Is BTO the Right Choice?

Is BTO the Right Choice?

"Is BTO the right choice?"
"Isn't BTO the best choice for all Singapore?"
"Subsidised, after MOP can sell high, not good meh?"
"So how ah? which is the best choice to go for?"

These are some assumptions that most people have when it comes to the BTO. Personally, yes I do agree that BTO is a great choice, in fact, it might even be the best choice if you have limited financial resources. However, one factor to consider would be the timing. As much as BTO is a "go-to" choice, but putting in perspective with a "private property" might not seem like the best of choice. I would be comparing the difference between going for a BTO and a New Launch, as new properties are known for their capital appreciation capability.

I'd always feel that there are no bad choices when it comes to property. As much as each project have their functions, are priced and design in a certain way, the type of properties also are design for different people, in all different walks of life. The only bad choice happens if you misinterpret the function of the property or if the function of the property you're getting does not align with what you're looking for.

As much as Resale flats could be great choices for people who want to just get a cheap, full paid flat after downgrading despite their potentially depreciating value, there are always 2 sides of the coin to look at things. To have a fully paid property, while having ample cash for retirement while taking your mind off everything else. For the sake of covering the function of the resale property, it could also be an option for people who didn't have enough financial resources at the moment and couldn't wait (time), and want to own a place of their own or even people who just prefers a larger living space.

Back to our comparison between the BTO and Private property, A BTO basically takes into account the time to build and the waiting period. Which average around 5-6 years in total, and in this case we are to anticipate a delay due to the covid situation. The MOP period only starts from when you take your keys (move-in), so in total it takes around 11 years before you can potentially realize your profit.

A private property, in this scenario, starts their period from the moment of you exercising the purchase option, in which after 3 years you won't be liable for the seller stamp duty. Taking this into consideration, even though the BTO does really seem like a great opportunity, the opportunity cost might not be as favourable if you compare it to an investment in a private property. This is not even taking into account the greater capital appreciation, but just based on the time taken to realize the paper gain.

Even though with everything taken into consideration, should you ever want to go for a BTO, you just have to sell (or in our terms, disposed) the private property and you'll be able to qualify for a BTO as a first-timer after a 30-month cooling period.

That being said, the function of BTO flats serves as a great platform for families who have time, ideally, young couples without much financial resources but this trade-off would be time, and on the other side of the coin would be individuals with adequate capital in hand, thus going for the private property to cut the time of their capital realization short. This could mean drastically reducing the time taken for capital realization, compared to selling a BTO flat after its MOP, by 2 to 3 times.

Depending on the trade-off that you're looking for, there is no right or wrong answer, or even to try going for a BTO first before going for a new launch, or just going for a new launch altogether if your finances allow. Both are great ways to reward buyers through property appreciation. End of the day this function of the 2 different property types clearly illustrates the saying of "time is money".
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