Explain how resale flat prices are set and what you give up to move in sooner.
Farah and Hakim (an invented example) rent their home, and their landlord has given notice: three months left on the lease, then a higher rent. The BTO launch they had their eye on has an estimated completion date four years away. Hakim does the sum in his head, sees four more years of rising rent, and opens the HDB resale listings that night.
A resale flat is an HDB flat put up for sale by its owner once the minimum occupation period has been met. You buy it from that owner rather than from HDB. Going resale instead of BTO changes three things for you: the way the price is arrived at, the time before you get the keys, and the length of lease you end up with.
With a BTO flat, HDB fixes the price when the project launches. A resale price comes out of bargaining. The owner asks for a figure, you offer one, and you meet at a number between the two. Many buyers and sellers use an agent, though neither side is required to.
You can test an asking price yourself with the resale transaction records HDB publishes on its website. Narrow them by town, flat type and date, and you get the prices similar flats really sold for, each listed with its storey range, floor area and the year its lease began. Set the asking price beside those results. If it sits well above what comparable units went for, it is priced on hope. If it sits near them, it is priced on evidence. When flats of the same type sell for different amounts, storey, condition and remaining lease account for most of the difference.
Farah and Hakim are searching for four-room flats in Bedok, close to Farah's parents. Recent transactions there run from about S$560,000 to S$650,000, and the unit they want has an asking price of S$620,000 (example figures).
Once a price is agreed, the seller grants you an option. HDB values the flat after that, and the agreed price is measured against the valuation. Whatever you have agreed to pay beyond the valuation has to be paid in cash. Lesson 6.2, "Valuation and cash over valuation", covers what that does to your budget.
From an agreed price to collecting the keys, a resale purchase normally takes a few months. HDB's website lists each step with typical timings, and Lesson 6.1, "The resale purchase, from option to keys", goes through them in order.
Getting into a home sooner is worth the rent you no longer pay. A cheaper BTO price has to cover that amount before the BTO becomes the better deal. To calculate it, take your monthly rent and multiply it by the number of months until a BTO flat would be ready. Next, multiply the same rent by the months a resale purchase needs. Then take the second figure away from the first. What remains is the amount the lower BTO price must make up.
For Farah and Hakim, rent is S$2,400 a month. A four-year BTO wait means S$2,400 x 48 months, or S$115,200, and that assumes the rent never goes up. A resale flat they can move into after six months costs them S$2,400 x 6, or S$14,400, in rent. The difference comes to about S$100,000 (S$100,800 to be exact).
Rent is only part of what a wait costs. Plans get put on hold as well: starting a family, having a parent come to live with you, or taking a job whose location depends on where you live. Couples who stay with family while waiting may pay very little rent, and their calculation comes out quite differently. Put in your own rent, even if it is almost nothing.
Every HDB flat is sold on a 99-year lease. BTO buyers start with nearly all of it. A resale buyer gets what the previous owners have not already used. The Bedok unit Farah and Hakim like dates from the late 1980s and, in this example, has 62 years to run.
Remaining lease, the portion of the 99 years still to go, affects you in three ways. The first is borrowing: banks and HDB cap lending on a flat whose lease will run out before the youngest buyer reaches a certain age. The second is CPF: a similar rule governs how much of your CPF can go into the flat, and the course "CPF Mastery: every account and the choices you control" deals with this in lesson 2.2, "Valuation and withdrawal limits, and why older leases are capped". The third is resale value: whoever buys from you later meets the same limits, with fewer years left. Lesson 7.2, "Lease decay: what a shrinking lease does", explains how that affects what the flat is worth when you sell.
For each flat on your list, record two figures: how many years of lease it has today, and how many it would have in the year you plan to sell.
CPF housing grants are open to resale buyers too, though the grants and the amounts are not always the same as for BTO buyers. A few grants apply only to resale flats, and one is given for buying close to your parents, which is part of Bedok's appeal for Farah and Hakim. Module 2 shows how to check which grants apply to you, and Lesson 2.2, "CPF housing grants: who qualifies and where the money goes", sets out how the money is paid.
A resale flat carries its own minimum occupation period, counted from the date your purchase completes. Before that period is over, you may not sell the flat on the open market or let out the entire flat. HDB's website gives the length and the conditions.
Taken together, resale means paying the market rate, which is often above a BTO price for a comparable flat, and taking a shorter lease. What you get back is a move within months, a flat you can inspect before buying, and your own choice of town, block and floor. To weigh that properly you need real resale prices for the flat you would actually buy. In the activity below you'll pull them from the HDB resale data for one flat type and one town, and note the remaining leases alongside the prices.
Look up recent resale transactions for one flat type in a town you would live in. Write down the price range and the remaining leases.
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