Should We Keep Our 4-Room Queenstown BTO Or Give It Up For A Resale HDB/Condo?

Hello Stackedhomes, 

I have been a huge fan of your page since 2020, especially reading the stories of couples from all walks of life and seeing you curate solutions that best fit their needs. The time has come for my fiancee and I to have our own conundrum, and we wish to seek your advice as well. Can I check is the advice chargeable? 

My fiancee and I have purchased the option for a 4-room BTO at Queenstown. However, our main gripe is that the BTO would only be completed in 2028, and we're getting married next year and would have to rent for 4 years. Hence we are considering giving up the BTO and looking at other options.

1. Buy a 5 bedroom resale. But we're concerned also about the lease decay hence would prefer >= 90-year developments. In addition, we would like a place that's located not too far from town (ideally <40mins from Dhoby Ghaut MRT)

2. Buy a 3br new launch condo/resale condo

3. Buy a 3br condo with 99-1 and decouple in future to purchase another 2br condo for investment/rental (seems unfeasible financially)

4. Original BTO option. Rent $3k a month for 4 years, stay BTO for 5 years, and purchase a new condo under my fiancee's name and rent out our BTO. 

Could you advise which option would be the wisest financially? We're looking at a 10-15 time year horizon. 

Any help would be greatly appreciated! 

Thank you very much in advance!

Disclaimer: Some personal and financial information were removed for privacy reasons

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Hello,

Thanks for writing in and we appreciate your support.

Deciding whether to forfeit your BTO flat is undoubtedly a challenging decision, especially given the consistently high demand and limited supply - particularly for units in central locations. Securing a BTO flat often feels like a game of luck, and not everyone comes out ahead. Your dilemma is understandable, as forfeiting the flat feels like you are giving up a coveted opportunity but holding on would mean incurring substantial rental costs. 

We will start by assessing your affordability before we explore the various pathways that you’re considering in more detail. 

Affordability

For the purchase of an HDB

Maximum loan based on ages of 30 and 28 with a combined monthly income of $16K, at a 4.8% interest	$837,701 (25-year tenure)
CPF + cash	$1,000,000
Total loan + CPF + cash	$1,837,701
BSD based on $1,837,701	$61,485
Estimated affordability	$1,776,216

For the purchase of a private property

Maximum loan based on ages of 30 and 28 with a combined monthly income of $16K, at a 4.8% interest	$1,677,260 (30-year tenure)
CPF + cash	$1,000,000
Total loan + CPF + cash	$2,677,260
BSD based on $2,677,260	$103,463
Estimated affordability	$2,573,797

Based on your affordability, the options you are considering are all feasible. 

Now let’s take a look at the performance of the various property types you’re looking at. 

Performance of resale 5-room HDBs

Year	<1980	1980-1990	1991-2000	2001-2010	2011-2020
2013	$666,696	$571,371	$544,141	$573,451	$862,500
2014	$665,208	$547,093	$514,542	$525,165	$880,667
2015	$625,696	$539,496	$494,915	$482,707	$927,326
2016	$633,256	$548,537	$494,137	$482,000	$836,368
2017	$630,114	$552,698	$500,729	$478,845	$765,656
2018	$613,583	$532,676	$501,746	$473,275	$745,050
2019	$580,913	$528,019	$490,354	$488,205	$644,979
2020	$557,345	$530,707	$501,486	$498,328	$630,492
2021	$629,762	$592,566	$565,810	$548,677	$689,425
2022	$676,334	$643,078	$624,433	$596,549	$739,897
2023	$703,938	$676,249	$654,779	$621,063	$773,044
Average	0.70%	1.81%	2.02%	0.97%	-0.81%

The data shows that flats built between 2011 and 2020 experienced the lowest growth rates over the last ten years, which is somewhat surprising given that they are among the newest flats on the market. In contrast, flats built before 1980 (some of the oldest available) had the second-lowest growth rate. When examining the year-on-year growth rates, 5-room flats built between 1980 and 2000 showed a much steadier appreciation over time, whereas the other flats experienced most of their growth during and post pandemic.

One possible explanation for this trend could be the increased demand for larger living spaces, especially during and after the pandemic, which boosted interest in older flats. These units typically offer more spacious layouts, a feature that became highly desirable as remote work and home-centred lifestyles gained popularity. In contrast, newer flats are often more compact and optimised for efficiency instead. 

Moreover, flats built between 2011 and 2020 generally entered the market at relatively high initial prices, reflecting the increased costs of land and construction. This high starting valuation may constrain their potential for further appreciation, as there is less room for price growth compared to older flats, which were originally sold at lower prices.

This data suggests that older flats don't necessarily experience greater depreciation than newer ones, at least as of this current moment, as supply is still constrained. Beyond age, other factors play a significant role in a property’s value, including location, supply and demand, and even down to details like the unit's layout.

Performance of non-landed private properties

To compare the growth rates of new launches against resale properties, we'll examine the performance of new launch properties completed in 2013 and compare them to properties completed between 2002 and 2012. This approach helps to assess the potential gains of purchasing a new launch property versus a resale property over a similar period.

Since many of the new launches completed in 2013 only came on the resale market in 2015 due to the Seller’s Stamp Duty (SSD) holding period, our analysis will focus on resale transactions from 2015 onward. To account for regional variations in property trends, let’s analyse each district individually. Additionally, some districts lack condominiums completed in 2013, so they have been omitted from this comparison.

Core Central Region (CCR)

Year	D1 condos completed in 2013	D1 condos completed between 2002 - 2012	D2 condos completed in 2013	D2 condos completed between 2002 - 2012	D9 condos completed in 2013	D9 condos completed between 2002 - 2012	D10 condos completed in 2013	D10 condos completed between 2002 - 2012	D11 condos completed in 2013	D11 condos completed between 2002 - 2012
2015	$2,465	$2,013	$2,162	$1,673	$2,318	$1,984	$2,315	$1,744	$1,647	$1,539
2016	$2,108	$1,956	$1,786	$1,675	$2,316	$1,969	$2,324	$1,709	$1,665	$1,566
2017	$1,889	$1,916	$1,894	$1,633	$2,337	$2,011	$1,996	$1,695	$1,708	$1,585
2018	$2,059	$1,977	$2,033	$1,748	$2,474	$2,164	$2,134	$1,851	$1,816	$1,690
2019	$1,897	$1,933	$1,918	$1,656	$2,377	$2,123	$2,528	$1,845	$1,819	$1,674
2020	$1,921	$1,804	$2,020	$1,606	$2,281	$2,099	$2,005	$1,798	$1,793	$1,638
2021	$1,912	$1,958	$2,063	$1,725	$2,486	$2,231	$2,158	$1,943	$1,931	$1,731
2022	$1,909	$1,944	$2,129	$1,738	$2,547	$2,261	$2,164	$2,127	$1,953	$1,842
2023	$1,918	$1,994	$2,261	$1,836	$2,627	$2,249	$2,417	$2,239	$2,077	$1,987
Average	-2.83%	-0.02%	0.90%	1.27%	1.66%	1.63%	1.32%	3.29%	2.99%	3.31%

Rest of Central Region (RCR)

Year	D3 condos completed in 2013	D3 condos completed between 2002 - 2012	D4 condos completed in 2013	D4 condos completed between 2002 - 2012	D5 condos completed in 2013	D1 condos completed between 2002 - 2012	D8 condos completed in 2013	D8 condos completed between 2002 - 2012
2015	$1,469	$1,384	$1,225	$1,547	$1,188	$1,163	$1,426	$1,347
2016	$1,444	$1,384	$1,083	$1,497	$1,313	$1,150	$1,365	$1,355
2017	$1,431	$1,371	$1,013	$1,567	$1,216	$1,157	$1,412	$1,312
2018	$1,458	$1,403	$1,179	$1,601	$1,327	$1,218	$1,403	$1,413
2019	$1,513	$1,452	$1,260	$1,555	$1,264	$1,215	$1,248	$1,397
2020	$1,471	$1,479	$1,263	$1,512	$1,337	$1,222	$1,224	$1,369
2021	$1,509	$1,489	$1,365	$1,592	$1,415	$1,314	$1,397	$1,475
2022	$1,692	$1,651	$1,788	$1,711	$1,576	$1,409	$1,483	$1,538
2023	$1,767	$1,766	$1,928	$1,789	$1,644	$1,511	$1,527	$1,682
Average	2.42%	3.16%	6.55%	1.92%	4.35%	3.38%	1.10%	2.91%

Year	D12 condos completed in 2013	D12 condos completed between 2002 - 2012	D13 condos completed in 2013	D13 condos completed between 2002 - 2012	D14 condos completed in 2013	D14 condos completed between 2002 - 2012	D15 condos completed in 2013	D15 condos completed between 2002 - 2012
2015	$1,460	$1,220	$1,627	$1,195	$1,416	$1,119	$1,389	$1,261
2016	$1,492	$1,219	$1,588	$1,181	$1,363	$1,055	$1,413	$1,212
2017	$1,411	$1,203	$1,573	$1,187	$1,426	$1,074	$1,362	$1,254
2018	$1,451	$1,273	$1,621	$1,272	$1,429	$1,205	$1,395	$1,319
2019	$1,492	$1,248	$1,067	$1,275	$1,468	$1,164	$1,474	$1,320
2020	$1,464	$1,296	$1,512	$1,330	$1,437	$1,093	$1,454	$1,313
2021	$1,475	$1,383	$1,529	$1,367	$1,520	$1,204	$1,457	$1,434
2022	$1,697	$1,472	$1,731	$1,485	$1,597	$1,297	$1,560	$1,541
2023	$1,888	$1,576	$1,818	$1,609	$1,683	$1,501	$1,701	$1,705
Average	3.45%	3.31%	3.32%	3.85%	2.24%	4.05%	2.65%	3.95%

Outside Central Region (OCR)

Year	D18 condos completed in 2013	D18 condos completed between 2002 - 2012	D19 condos completed in 2013	D19 condos completed between 2002 - 2012	D21 condos completed in 2013	D21 condos completed between 2002 - 2012	D23 condos completed in 2013	D23 condos completed between 2002 - 2012	D27 condos completed in 2013	D27 condos completed between 2002 - 2012
2015	$1,036	$846	$1,181	$965	$1,381	$1,274	$1,006	$885	$996	$744
2016	$991	$836	$1,128	$943	$1,350	$1,255	$1,010	$867	$929	$699
2017	$891	$813	$1,130	$958	$1,256	$1,295	$998	$865	$908	$706
2018	$934	$827	$1,083	$999	$1,265	$1,411	$1,039	$927	$916	$738
2019	$942	$844	$1,103	$993	$1,397	$1,455	$1,073	$927	$907	$698
2020	$890	$832	$1,090	$1,003	$1,498	$1,451	$1,074	$941	$948	$737
2021	$962	$880	$1,165	$1,080	$1,613	$1,503	$1,158	$990	$980	$828
2022	$1,079	$1,005	$1,328	$1,214	$1,721	$1,696	$1,254	$1,082	$1,060	$863
2023	$1,236	$1,102	$1,445	$1,287	$1,822	$1,808	$1,458	$1,150	$1,163	$948
Average	2.56%	3.49%	2.74%	3.75%	3.68%	4.56%	4.88%	3.40%	2.08%	3.26%

The data shows varying performance between new launches and resale properties across different districts, though resale properties generally exhibit a higher growth rate in most districts. This trend may be due to the fact that new launches were initially priced higher, leaving more room for resale properties in the area to catch up over time.

Since each condominium project has unique characteristics, such as tenure, unit mix, number of units, and layout design, it’s challenging to definitively say whether a new launch or a resale property is the better choice. Ultimately, the decision depends on the specific attributes of each project.

Performance of BTOs

We previously wrote an article exploring the profitability of BTOs, which you can read here. Over the years, rising land and construction costs have led to higher BTO prices and lower profits. However, the data shows that BTO flats still yield profits of at least 50%, which remains a significant return.

On the topic of BTOs, we’re assuming that the unit you secured is from the June 2024 launch, prior to the introduction of the Prime, Plus, and Standard categories. However, if it’s Holland Vista in Queenstown, it falls under the Prime Location Public Housing (PLH) model. This means it comes with a 10-year Minimum Occupation Period (MOP), restricting your spouse from purchasing a second property until the MOP is fulfilled. Additionally, upon resale, a subsidy recovery fee of 9% of the resale price or valuation (whichever is higher) will apply.

Now let’s take a look at the potential costs for the various options. 

Costs of potential pathways

Buy a 5-room resale flat

Centrally located 5-room flats with at least 90 years remaining on their lease are currently transacting at prices ranging from $1M to $1.5M. One advantage of this option is the limited supply of newer 5-room flats in the central region, as HDB has not included them in centrally located BTO launches since 2017. This scarcity could help maintain their value over time.

For calculation purposes, let’s assume you purchase a unit at the median price of $1.25M and hold it for 15 years. You’ll also need to rent a place at the start to stay as the completion and renovations would take time. Factoring in the potential that the seller applies for an extension, we can conservatively look at 12 months of rental during this time. However, if there’s no submission delay, then it could be as quick as 3 to 4 months to get the keys.

While you have substantial CPF and cash reserves that don’t need to be fully allocated to this purchase (leaving room for other investments) we’ll assume for this calculation that the full amount is used.

Purchase price	$1,250,000
BSD	$34,600
CPF + cash	$1,000,000
Loan required	$284,600

BSD	$34,600
Interest expense (Assuming 25-year tenure at 4% interest)	$134,175
Property tax	$19,950
Town council service & conservancy fees (Assuming $90/month)	$16,200
Rental expense (Assuming $3K/month)	$36,000
Total cost	$240,925

Buy a 3-bedroom new launch condo

Similar to purchasing a BTO, buying a new launch property means you’ll need to rent a place while waiting for the property to be completed. Based on the current market, a centrally located 3-bedroom unit will likely require you to stretch your maximum budget.

For calculation purposes, let’s assume you purchase a property for $2.5M, rent for 3.5 years during the construction phase, and reside in the property for 11.5 years.

Purchase price	$2,500,000
BSD	$94,600
CPF + cash	$1,000,000
Loan required	$1,594,600

Progressive payment plan 

Stage	% of purchase price	Disbursement amount	Monthly estimated interest	Monthly estimated principal	Monthly estimated repayment	Duration	Total interest cost
Completion of foundation	5%	$0	$0	$0	$0	6-9 months (from launch)	$0
Completion of reinforced concrete	10%	$94,600	$315	$136	$451	6-9 months	$1,224
Completion of brick wall	5%	$219,600	$732	$316	$1,048	3-6 months	$4,392
Completion of ceiling/roofing	5%	$344,600	$1,149	$497	$1,646	3-6 months	$6,894
Completion of electrical wiring/plumbing	5%	$469,600	$1,565	$677	$2,242	3-6 months	$9,390
Completion of roads/car parks/drainage	5%	$594,600	$1,982	$857	$2,839	3-6 months	$11,892
Issuance of TOP	25%	$1,219,600	$4,065	$1,757	$5,822	Usually a year before CSC	$24,390
Certificate of Statutory Completion (CSC)	15%	$1,594,600	$5,315	$2,298	$7,613	Monthly repayment until property is sold	$669,690

BSD	$94,600
Interest expense (Assuming 30-year tenure at 4% interest)	$727,872
Property tax	$69,920
Maintenance fees (Assuming $350/month)	$48,300
Rental expense (Assuming $3K/month)	$126,000
Total cost	$1,066,692

Buy a resale 3-bedroom condo

The specific project you choose will determine whether you need to utilise your maximum budget. For calculation purposes, let’s assume you do and hold the property for 15 years.

Purchase price	$2,500,000
BSD	$94,600
CPF + cash	$1,000,000
Loan required	$1,594,600

BSD	$94,600
Interest expense (Assuming 30-year tenure at 4% interest)	$804,915
Property tax	$91,200
Maintenance fees (Assuming $350/month)	$63,000
Total cost	$1,053,715

Buy a BTO

With $1M in CPF and cash, you have the flexibility to fully pay for the BTO and still have funds remaining for other investments. For this scenario, let’s assume you take that approach. As with the previous examples, we’ll consider a 15-year timeframe, where you rent for 4 years during construction and reside in the property for 11 years.

Purchase price	$615,000
BSD	$13,050
CPF + cash	$1,000,000
Loan required	$0
CPF + cash remaining	$371,950

BSD	$13,050
Property tax	$4,598
Town council service & conservancy fees (Assuming $75/month)	$9,900
Rental expense	144000
Total cost	$171,548

Assuming that you invest $300,000 of the remaining CPF + cash for 15 years, let’s take a look at the potential gains at various ROI.

ROI	Potential Gains
4%	$240,283
5%	$323,678
6%	$418,967
7%	$527,709

What should you do?

Let’s do a quick recap on the potential cost incurred for the various options.

Potential pathways	Property value	Cost incurred	Average growth rate required in order to breakeven on the cost in 15 years
Buy a 5-room resale flat	$1,250,000	$240,925	1.18%
Buy a 3-bedroom new launch condo	$2,500,000	$1,066,692	2.40%
Buy a resale 3-bedroom condo	$2,500,000	$1,053,715	2.37%
Buy a BTO	$615,000	$171,548	1.65%

When comparing the average annual growth rates required to break even across the different options, all pathways appear feasible based on historical data. However, each option presents distinct advantages and trade-offs that merit careful consideration.

Buying a BTO incurs the lowest costs since you can avoid taking a loan. With your available CPF and cash, you can fully pay for the BTO and allocate the remainder to other investment avenues. As demonstrated earlier, even with a conservative 4% return on investment (ROI), the potential gains from your investments would more than cover the costs incurred over a 15-year horizon.

Additionally, the lower price point of a BTO makes it an appealing option if you plan to eventually purchase a second property. While we cannot confirm the feasibility of an owner-occupier arrangement without more details about your income and CPF balances, your substantial CPF and cash reserves suggest this could be a viable approach. It’s important to note that under this arrangement, the occupier’s CPF funds cannot be used for the BTO purchase. If your fiancee is not an occupier then ABSD would be due as the condo would be considered her second property, which is not ideal.

The primary drawback of the BTO pathway is the extended timeline. With a 4-year construction period and a 10-year Minimum Occupation Period (MOP), the occupier would only be eligible to purchase a second property after 14 years. This delay represents a considerable opportunity cost, as property prices and investment opportunities could evolve significantly in that time.

However, the main advantage of getting a BTO is the profit. While new rules such as the Subsidy Recovery and the income ceiling could reduce the profit you could make, it’s more likely that you’ll be sitting on cash profits during your MOP which you can use to make a downpayment for a condo or just to purchase a resale flat elsewhere and utilise the cash for other investments.

If you own a Prime HDB, you won’t be able to rent out the whole unit too. This could set you back if you intend to use it as an investment vehicle. As such, it may make sense to simply sell the BTO later and use it as a platform to upgrade or simply cash out.

Purchasing a centrally located resale 5-room HDB offers several advantages. Since no new 5-room flats have been launched in central areas since 2017, younger units in this category are limited, making them potentially more resilient in value. Additionally, under the owner-occupier arrangement, you could purchase a second property after just a 5-year MOP. 

If your long-term goal is to eventually own two properties, buying an HDB first appears to be the more practical approach.

Private properties generally demonstrate stronger capital appreciation compared to resale HDB flats, as evidenced by historical data. However, this depends heavily on the specific project purchased. Private properties also offer shorter holding requirements, with only a 3-year Seller's Stamp Duty (SSD) period. By purchasing under a 99-1 arrangement, you could decouple and purchase a second property once your financial position strengthens. While this offers flexibility, the higher purchase price of a private property and the challenge of supporting the loan under a single name in the short to medium term could limit its viability.

Given these considerations, purchasing an HDB first appears to be the more prudent choice. Between a resale flat and a BTO, we recommend leaning towards the resale option. It allows you to enter the private property market sooner, with a 5-year MOP instead of a 14-year timeline for BTOs. Furthermore, the scarcity of younger, centrally located 5-room flats may support their value over time. Your BTO, being located in Queenstown and likely having restrictions, would probably be restricted from whole unit rental.

Forfeiting your BTO would not significantly affect your financial position, apart from the loss of the down payment, since your combined income already exceeds the threshold for receiving any CPF housing grants.