Comparing HDB Flats in the Same Estate: How Old Should You Go? (BTO vs Resale)

·10-min read
Comparing HDB Flats in the Same Estate: How Old Should You Go? (BTO vs Resale)
Comparing HDB Flats in the Same Estate: How Old Should You Go? (BTO vs Resale)

When buying a HDB home, many buyers usually have a location and flat size in mind. For example, you could be shopping specifically for a 4-room flat in Tampines. Once settling on this, you still have two main options: to choose a new HDB flat (like Build-to-Order (BTO) or balance flats) or an older HDB resale flat.

In the past year, there’s been quite a bit of buzz around resale HDB flats. In 2020, not only did HDB resale flat prices increase at its fastest pace in eight years, but there was also a record-high of 82 million-dollar HDB transactions.

So why are so many Singaporeans snapping up resale flats? Could ‘preloved’ really be better than brand new? If picking a resale flat, how new or old should you go?

With the volume and interest picking up for the HDB resale property market, we explore some things a buyer may need to take into consideration when deciding between a resale flat or a BTO in the same estate.

5 Considerations when Choosing HDB Flats in the Same Estate

When researching for this article, we found that close to 80% of the population resided in a HDB flat. Of which, 4-room HDB flats were the most commonly occupied type of dwelling at around 31.8%.

Hence for this article, we mainly compared 4-room HDB flats. For buyers who want 5-room or larger flats, there may be additional constraints such as locations such flats are built in.

1. New vs Old 4-Room Flat Sizes and Layouts

Since the starting years of HDB to the current period, 4-room flats have been constructed in various sizes and concepts. In other words, not all 4-room flats are made equal. Which ‘era’ it is from and when it was built matters.

There are at least four different types of 4-room flats: the 4A, the 4 New Generation (NG), the 4 Simplified (S), and the 4 Standard (Std). Here’s a quick breakdown of the different types of 4-room flats built over the years.

The newest 4-room (A) flats were also built in different sizes depending on the construction years.

Period

Type

Size (sqm)

Features

1960 – 1970

4-room (Std)

70 – 75

- One WC shower. Sometimes the WC and shower can be separated.

- Refuse chute is attached in the kitchen.

1966 – 1980

4-room (I)

82 – 84

- Separate WC and shower.

- Refuse chute is attached in the kitchen.

1976 – 1989

4-room (S)

84

- Two full-sized toilets

- Refuse chute is attached in the kitchen.

1984 – 1989

4-room (NG)

92

- Two full-sized toilets

- Refuse chute is attached in the kitchen.

1982 – 1990s

4-room (A)

105

- Two full-sized toilets

- Refuse chute is attached in the kitchen.

1993 – 1998

4-room (A)

100 – 108

- Two full-sized toilets

- Centralized refuse chute outside the unit.

1998 – 2000

4-room (A)

100

- Two full-sized toilets

- Refuse chute is attached in the kitchen.

- Comes with a storeroom-cum-apartment shelter

2000 – present

4-room (A)

90

- Two full-sized toilets

- Refuse chute is attached in the kitchen.

- Comes with a storeroom-cum-apartment shelter

Sources: teoalida; singaporewatch; HDB

The older HDB flats from the 90s offer a bigger layout and more space than the current BTOs. You may also find that the newer HDB blocks are built closer to one another as compared to the older HDB flats, losing some sense of privacy in the process.

Related article: Property Floor Plan Guide: How To Read Your Condo or HDB Floor Plan Correctly

2. Deprecating Lease of HDB Flats

Another factor that differentiates HDB flats of the same size in the same estate is the remaining lease left. The value of all 99-year leasehold properties drop as they age, but the depreciation may be faster as the lease nears its end.

This effect on the valuation affects the demand for the older leasehold units as it gets harder for a home buyer to get a mortgage loan from HDB or a bank. For some idea of the deprecating effect, we compared 4-room flats in Queenstown with different lease balances.

Location

Balance lease (built year)

Size (sqm)

Avg Selling Price ($)

(based on the past 1 yr transaction)

161 Mei Ling St

49 years (1970)

85

310,000 – 380,000

129 Clarence Lane

75 years (1996)

105

680,000 – 810,000

58 Strathmore Ave

79 years (2000)

85

665,000 – 710,000

91 Tanglin Halt Road

87 years (2008)

90

700,000 – 810,000

27 Ghim Moh Link

92 years (2013)

87

740,000 – 830,000

28 Ghim Moh Link

92 years (Sales of balance 2013;)

92

680,000

96 Dawson Road

99 years (BTO; TOP Sep 2021)

83

582,900

Although it may not exactly be an apple-to-apple comparison (the exact location, facing, floor and condition of the flats within the same town can command different prices), we can generally see a trend of lower prices for flats with a shorter lease left compared to the newer flats in the same town.

Related article: 5 Ways The Government Can "Save" Ageing HDB Flats in Singapore

3. Proximity to MRT Stations and Nearby Amenities

Properties are bought based on location, location, location. The reason is simple: Convenience. Buyers are often willing to fork out a premium for better accessibility to amenities and transport nodes.

We take a look at whether the resale market can offer better value in terms of the premiums paid, compared to BTO flats when choosing a flat next to transport nodes and public amenities.

For this, we compared the selling prices of two 4-room BTO flats in a new town such as Canberra, where one is close to Canberra MRT on the North-South Line (NSL) and the other is relatively further away. Likewise, we use the data from a nearby non-mature town, such as Sembawang to make a similar comparison for the resale market.

Location

Balance lease (built year)

Size

Price ($)

Location to amenities

132B Canberra View

99 years (BTO – 1 Sep 2020)

92 sqm

349,300

(10th floor)

50m away from Canberra MRT station

103A Canberra st

99 years (BTO – 1 Dec 2020)

93 sqm

297,900

(9th floor)

500M away from Canberra MRT station

488 Admiralty Link

83 years (Resale – 2004)

94 sqm

355,000

1000M away from Sembawang MRT station

341B Sembawang Close

80 years (Resale – 2001)

91 sqm

370,000

300m away from Sembawang MRT station

In Canberra, the premium for choosing a flat that is close to the MRT station compared to another flat within the same town that is relatively further away, is around $50,000. The premium demanded in the resale market in Sembawang seems to be smaller at around $15,000.

From this example, the price premium seems pretty similar. However, the resale market offers one advantage: Negotiation. You definitely can’t haggle with HDB, but for resale flats, you may be able to negotiate with sellers for a better price and better value.

4. CPF Housing Grants for BTO vs Resale

Keeping HDB flats affordable for the masses has been a key driving force for HDB. As such, generous government subsidies are offered for eligible buyers. You can read more about CPF housing grants here: HDB Grants for BTO, Resale Flat and EC Buyers: How Much Can You Get?

Generally, a BTO buyer can expect up to $80,000 in maximum grants and a first-time buyer purchasing a resale flat can expect to receive up to $160,000 in grants, where eligible. Knowing the total amount of grants available for either purchasing a BTO or resale flat, would allow the buyer to make an informed decision on whether it would be justifiable to jump into the resale market at current price levels instead of going through the long waiting period for a BTO flat.

If you’re not sure how much CPF grant you are eligible for, you can use CPF’s housing grant calculator.

5. Financing and Paying for a New BTO vs Resale Flat

Regardless of BTO or resale flat, there are two choices for HDB home buyers to finance their mortgage, HDB and bank loans. You can read more about HDB vs bank loans here: The Complete Guide to Financing your HDB Flat

If you’re choosing between a BTO and relatively new resale flat, the financing journey is quite similar.

  • For HDB loans, the main difference is that for BTOs, cash payment may not be necessary. In other words, if you have enough CPF OA savings, you may not need to fork out a single cent.

  • For resale flats, there are cash-compulsory payments, like the option fee and deposit to seller.

  • For banks, there is no difference between BTO and resale flat financing.

If you’re eyeing a super old HDB resale flat, though, then it’s another story. You may not be able to borrow as much in home loans as banks may lower the LTV. How much of your CPF savings you can ‘unlock’ may also be limited.

To obtain maximum CPF usage and HDB housing loan, the remaining lease of the flat must cover the youngest buyer until at least the age of 95. If not, the amount will be pro-rated.

And this is already after the CPF rules were relaxed in 2019. Previously, the rules focused mainly on the remaining lease. This recent change mainly benefits the older buyers – for younger buyers who are likely to outlive the remaining leases of these super old flats, it is still a tough situation.

Limitations of HDB Loan for Second-Timers

What about if you’re a second-time HDB buyer – is there any difference?

Yes. One of the main appeals of an HDB loan is that first-timers can potentially loan up to 90% of the flat’s price (or value). However, the allure of an HDB loan wanes when it is applied to be used for a second time after selling your first home and to finance a second HDB flat.

When taking the HDB loan for the second time, the loan quantum (i.e. how much you can borrow) is right-sized by utilising the CPF monies refunded and up to 50% of the cash proceeds from the disposal of the existing or previously owned HDB flat.

For example, let’s assume the buyer had made $200,000 in cash by selling his BTO after deducting the loan refund and accrued interest. For the second purchase, the buyer has to use 50% of his $200,000 cash proceeds for the purchase of the second flat and everything in his CPF OA (save for the $20,000 allowed) before the loan quantum is determined. This means, the second HDB loan may be of a much lower loan quantum percentage compared to the first loan.

Banks Do Not Consider Your Sales Proceeds

This is not the case for bank loans, which do not consider your profit from the previous property, meaning you can potentially loan a bigger amount to finance your new home.

Assuming this is your only mortgage, you can usually loan up to 75% of your flat’s price (or valuation).

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