HDB Upgraders Guide 2018: Upgrading From Your HDB Flat To A Private Condominium In Singapore

After living in your Build To Order (BTO) or first resale Housing & Development Board (HDB) flat for more than five years, you may be preparing for an upgrade. This bodes well as you would doubtlessly have gone for the most practical housing choice as a young couple just starting out in the world.

Following quite a long while, you may have found higher paying jobs, have more family members to feed or have at last set something aside for a bigger place. For some in Singapore, one of the dreams is to upgrade to live in a condominium.

Let’s take Mr. Yeo for example.

Mr Yeo, whose spouse gave birth to twins toward the end of last year, is actively looking for a condominium within a 15-minute drive of his in-laws’ home. He thinks private property offers better long-term value compared with public housing. In fact, HDB flats in mature estates such as Bishan, Serangoon, and Toa Payoh are at their peak valuations — which means there is limited appreciation potential. “It’s near the $1 million mark already. The vast majority won’t pay $1 million for an HDB flat,” he tells The Edge Singapore.

As it may be, private property prices are currently outpacing HDB prices. In the 1st quarter of  2018, the private residential property price index has shot up 3.9% to 144.1, from 138.7 in the former quarter, as indicated by the statistics released by URA. This is the fourth consecutive quarter of increase.

Here are a couple of key points to enable you to identify if upgrading to private property is perfect for you.

1) Private property prices is going up quicker than HDB prices

Source: HDB, URA

2) Prices are just going to increase till 2030.

Hence, the latest round of cooling measures in July 2018 which aimed to stabilize the market. The following article is reported in business times that new private homes will cost even more expensive by 2030

3) HDB Units Have Reached Their Peak Prices And The Older The Flat Is, The Less It Is Likely To Be Worth


Source:  Straits times

Over in the HDB resale market, HDB units that have a shorter expectancy on their lease are starting to be valued in. This typically implies prices of these units are cheaper, which will haul down the HDB resale price index. A year ago, Minister of National Development Lawrence Wong clarified that not all older flats were qualified for the selective en bloc redevelopment scheme.

Once HDB owners realise that their properties are no longer an investment but a consumption good, many will try to cross over to the private market to protect their wealth


Here are a few things to note before deciding if you should upgrade to private property.


You Have To Serve Out Your Minimum Occupation Period (MOP)

Majority of you would have already realized that you need to serve out your MOP before being able to sell or purchase another property in Singapore or overseas. The following is a graph itemizing the diverse situations you may face depending on the type of flat you purchased and when you obtained it.

You likewise need to take note that any period when you are not occupying the flat or if there has been an infringement of the flat lease will not count towards your MOP.

Source: HDB

Purchasing Your Dream Condominium

If you have complied with your MOP, you can at last start working towards buying your fantasy home. You may as of now already have some familiarity with the procedure, having experienced a comparable one when you purchased your first home. Be that as it may, there is likewise some key contrast between purchasing a private residential property and an HDB flat.

You need to take up a bank loan as opposed to depend on an HDB loan. This implies you have to pay out 20% of the property value in the initial downpayment, of which something like 5% has to be in cash and the remaining 15% in cash and CPF savings. You will likewise also incur lower interest rates on your loan – with HDB loans pegged at 2.6% and bank loans drifting at close to 1.5%.

Past this, you additionally need to draw up a proper plan to pay down your home loan. As there are limits to how much of your CPF monies you can use to pay off your home loan. 2 Limit such as Valuation Limit (VL) and Withdrawal Limit (WL) will cap the maximum amount of CPF monies you can use to repay your home loan. Do take note once you reach these limits, you will need to fork out the rest of your home loan payments in cash. You can use CPF’s calculator to check how this may affect you.

Presently, you likewise need to comply with the Total Debt Servicing Ratio (TDSR), where you can just use up to 60% of your gross income to pay off your debts. This incorporates any credit card debt, student loans, car loans, personal loans and, obviously, home loans. If you are self-employed, just 70% of your gross income will be evaluated in this calculation, which makes it even much harder to meet all requirements for a bigger loan.

You additionally need to stick to a Loan-to-value (LTV) proportion, which sets the maximum loan you can take against the property’s value relying upon your circumstance.

There are also likewise different considerations you need to consider, for example, paying stamp duty, engaging a property agent to enable you to buy your property, where you may bring about 1%-2% commission expenses for this, and employing a lawyer to instruct you on the procedure of regarding purchasing a condominium and handling the legal documentations.

Some of you may likewise need to keep your HDB flats to rent out for passive income after moving into your new condominium. This choice is only available to Singaporeans as Permanent Residents have to sell off your HDB flats within six months of buying a condominium, or some other private residential properties in Singapore or overseas.

Schedule A Free Consultation To Get Your Customised Asset Progression Plan

Step 1. Review your current finance situation, this is the starting point, we will quantitatively analyze your usable financial resources. Here are some questions we need find the true facts. How much cash savings and CPF OA you can put for property investment? How is the your monthly or annual income during the past 2 years? How is the returns of your investment (stock, fund, forex, bond, etc.)? How healthy is the liability if you have any? how much home loan could you be granted from the bank?

Step 2. Review your current property portfolio and evaluate its performance: how is the market valuation, how about the rental income if have, how is the balance loan if have, how is the profitability and future potential? any risk in the current property asset? etc..

Step 3. Monitor the opportunity in the market: is there any good buy property (i.e. entry price, potential upside, low risk) to recommend matching one’s financial position.

Step 4. restructure your property portfolio: after analyze your current financial situation and property portfolio, with recommended good buy property in mind, we will work out a strategic financial plan with proper timeline to optimize your property asset. It’s time to dispose the bad or less performing property and own more valuable property with well-risk management.

Actually, we are committed to provide professional consultation service like a certified financial planner does on your financial investment portfolio. We need keep pace with times to reorganize your property portfolio for the maximum returns as much as possible. Follow the right trend, the time will give you abundant rewards one way or another.

Schedule A Free Consultation To Get Your Customised Asset Progression Plan

Here’s what you’ll learn when you schedule your free session:

  • Do you know what costly mistakes HDB buyers and sellers made in their property transactions?
  • How do I plan for a smooth transition of the sale of my property and next purchase?
  • How much cash proceeds will you have and how to maximise your funds and/or diversifying your property portfolio?
  • Free customised report for your complimentary home report today to find out how much is your property worth!
  • With the current abundance of new launches, can you spot the value buys from the not-so-ideal buys? We will be able to provide a free complimentary comprehensive report and comparison on new launches.

Let our Property Wealth Advisors help you craft out a systematic and low-risk path to own multiple properties whether you are intending to upgrade from a HDB to a private property or thinking of your second property.