BTO vs. Resale Flats: Which Is Right for You?

This post was posted on Planner Bee.

Whether you’re a young couple buying your first home or someone looking for a property upgrade, understanding the key differences between BTO and resale flats can help you make a decision that fits your lifestyle, financial goals, and future aspirations.

Let’s break down the essentials to help you determine which option is the right one for you.

What is a BTO flat?

A Build-to-Order (BTO) flat is a new public housing unit developed by the Housing & Development Board (HDB) in Singapore. Unlike resale flats, which are pre-owned, BTO flats are constructed only after a sufficient number of buyers have been confirmed, and the construction is completed within three to five years from the launch of the project.

As a first owner, you’ll get a brand new unit with a fresh lease, making it appealing for those looking for long-term investment potential. You can personalise the design and layout, although some restrictions apply depending on HDB regulations.

BTO flats are typically more affordable than resale flats, as they are sold at subsidised prices. Furthermore, unlike resale flats, BTO flats do not have additional cash payments required above the sale price, making the upfront costs lower.

However, one major downside is the waiting time. Depending on the location and project, you may need to wait anywhere from three to five years before you can move in.

BTO flats are especially popular among young couples and first-time buyers due to their affordability and long-term benefits.

Read more: The Ultimate BTO Flat Booking Appointment Checklist

What is a resale flat?

Resale flats, on the other hand, are pre-owned HDB flats purchased on the open market. Unlike BTO flats, these units have been lived in before and are available for immediate occupancy. Resale flats offer greater flexibility in terms of location and availability, but they also come with their own set of considerations.

One of the biggest advantages of resale flats is that you can move in right away after completing the purchase, without waiting for construction to finish. Resale flats are located in both mature and non-mature estates. Many older flats are situated in well-established, convenient areas close to schools, shopping malls, and transport links.

However, while resale flats may have better locations and fewer waiting times, they are generally more expensive than BTO flats. Additionally, buyers often have to pay Cash Over Valuation (COV) if the flat is priced above its valuation, further increasing costs.

Depending on the condition of the flat, you may also need to invest in renovations, which can add to the overall cost of purchasing a resale flat.

While resale flats may not provide the same affordability as BTO flats, they offer a great option for those who need immediate housing or prefer living in a more established neighbourhood.

Read more: The Differences Between BTO, SBF, Open-Booking, and Resale HDB

Financial considerations

Upfront costs

One of the major benefits of purchasing a BTO flat is the minimal cash required upfront. For the downpayment, you can use funds from your CPF Ordinary Account (OA), which helps reduce the need for immediate cash out-of-pocket. Unlike resale flats, there is no Cash Over Valuation (COV) when buying a BTO flat. This makes the upfront financial burden considerably lower.

On the other hand, when purchasing a resale flat, the upfront costs can be significantly higher. In addition to the purchase price, you may have to pay COV if the market value exceeds the valuation price set by the HDB. The COV is paid in cash and cannot be financed using CPF, which means additional immediate out-of-pocket expenses. Buyers of resale flats are also required to pay for valuation fees, which may add another layer of financial consideration.

CPF usage and housing grants

First-time buyers of BTO flats can typically use their CPF savings to cover the full purchase price, including the downpayment. The government also offers a CPF Housing Grant, which can be used to offset the cost of the flat. The Enhanced CPF Housing Grant (EHG) can provide up to S$80,000, depending on your household income.

Resale flat buyers can also use CPF to finance the purchase. In addition to the EHG, first-time buyers of resale flats may also be eligible for the Family Grant, which offers up to S$50,000. If you are purchasing a resale flat close to or with your parents, you may qualify for up to S$30,000 in grants, which can help offset the cost.

Read more: Joint Singles Scheme or Orphans Scheme: Buy Your First HDB Flat With the Enhanced Housing Grant (EHG)

Appreciation potential

Over time, BTO flats tend to appreciate significantly in value, especially after the Minimum Occupation Period (MOP) of five years. Due to the low initial price, the potential for capital gains post-MOP is high, especially in high-demand locations like near transport hubs or popular residential districts.

While resale flats can appreciate in value too, they may not see as much of a capital gain, especially if they are older and have a shorter lease remaining. Resale flats in mature estates may hold their value, but it’s important to note that resale units with shorter remaining leases may be subject to depreciation over time.

Long-term investment

BTO flats are a good long-term investment, especially if you plan to upgrade to a larger home in the future. Once you’ve met the MOP, you can sell your BTO flat on the open market, and its appreciation can serve as capital for purchasing a bigger property.

Resale flats, particularly older units, may not offer the same level of long-term capital appreciation. However, they can still be an attractive option for those who value immediate availability and proximity to family, schools, or work.

Other factors to consider

While financial considerations are critical, there are other lifestyle factors that may play a significant role in your decision-making process.

Flexibility and location

BTO flats are generally located in non-mature estates, which may not have as many amenities as mature estates. However, some BTO projects are strategically located near MRT stations, schools, and parks, making them more convenient for long-term living. As BTO flats are released in batches, your preferred location may not always be available, and you may need to be flexible with your choice of estate.

Resale flats, especially those in mature estates, offer more variety in terms of location. You can select a flat based on proximity to work, school, family, or other key considerations. This flexibility makes resale flats an ideal choice for those looking for specific neighbourhoods.

Long-term residency and lifestyle needs

If you’re starting a family or planning to settle in the long term, a BTO flat might be a better option. The newness and potential for customisation make it ideal for families looking to make a place their own. Moving into a new estate also means that you’re part of a growing community. You’ll witness the development of the surrounding infrastructure, schools, and amenities, which can be exciting and rewarding.

However, if you need a place to live immediately, or if you prefer the conveniences and established amenities of mature estates, a resale flat may be the more suitable option.

For buyers looking to live near parents or extended family, resale flats in mature estates may be the better fit as well.

Read more: HDB Living for Young Couples: Should You Choose a 3-Room or 4-Room Flat?

BTO vs. resale flats: A quick comparison

Choosing between a BTO flat and a resale flat ultimately depends on your personal needs, budget, and long-term plans.

If you’re a first-time buyer seeking affordability and future capital gains, a BTO flat may be ideal. However, if immediate availability, location, and flexibility are your priorities, a resale flat might be the better choice.

Read more: The Complete Guide to Purchasing a New HDB Flat