Upgrading from HDB to condo in Singapore: 5 signs to know you’re ready

sell hdb buy condo singapore - how to upgrade from hdb to condo

Remember the time you collected your keys to your first HDB flat? Huge milestone. Huuuuge.

And now that we’re HDB homeowners, many of us are probably thinking about the next step in our property journey: upgrading from a HDB flat to a condo.

The biggest concern is, of course, the $$$. If you’re in a good financial position, AND you can confidently avoid these common mistakes, it’s about time you start your search for your new condo to call home:

1. You’re not overestimating your HDB flat’s final selling price
2. You’re understand you’re getting a lot less cash from the sale of your HDB flat
3. You’re planning your long-term finances wisely
4. You have spare cash for a surprise Additional Buyer’s Stamp Duty (ABSD)
5. You’re not planning to “downgrade”

1. You’re not overestimating your HDB flat’s final selling price

A lot can change between now and the time you actually sell your HDB flat. Especially if you’ve still got years of waiting out your 5-year Minimum Occupancy Period (MOP).

Even if the economy is expected to do well – which normally bumps property prices up – there are a whole ton of other things to factor into the equation. For instance:

More BTO flats = more upcoming supply of resale HDB flats

In 2020-2021, more than 50,000 new HDB flats would be crossing their 5-year MOP (i.e. these many BTO flats were completed 5 years ago), meaning they’ll be eligible to be put up for sale.

And here’s why this number might worry you: It’s much, muuuch bigger number as compared to, say, the 10,000 HDB flats that reached their MOP in 2014-2015. And looking at past trends, the number of HDB resale transactions rise closely in tandem with more HDB flats reaching MOP.

If even 1 in 5 of these homeowners, like you, are thinking of upgrading, that’s already 10,000 other HDB flats competing for buyers. So, selling your HDB flat might be tougher than you think – the larger supply of HDB flats in the market means you might need to price your home lower to stay competitive.

Amenities – even if (or especially if) they’re not near your HDB flat

Your HDB flat is right beside Tampines MRT Station. Score! You’ll probably be able to sell your flat at a premium for that very reason… 5 years ago.

But ever since Tampines East and Tampines West MRT Stations opened in October 2017, many other HDB flats much deeper into the estate also had access to an MRT station right at their doorstep. Now, your “premium” is, well, less premium.

Again, more competition, possibly lower selling price.


Read more: HDB Resale: 7 Steps to Sell Your HDB Flat in Singapore on Your Own »

2. You’re understand you’re getting a lot less cash from the sale of your HDB flat

When you sell your current HDB flat, any CPF monies you used to pay for it must be put back into your CPF account… with accrued interest.

Accrued interest is the interest that your money would have earned if it was sitting in your CPF Ordinary Account (which currently has an interest rate of 2.5% per annum), instead of being used to pay for your property. And this is what many people forget to take into account.

For instance, if $300,000 of CPF funds go towards financing your HDB flat for a period of 10 years, you won’t just have to return that $300,000 to your CPF account. Compounded at 2.5% per annum, the REAL amount going back to your CPF account is about $345,000.

Consequently, the amount you get in cash from the sale of your HDB flat is lesser.

Might be a challenge, given there’s quite a bit of cash-only expenses to tackle at the start of the condo-buying process.

First, the downpayment. While you’re allowed to use your CPF to downpay your HDB flat, you’ll have to pay a minimum of 5% of the purchase price, upfront in cash, when buying a condo.

Then you’ve got the Buyer’s Stamp Duty (BSD). The BSD rate is calculated based on the purchase price or market value of the property, whichever is higher (1% on first $180,000, 2% on next $180,000, 3% on next $640,000 and 4% on the remaining amount).

Say you’re buying a $1,200,000 condo. This is how much cash you’ll have to part with:

Downpayment = 5% x $1,200,000 = $60,000

BSD = 1% of first $180,000 + 2% of next $180,000 + 3% of next $640,000 + 4% of remaining $200,000 = $1,800 + $3,600 + $19,200 + $8,000 = $32,600

Total = $60,000 + $32,600 = $92,600

Point being, when upgrading from a HDB flat to a condo, it’s important to understand your cash flow, and a significant part of this will depend on how much cash you’ll get from the sale of your HDB flat.

3. You’re planning your long-term finances wisely

Not to forget, the additional costs of living in a condo.

Condo maintenance fees, for instance, cost a lot more than the HDB’s Service and Conservancy Charges (SCC). We’re looking at an average of $300 a month for condo maintenance fees (with some luxury condos charging upwards of $1,000!) as compared to an average of $50 per month for HDB SCC.

Looking at it long-term, that’s already thousands of dollars more a year. Yikes.

4. You have spare cash for a surprise Additional Buyer’s Stamp Duty (ABSD)

But ABSD is only payable if you own more than 1 property, right?

Yes, but if you found your dream condo before selling your current HDB flat, you technically own 2 houses during this transition period. Which also deems you liable to pay ABSD.

But the good news is that if you’re buying as a couple, you qualify for the ABSD Spouses Remission (basically a refund of your ABSD) if you sell within 6 months of buying.

What’s the problem, if you’re going to get your money back anyway? The fact that you have to pay ABSD – which, like BSD, is only payable in cash – means you’ll need to have quite a bit of spare cash on hand.

ABSD isn’t a small sum, btw. It’s 12% of the purchase price of the condo since it’s technically your second property, which easily makes it a 6-figure sum.

Of course, one way to avoid this is to simply sell your HDB flat before buying your condo. But getting the timing just right is mad tough. If you sell too early, where will you stay in the interim? You could rent short-term, but imagine all that moving from place to place. Simply put, every alternative has its challenges.


Read more: Property Stamp Duty: The Ultimate Guide to SSD, BSD, and ABSD in Singapore »

5. You’re not planning to “downgrade”

Perhaps, one day, you might consider moving back into a HDB flat.

You’re no longer a stranger to this home-buying thing, and HDB flats are much more affordable, so it should be easy, right?

Not in some cases. “Downgrading” is much more restrictive than upgrading. You might even find yourself not eligible for certain flat types, schemes or grants. Most notably, you’ll need to dispose of your condo a whole 30 months before you want to:

  • Apply for a BTO flat or a new Executive Condominium
  • Apply for CPF Housing Grants
  • Apply for a HDB loan

All of which ease your financial burden in your property journey.

So if you don’t want to wait for a painful 30 months, your best bet (and pretty much only bet, tbh) would be to buy a resale HDB flat without grants, and take up a bank loan if necessary.

 

Goodbye HDB flat, hello condo!

To think probably all of us were once barely-adulting adults, thinking, “How on earth am I supposed to afford any property in Singapore?”

So if you’re a HDB homeowner and already planning for your next property upgrade, props to you, because look how far you’ve come :’) Don’t let the wrong financial decisions get in your way, because you (literally) won’t want to be paying for them.

Check out our other condo guides below:

cheap hdb flats and condos for sale in singapore

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