Most of Singaporeans are under the impression that HDB resale flats are more expensive than BTOs. I was one of them… until I tried to buy an HDB flat for the first time in my life this year.

For context, I wanted a flat in a central, mature estate complete with hawker centres and ValuDollar outlets. Not easy to come by in a BTO, I know. So, in between HDB BTO launches, I also decided to check out the prices for the resale flats around Singapore. Here are my findings:

  • HDB resale flats are not that much more expensive than BTOs right now
  • Buying an HDB resale flat can get you more housing grants than buying a BTO
  • Remaining lease affects the prices of HDB resale flats

That last point may sound a bit tangential – after all, you’re probably more interested in the current price tag and don’t intend to stay in that flat all the way to the end. But I’d argue that it’s really important to understand this issue as it would play a big role in your decision.

Okay, enough preamble. Let’s get on with the HDB BTO vs resale price showdown.


HDB resale flats are not much more expensive than BTOs

My statement might sound controversial, since HDB BTO launch pricesare supposed to be heavily subsidised, whereas resale flats are subject to the vagaries of the open market. But numbers don’t lie, so I’ll let them do the talking.

First, how much does an BTO flat cost these days? HDB launched 3 batches of BTO flats in 2018 – May, Aug and Nov – and, after compiling the published prices, I’ve come up with a range of starting prices for 4-room flats (the most ubiquitous flat type) before grants:

  • $248,000 to $290,000 for non-mature estate (e.g. Yishun, Punggol)
  • $312,000 to $380,000 for mature estate (e.g. Tampines, Toa Payoh)

Now, let’s check out how much resale flats are going for in the 6 BTO estates. I left out Tengah since it doesn’t even exist yet.

To get the data, I went to the HDB Resale Flat Prices portal, which records the transacted prices of resale flats, and picked out the lowest transaction price in December 2018 for the same flat type (4-room flat in the same HDB estate).

* Included the 2 lowest transactions since there was such a big difference in prices, most likely due to remaining lease (indicated in brackets).

As you can see, HDB resale flats are more expensive than the BTOs – but in most cases, not by very much.

The ones with a larger price difference seem to be the more mature or “hotter” estates: Punggol, Tampines and Toa Payoh. But for Yishun, Sengkang and Sembawang (all non-mature estates), the difference is less than $50,000.

Before you jump to the conclusion that HDB has been jacking up BTO prices, the likelier reason is that HDB resale prices have been declining. Which is terrible news if your flat is your only investment, but nice for those of us looking for an alternative to ulu BTOs.

In a nutshell: HDB resale flats are a lot more affordable than they used to be, and the price gap between resale vs BTO is currently quite narrow.



With HDB resale flats, you might get more housing grants than a BTO

I mentioned earlier that the price difference between an HDB BTO and a resale flat in the same estate can be as low as (or less than) $50,000.

This number is significant, because first-time HDB applicants can get a HDB grant of $50,000. So if the resale flat you’re eyeing is less than $50,000 more than a comparable BTO, that would mean the final price tag “after discount” is actually lower than the BTO price.

Let’s say you and your fiancee are first-time applicants looking for a flat in Tampines, near your folks. You’re both working full-time and earn $9,000 a month combined.

A 4-room BTO flat in Tampines costs $352,000. There are HDB grants for BTOs, but since your household income exceeds the ceiling of $8,500, you don’t qualify for any. Final price: $352,000.

A resale flat in the same estate costs $380,000. First-timers get a straight HDB grant of $50,000 for the resale flat, which “reduces” the price to $330,000. That’s already $26,000 cheaper than the BTO flat, but that’s not all…

Additionally, HDB resale flats qualify for Proximity Housing Grant of $20,000 if you happen to be buying a unit within 4km of your parents. (There’s no such grant for BTOs – you only get priority when balloting.) If this applies, that’s an extra discount off the price. Final price: $310,000. That’s $42,000 less than the BTO.

To summarise, here are all the HDB grants in a table. Note the monthly household income ceilings.

Summary: If your monthly household income is on the higher side, you will not get much (or any) grants for a BTO.

But for resale flats, there’s a more lenient income ceiling for the $50,000 first-timer grant, and also the chance to get a bonus $20,000 grant if you plan to live near your parents. The total grant amount would range from $50,000 to $70,000, which is significant.



BUT: The remaining lease affects HDB resale flat prices

In the first sub-section, where I compared the prices of HDB BTO vs resale flats in 6 estates, I came across a stark difference in price between 2 Toa Payoh resale flats of different ages. The $380,000 one had 53 years left on the lease, while the $520,000 one had 66 years left.

And that’s not the only instance I’ve come across where the older the flat, the cheaper the price tag. What gives? There are at least 2 distinct lease-related issues at play:

  • “Lease decay” – the idea that your 99-year lease HDB flat will have no more value when it reaches the end of its life (if it’s not selected for en bloc)
  • Restrictions on using your CPF to pay for older flats

Regarding lease decay: There’s been a lot of gov-bashing about this whole 99-year lease thing this year, but c’mon guys, it’s been there right from the start. It’s not like HDB suddenly said, “Hey dude, forgot to tell you that your house is only on 99-year lease.”

Singaporeans should be aware that buying a resale flat is like buying a second-hand car with less than 10 years left on the COE. If you want to pay a premium for it because you really like the car and can’t get it first-hand, then that’s your issue. 

Meanwhile, the basic bro/babe buying a Sengkang BTO doesn’t get to stay in a painfully hip Tiong Bahru walk-up apartment, but it’s brand new with a fresh 99-year lease. Those are just the tradeoffs in the property market.

The other thing is CPF restrictions. It was only until recently that if your HDB resale flat has less than 60 years left on the lease, there are limits on how much CPF you can use to pay for it. You can only unlock your CPF if your age and remaining lease is 80 years or more.

From 10 May 2019, this rule has changed. HDB purchases can utilise CPF up until the 90% loan-to-value ratio if they at least have 20 years left on the lease and the remaining lease can cover the youngest buyer until the age of 95.

Whatever your thoughts on these government policies, they’re definitely going to affect demand for older HDB resale flats, especially the ones that have less than 60 years left (i.e. flats from the 1970s).

But what does this mean for potential HDB resale flat buyers? It depends on how you view your purchase.

If you’re purely buying a home to live in, and not as an investment asset, then hurray, because older flats are extremely affordable right now. Always wanted to live in the city fringe in a historic estate, like Toa Payoh or Pek Kio? Then you’ll be glad to know there are tons of affordable options right now, because everyone’s trying to sell off their older flats.

However, if you view your home as an investment asset – perhaps you plan on selling it after 5 years at a tidy profit, or liquidating it for money at some point in your life – then you must pay careful attention to the age of the flat, and the age it will be when you plan to resell it.

This article was first published in Moneysmart Singapore.