BTO vs Resale: Which is the ideal home choice for you?

Choosing the ideal home can be really challenging and daunting. Having to make such important and expensive decisions, the stakes are high for you and your family. However, we are here to help you with one of life’s greatest milestones.

In recent years, the Housing Development Board (HDB) has been launching several new projects all around Singapore under the Build-To-Order (BTO) Scheme. BTO projects are widely raved options amongst younger Singaporean couples, especially for its price. In 2019 alone, flats in Non-Mature Towns such as Jurong West, start at just $110,000 for 3-room options. On average, waiting times for BTO projects are between 2.5 to 3 years, which for younger couples is ideal as it gives them ample time to prepare for the financing of their homes and marriage.

On the other hand, Resale options are often viewed as the more expensive option between the two. On average, a 3-room resale flat in Jurong West averages around $245,000. Price alone acts as a push factor deterring couples looking for a new home.  In addition, resale options have shorter remaining lease compared to their BTO counterparts. For some couples, the resale option is also less preferred due to emotional reasons, such as the lack of novelty and excitement of receiving a brand-new home.

If you are reading this and are still feeling unsure of which is the best choice for you, fret not! This article will take you through a detailed understanding of the differences between the BTO and Resale Options, the overall process to be expected for each and hopefully, by the end of it, you would be more informed and take a step forward to purchasing your next dream home.

In the table below, it provides you with an overall comparative summary between BTO and Resale Flats.

Build-To-Order (BTO)Resale Flats
·      Average 3 years waiting time

·      Grants receivable of up to 80K

·      Ranges between 160K- 600K

·      Generally newer layouts (smaller kitchen space, living room and bedroom)

·      Balloted and lesser flexibility when choosing a flat

·      Value generally appreciates up to 60% after 5 years (MOP)

·      Renovation not included (renovation packages range from 50K-100K)

·      Better and modern designs from developers, lower costs required

·      About 3 months

·      Grants of up to $160K

·      Ranges between 200K-1.2M

·      Much bigger living spaces, common rooms can fit queen size beds comfortably with excess space

·      Wider range of choices such as floor level, direction and location

·      After 15 years, prices will fall (especially with more BTO projects launched)

·      Older flats may require renovation and incur additional maintenance costs

As you would observe, both the BTO and Resale Flats each possess their individual costs and benefits. Now it seems you are caught in a greater dilemma. So how do you decide which is the most ideal?

Here are some guiding questions that we hope would help you.

Question 1: Financially, what are my constraints?

Your financial health and capacity should be a priority consideration. In Singapore, the maximum Loan-To-Value (LTV) obtainable while taking up a bank loan is 75%. LTV is a restriction on the loans borrowable for the financing of the house. This is the Singapore government’s initiative to protect home buyers from over-borrowing. For example, if you intend to purchase a resale flat worth $300K, the loan sum borrowable is capped at $225K. The rest of it has to be financed with personal cash flows.

While for most it would be ideal to have larger living space, larger living spaces often translate to higher financial commitments. Weigh your options and make a decision that meets the needs of your family while also taking into consideration your financial longevity. Do feel free to speak with us at any time when you need assistance on planning for your financial journey!

Initially, it seems that BTO flats seem far more affordable than their resale counterparts. However, there is more than meets the eye. As of September 2019, the government has launched new initiatives that affect the grants made available to first-time home buyers. With grant amounts raised from 120K to 160K, and income cap raised from 8K to 9K, this levels the playing field between BTO and resale. Thanks to this initiative, there is greater incentive for homebuyers to choose the Resale Option. This opens up more options for you as well!

Question 2: What does my timeline look like for the coming years?

If you are a young couple looking to set up a family after a few years, perhaps a BTO would be a better option – we too understand the need for careful and conscientious preparation prior to settling down. Given the 3-year average waiting period till your flat is ready for occupation, you and your partner have till 3 months before the key collection date to produce your marriage certificate and to get everything ready to live a life together.

Additionally, BTO flats are brand new apartments that do not come with many furnishings provided. Hence, this presents you with an opportunity to be your own artist. Design your house the way you like it, make it into your very own dream home.

On the converse, if you are ready to move in immediately to a place of your choice, resale flats are recommended. Perhaps you are hoping to enrol your child into a nearby Primary School you desire, or even living near amenities such as an MRT station. With Resale as one of your consideration, the world is your oyster. Live how you want, and wherever you want.

Question 3: What are my (future) family’s needs?

Speak with your spouse/family members. Identify needs from wants. By doing this, you are better able to make decisions that minimise wastage and refocus those resources into things that matter more in life.

For example, if you are willing to travel slightly more, a flat in non-mature towns and less central areas could be a point of consideration. In general, these flats are also cheaper and much more affordable!

In summary, these 3 guiding questions are by no means exhaustive nor facts, but we hope they would help you in your decision-making!

Colin Lim

Colin was originally an engineer with a manufacturing firm. With the analytical skills and patience he had amassed over the years, he moved into banking, assuming the role of a mortgage banker and subsequently a relationship manager with exposure in wealth management with stints from 2 major foreign banks.
Colin Lim

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