Tanglin Halt Courtyard has the highest subscription rate among the BTO projects launched this year. (Image: HDB)
SINGAPORE (EDGEPROP) - Homebuyers often face the choice between applying for a Build-To-Order (BTO) flat or purchasing a resale HDB flat.
Prospective buyers of resale flats typically scour property listings to find their ideal home or engage a property agent to assist them. Price negotiations are conducted directly between buyers and sellers or through their respective agents.
In contrast, details of BTO projects for each BTO exercise are made available online several months before the project's launch. Interested buyers can submit their applications online once the projects are made available. Currently, HDB conducts three BTO exercises per year.
There have been several recent changes to the BTO system. One major change is the reclassification of BTO flats from Mature or Mon-mature estates to Prime, Plus, or Standard categories. Prime BTO flats are centrally located, well-connected, and surrounded by amenities. Plus flats, while not in central locations, are also well-connected and located in more desirable areas within the neighbourhood. The remaining flats are classified as Standard.
Prime and Plus flats are priced higher than Standard flats but come with stricter restrictions and a longer minimum occupation period (MOP). These new classifications do not apply to the current resale flats, so the stricter restrictions and extended MOP are not relevant to resale buyers.
In this article, we examine the differences between purchasing a resale flat and a BTO flat, as well as the pros and cons of each option.
More choices for resale
Buyers who choose to purchase a resale flat have more options in terms of location. Completed HDB flats are located all over Singapore, and buyers are not subject to any location restrictions. In contrast, buyers applying for a BTO flat are limited to the projects available during each BTO exercise. According to HDB’s latest annual report, there are 27 HDB towns, but only 16 towns were included in the three BTO exercises conducted this year (see Table 1).
Prospective buyers are often unable to predict when, or if, their preferred HDB town will be included in a future BTO exercise. Additionally, some may apply for a flat during an ongoing BTO exercise only to discover that the subsequent exercise has a project with a more desired location.
Certain buyers are determined to live in specific locations for various reasons, such as living near their elderly parents or their children’s schools. These buyers are more likely to choose a resale flat over a BTO flat to ensure they can secure a home in their preferred location.
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Notably, singles are only eligible to purchase two-room BTO flats but are allowed to buy resale flats of any size. Before the recent changes in BTO flat classification, singles could only apply for BTO flats in non-mature estates. However, they are now allowed to apply for BTO flats in any location. Despite this relaxation of location restrictions, singles remain limited to two-room BTO flats. As a result, singles who prefer larger flats will need to turn to the resale market.
Longer wait time for BTO
Buyers of BTO flats have to wait longer to collect the keys to their homes because the flats are still under construction. The estimated wait time for flats in this year’s three BTO exercises ranges from 24 to 59 months (see Table 2).
In contrast, buyers of resale flats experience a significantly shorter wait time since the flats are already completed. Buyers can usually collect their keys within months of signing the sale and purchase agreement. Unsurprisingly, prospective buyers with more urgent housing needs tend to opt for resale flats instead of BTO flats.
Furthermore, resale flats offer greater certainty. Prospective buyers and sellers negotiate with each other or through their agents. This allows both parties to quickly determine whether they have reached an agreement. If an agreement cannot be reached, buyers can immediately resume their home search and sellers can restart their sale process.
In contrast, applicants for a BTO flat must wait several months to find out if their application is successful. If unsuccessful, they have to wait several more months for the next BTO exercise before applying again. It is also uncertain when they will have a successful application.
Notably, the majority of BTO projects launched this year were oversubscribed (see Table 3). The lone exception is Taman Jurong Skyline, with a subscription rate of 0.9. The HDB project in Jurong West features 1,844 flats and is the largest project in the October BTO exercise. The large supply of flats for the project could have potentially contributed to its low subscription rate. The low subscription rate could also be attributed to the lack of nearby MRT and LRT stations and primary schools within a 1km radius.
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In contrast, Tampines Green Topaz, from the June BTO exercise, achieved the highest subscription rate of 9.6. The project’s proximity to Tampines West MRT Station and three primary schools likely contributed to its popularity.
Longer remaining tenure for BTO
A BTO flat comes with a leasehold tenure of 99 years, while a resale flat will have a shorter tenure. As the first owners of BTO flats must fulfil a MOP of five years before selling, the maximum tenure of a resale flat is typically 94 years.
The recent changes to the classification of BTO flats, including the extension of the MOP to 10 years for Prime and Plus flats, mean that the maximum tenure for some resale flats will drop to 89 years. However, the new classification does not apply to HDB flats launched before the October BTO exercise. Buyers who prefer a flat in a prime location but wish to avoid a longer MOP may want to consider a resale flat instead.
Price difference between both types of flats
We compared the prices of four-room flats from this year’s BTO projects with their resale counterparts in the same towns that are 10 years old or younger. Four-room flats were chosen because they constitute the largest percentage of HDB flats. According to HDB’s latest annual report, there are 450,073 four-room flats in Singapore, accounting for 42% of all HDB flats. Additionally, four-room flats were included in all the BTO projects launched this year.
The smallest price difference is for four-room flats in Bayshore Vista in Bedok. This BTO project was launched in October under the Plus category, which likely contributed to its higher price point, resulting in a smaller price gap when compared to similar resale flats in the same town (see Table 4).
Two other projects, Bayshore Palms and Kembangan Wave, were also launched in Bedok during the same BTO exercise. Like Bayshore Vista, these projects were categorized under the Plus classification. The price differences between Bayshore Palms and Kembangan Wave and their resale counterparts are similarly narrow compared to other BTO projects.
This is despite four-room flats in Bedok ($751 psf) that are 10 years old or younger having a higher average resale price compared to their counterparts in the East Region ($738 psf) and islandwide ($690 psf) (see Chart 1). The strong prices in Bedok attest to the popularity of this well-established HDB town.
Source: EdgeProp Market Trends (as at 25 November 2024)
In contrast, Tanglin Halt Courtyard has the largest price difference (see Table 4). This Prime project in Queenstown was launched in February. Interestingly, Queenstown is the only HDB town with an average resale price exceeding the $1,000 psf mark. The town’s proximity to the CBD and city centre likely contributes to its high resale prices.
Another BTO project under the Prime category, Holland Vista, was launched in June at similar prices to Tanglin Halt Courtyard. As a result, it also shows a similarly large price difference when compared to its resale counterparts.
The average price of four-room flats in Queenstown ($1,017 psf) that are 10 years old or younger has consistently trended higher than those in the Central Region ($964 psf) and islandwide ($690 psf) (see Chart 2). Notably, the price gap between the average resale prices in Queenstown and the Central Region has widened since 2020.
Source: EdgeProp Market Trends (as at 25 November 2024)
Conclusion
The decision to apply for a BTO flat or purchase a resale flat ultimately depends on the buyer's needs. Prospective buyers with urgent housing needs are likely to choose a resale flat because of the shorter wait time before they can collect the keys to their new home. Similarly, prospective buyers determined to live in certain towns are likely to opt for a resale flat to ensure they can secure a home in their preferred location.
On the other hand, prospective buyers with a more modest housing budget are more likely to apply for a BTO flat, as these tend to be priced lower than their resale counterparts. Additionally, prospective buyers who are more flexible about location and timeline are also more likely to choose a BTO flat over a resale flat.
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