheme (SERS) replacement flats. They are offered by the Housing Development Board (HDB) either through a SBF exercise or a Re-Offer of Balance Flats (ROF) sales exercise. An ROF exercise offers flats that remain unsold from a previous SBF or ROF exercise.

BTO vs SBF

HDB-hunting can be a real roller coaster ride, and young couples generally want to pick the most ideal home that they can reasonably find. In that case, which is better, BTO or SBF? Do note that it is an either-or situation because HDB will not allow you to apply for both. To make this decision, we will have to consider the following factors:

  1. You will get a flat much faster through SBF

BTOs take about 3 years to complete construction, so homebuyers will have to wait this out before getting their new homes. On the other hand, some SBF units are already completed, so if you choose these flats you can get your home almost immediately. The SBF units that are not yet completed will generally still have shorter waiting times as compared to a BTO unit. However;

  1. A shorter wait time may carry a premium

 Nothing is truly free in this world, and shorter waiting times is definitely not one of them. Although SBF units are subsidized, their prices are adjusted to reflect market-rate prices. SBF units will cost less than resale HDB units, but they will still be costlier than BTO units.

  1. You can pick from a wider range of estates for SBF

 BTO launches are commonly confined to a few estates per launch, whereas SBF can offer a wider range of estates. Homebuyers who want to stay in a particular estate, even though there are no BTO launches in that area, can opt for SBF. However, although SBF offers a wider range of different estates, it is limited in the choice of floor level and orientation of units in these estates.

  1. SBFs are essentially leftover flats

Sometimes, there is a reason why the flat has remained unsold despite being offered through a BTO or SBF exercise. For example, this unit may be on a low floor and directly facing the rubbish dump. If you get a repurchased flat from the SBF exercise, there is a chance that this unit has a dodgy past. The possibility of having paint-splashed doors and “O$P$” written on the walls is not entirely absurd for repurchased flats, as the previous owner may have run into financial trouble, which was probably why the owner sold the flat back to HDB.

Other forms of crime may have taken place as well, but this is usually very rare. Whether or not this is a deal-breaker will depend on you, but this can be a good opportunity to snag a unit because there may be lesser competition.

  1. The chances of getting a flat from SBF are lower

 The odds are not in your favour if you apply for a flat through SBF. This is because SBFs tend to be oversubscribed, compared to BTOs in non-mature estates. As mentioned earlier, since you can only apply for either BTO or SBF per launch, it will be wise to consider carefully which to apply to least you end up with a wasted ballot.

Additionally, since HDBs are subject to the Ethnic Integration Policy (EIP), buyers of Chinese ethnicity may face difficulty getting an SBF unit in mature estates because these estates tend to already have the maximum quota of Chinese residents.

The Verdict

Although SBF does offer certain advantages over BTO, it comes with a myriad of potential problems. As such, you should really only choose to apply for SBF in 2 situations:

  1. You need a flat urgently due to certain circumstances (eg. a little one on the way) and cannot afford to wait for a BTO. In that case, applying for SBF makes a lot more sense than for BTO, and SBF will give more value-for-money compared to resale flats.
  2. You *really* want to stay in an estate that is not offered in the BTO exercises. If it is because you want to stay near your parents, do remember that HDB offers a Proximity Housing Grant (PHG) for resale flats, so when comparing SBF to resale prices, deduct the grant quantum from resale prices to give yourself a better comparison.

Otherwise, BTO is most likely still the way to go for most young couples as it is the cheaper and “safer” option. If you are particular about getting to choose the aspects of your home (orientation, floor level etc.) and do not mind the wait, then it is best to go with BTO.

Cheryl Megan Choo

Cheryl started her career in Accounting, and moved into Financial Advisory where she found her passion in advisory and sharing her knowledge with her clients. She continued to build her knowledge in wealth management and planning to help her clients manage and build their estates. She believes in providing her clients holistic and unbiased advice, and joined the Redbrick team to ensure they make the best informed decisions in the purchase of their properties and homes.
Cheryl Megan Choo

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