Property: Deciding between a BTO and Resale flat


As HDB flats comprise 80% of household residence in Singapore, most prospective home buyers on the island have two options: sign up for a new BTO that will be ready in 3-5 years, or purchase a resale HDB to move in immediately. When choosing between the two, consumers should largely consider four different attributes: purchase price, renovation cost, return on investment and convenience.

BTOs are much cheaper than Resale flats

In terms of pure purchase price, BTOs tend to be around 20-30% cheaper than resale flats in similar areas. For example, the last 4 BTO projects that launched in Geylang (Ubi Grove), Tampines (Tampines GreenDew), Choa Chu Kang (Teck Whye View) and Woodlands (woodlands Glade), according to the HDB website. Whilst the 3-room flats in these projects cost around S$200,000 on average, resale flats tend to cost around S$300,000 in the same neighborhoods. Assuming one finances the 80% of the purchase with a home loan, the difference in interest payment will easily add another S$20,000 of cost for the resale flat.

Of course, BTOs tend to be smaller than older HDB flats. However, this size difference doesn't seem to explain all of the cost differences. For instance, the cost per square foot for similarly sized flats were still 20-40% lower for BTOs compared to resale flats.

Renovation Cost: BTOs tend to be cheaper

Most home buyers would have to consider renovating their new home before moving. It is a necessary step for BTOs, while the need for a renovation project could vary greatly for resale flats. One could avoid the extra cost of renovation if he or she were to purchase a relatively new and well-maintained flat, but renovating an older home could cost significantly more than what it could cost for a newly built flat. For example, we collected the basic package pricing for renovations from 76 renovation companies in Singapore, and found that BTO renovation projects could cost 40-60% less than a resale home renovation.

That's not all. These quotes are for basic packages, and any more additions on accessories (i.e. appliances, furniture and extra lighting/electrical work) could easily add another S$10,000 to S$30,000 to this cost. Therefore, for a comprehensive project on a 4-room resale flat, one should expect to spend around S$50,000, while a 4-room BTO flat could cost around S$30,000-S$35,000. Taking out a renovation loan to complete your project could widen the gap even further due to its interest and fees. As a side note, given these high costs, one would be wise to insure his home improvement projects whether he purchases a BTO or a resale flat.

Return on Investment: BTOs can lead to better returns with some patience

All in all, the decision between buying a BTO or renovating a resale flat comes down to personal preference on economics and convenience. BTOs tend to be the better option in terms of economic cost and returns. Since all BTOs eventually become resale flats, homeowners can benefit from the price appreciation after a few years of moving in. However, there are also meaningful downsides to choosing a BTO over a resale flat. Most prominently, you can't move in immediately and have to wait for a few years until your unit is actually built. This also means that you have no idea what your flat will actually look like when you have to make a decision. Not only that, BTOs tend not to have the necessary services and stores at convenient locations when people move in. In fact, BTO prices appreciate precisely because these services get established in the neighborhood over time. In this sense, purchasing a resale flat is a much more convenient option, which shouldn't be easily disregarded since it will impact one's daily life.


Written by Duckju Kang for ValuePenguin.