The first thought for someone looking to purchase a property is often: Get a BTO!
Is it always the best choice? At the very least, this article will show you how a BTO is not the only choice in buying your first property in Singapore.
Summary:
BTO flats are suitable if you are a buyer in your early 20s, as it takes about 8-10 years before you can sell it to reap the profits. Otherwise, it makes sense to consider resale flats, which require an occupancy period of 5 years before you can sell it.
Applying for BTO is useful to delay getting married. The real question to consider before picking BTO or Resale is whether you are ready to get married, now?
BTO is not the only option
For those of us that are new to adulting, whenever you plan for your first home, the suggestion to just 'go for BTO' inevitably comes up. This piece of advice often comes from the older generations who see it as the best and only sensible option for purchasing your first home from HDB. But is it really so?
From Aaron's experience dealing with property, we would like to share that it's not true and for some people, applying for a BTO might not be the most prudent choice. BTO is known to 'make money' for the buyers. It's true that many who sell off their BTO flats make 100k or more in profit, but if this profit comes 8-10 years later, is it worth it?
When does applying for a BTO make sense?
If you are under 25 years old, with a committed partner ready to commit to a marriage, BTO makes for an attractive choice.
Being young and starting out in a working life, you have:
Time on your side
Less cash on hand than older working people
From making the purchase, 8-9 years puts you at only 32-35 years old whilst committing to a BTO also allows you to continue to work and accumulate cash, CPF savings at the same time.
The situation for first time homebuyers above 25 years old
For someone that is 25 years old and above, looking for a first time home, applying for a BTO
creates a long wait, both for the flat to be ready and a long wait before you can realise any profits. The wait of 8-10 years from committing today to a BTO creates opportunity costs.
Thus, it's not advisable for first timers to go for BTO, and it's not your only way to a first property.
Why choose a Resale Flat
For first timers looking for a property, you can definitely consider a resale flat. There is actually an abundance of choice in the resale market and you have choices of 4-5room units for 400k plus. Purchasing a resale flat also comes with its own benefits and grants which go up to 50k.
For someone in your late twenties or hitting the thirties, the loan tenure also gets shorter as you get older. Committing to a resale flat instead of a BTO flat means you need only 5 years before realising a profit and you might even be able to afford an EC by then, tapping on the available EC related grants.
Therefore, a resale flat is recommended for those who are ready to commit to a home purchase immediately, to not spend the years waiting.
Difference between BTO & Resale
Other than the length of time you have to wait before selling, the main difference is when you have to get married by.
When purchasing a resale flat, it takes between 3-6 months before you collect the keys and you have to show proof of marriage solemnization within the same period. As for BTO, you usually have several years for the unit to be ready before you need to commit to the marriage and show relevant proof.
The following might seem controversial or offensive even; but when we sit down with clients for consultations, the main reason for BTO often is that they are not ready to get married right away. Thus, BTO becomes a convenient delay of their wedding date, rather than a thought out prudent financial decision for property purchase.
Therefore, it's important to ask the right questions based on your own situation and circumstances. Regardless what others might tell you, BTO is not the only option!
Check out the video to hear about Aaron's own experiences and opinions regarding BTO and a quick intro about HDB valuation processes.