Sale of Balance flats vs Open Booking flats vs BTO flats vs Resale flats: Which should you get in 2023?

 

	Availability	Affordability
BTO	Four launches per year Waiting time of around three to five years	Units sold at subsidised prices Housing grants up to $80,000
SBF	Two launches per year Units under construction, near completion or completed	Unit prices influenced by market trends Housing grants up to $80,000
OBF	Application opens twice a year Units under construction, near completion or completed	Unit prices influenced by market trends Housing grants up to $80,000
Resale	Units available anytime	Units sold at prevailing market price Housing grants up to $190,000 May trigger cash-over-valuation May be subject to CPF withdrawal limits

Availability of BTO, SBF, OBF and Resale Flats

BTO flats offer a fair amount of variety, but come with the longest waiting time.

While you will be able to choose from the full range of units offered under the launch (subject to quotas and limits), you will have to pick from a smaller range of locations, as BTOs typically only cover two or three towns.

Also, BTO units require construction time ranging anywhere from three to five years, making them the flat type with the longest waiting time.

SBF and OBF flats, in contrast, offer significantly reduced waiting times for buyers, as these units are often under construction, nearing completion or already completed.

While SBF and OBF units are drawn from across Singapore, your choices are tempered by the number of units actually available. In practice, this almost always means you’ll be faced with even more limited options.

Finally, purchasing a resale flat does not involve any construction or waiting time.

The range of unit types and locations available is also the largest. Once you find a unit that you like, you can proceed to make an offer to the seller, and upon striking a deal, can move in in around eight weeks.

Affordability of BTO, SBF, OBF and Resale Flats

Now, in terms of affordability, you’ll find a big difference between BTO, SBF and OBF flats, and resale flats.

Generally speaking, BTO flats are the most affordable of the lot, as they are sold at subsidised prices.

SBF and OBF flats, too, are pegged at subsidised flat prices, but their selling prices can be influenced by market trends.

Overall, you may find SBF and OBF flats to be slightly more expensive than their BTO counterparts. But this is by no means a hard rule, and of course, exceptions abound.

Resale flats are, in comparison, much more costly.

For example, Farrer Park Fields, an BTO project launched in Feb 2023 offers 3-room units for $356,000 to $449,000. Equivalent resale flats in the area are going for between $450,000 to $560,000.

[[nid:621575]]

But what about government grants?

Strangely, buying a resale flat entitles you to three housing grants (Enhanced CPF Housing Grant, CPF Housing Grant, and Proximity Housing Grant), whereas the only grant available when buying a BTO, SBF or OBF flat is the Enhanced CPF Housing Grant.

Resale flat buyers, then, can access up to $190,000 in housing grants across all three schemes, whereas those buying a “new” flat can only get up to $80,000 in grants.

Still, this disparity, while seemingly large, may not make up for the inflated prices of the resale market.

This is because 1) the actual subsidy you can qualify for depends on your income level, marital status and other factors, and 2) the Proximity Housing Grant only applies to those staying with or near their parents.

In addition, resale flat affordability may also be impacted two other ways. For one, if the sale price you and the buyer agreed upon turns out to be higher than the valuation of the flat, you will have to pay the difference in cash.

For another, depending on the age of the resale flat, you may be restricted in how much of your CPF monies you can use to pay for your flat. This, in turn, could mean having to pay part of your mortgage in cash, creating a strain on your cashflow.

Renovation

BTO flats are brand new, and you can also opt for upgraded fittings and fixtures to be included when booking your unit, allowing you to keep your renovations to the bare minimum. You probably just need to get some furniture and appliances, and you can move in.

This also applies for new flats purchased via SBF and OBF exercises — however, note that there’s a chance that you may come across units repurchased by HDB that may be several years or even decades old.

Resale units (or the aforementioned repurchased units), meanwhile, have the greatest possibility of requiring renovation works, and pretty extensive ones at that.

The fact is, such units would have undergone a fair amount of wear-and-tear which must be remedied for the sake of safety.

This means having to spend on renovation even if you’re lucky enough to find a resale unit that has been relatively well maintained.

Capital appreciation

New units bought via BTO, SBF and OBF launches have a full 99-year period to undergo capital appreciation, at which point you (or your descendants) can liquidate them for a healthy profit.

Of course, this is by no means guaranteed, and very much depends on how the housing market goes in future.

In comparison, resale units have a diminished potential to realise meaningful capital appreciation, especially if they have a short lease remaining, or occupy unfavourable locations.

But that’s not to say that resale flats cannot make for good investments; rather, you may need to find other routes to unlock value, such as perhaps by renting out the unit to help fund your retirement.

This article was first published in ValueChampion.