With the introduction and repeated enhancement of cooling measures like additional buyer stamp duty (ABSD), mortgage servicing ratio (MSR), total debt servicing ratio (TDSR) & tightening of Loan-to-Value (LTV), upgrading from HDB to private condo or executive condo is no longer a simple decision based on the price of the next property you can afford. You now have to take into account the ABSD involved in the purchase of your new property and the amount of mortgage loan you can secure from the banks due to MSR, TDSR and LTV to make the most cost-efficient purchasing decision.
Talking about this, you may also see many ads like the ones below, “with an income of just S$7,000 onwards, you can upgrade to own private properties, without having to pay extra cash from your pocket.”
Wondering how you can upgrade to a private condo or executive condo without touching your cash?
Well, in this article, we will show you the numbers behind the different upgrading options:
- Keep HDB, Buy Private Condo
- Sell HDB, Buy Private Condo
- Sell HDB, Keep Cash-on-Hand, Buy Private Condo
- Upgrade to Executive Condo
- Upgrade to Executive Condo (Keep Cash-on-Hand)
- Sell HDB, Buy 2 Private Condo with Cash-on-Hand
Profile of HDB Owners
Here’s a typical profile of HDB upgrader I have worked with that I will be using as an example:
|Monthly Debt Obligation||1,100||–|
|Max Home Loan Allowed||Approx. $855,000||Approx. S$800,000|
|Cash on Hand||S$250,000|
|OA from sales of HDB||S$302,000|
|Cash Proceed from Sales of HDB||S$135,000|
Option 1: Keep HDB, Buy Private
If they plan to keep their HDB and own a private condominium, they are only able to afford at max an S$460,000 condo. In today’s market, there is only a handful of condo you can get at S$460,000.
Here are their sums for keeping their HDB and buying a private condominium:
|Maximum Property Value Buyable||S$463,714|
|Total Downpayment Required (Cash/CPF)||S$255,043|
|Total Fees and Duties||S$67,157|
Their maximum affordability is limited by MAS regulations on Loan-to-Value (LTV) of 45% for purchase of new property given that they are still financing their existing loan. Also, they have to pay a higher tier of ABSD at 12% as the next property purchase will be deemed their second property.
Option 2: Sell HDB, Buy Private Condo
Taking this option, they can purchase a property up to S$2,250,000. At S$2,250,000, they would have plenty of housing options at their disposal. However, they should not max out their budget for the private property purchase; it is wise to conserve funds to tide them through unforeseen financial difficulties.
|Maximum Property Value Buyable||S$2,252,877|
|Total Downpayment Required (Cash/CPF)||S$694,013|
|Total Fees and Duties||S$77,715|
Option 3: Sell HDB, Keep Cash-on-Hand, Buy Private Condo
Here is the exciting part, upgrading to a private condominium without touching cash-on-hand. In other words, they will only use the cash proceeds (estimated at S$135,000) from the sales of their HDB to purchase the private condominium.
|Maximum Property Value Buyable||S$1,827,142|
|Total Downpayment Required (Cash/CPF)||S$456,786|
|Total Fees and Duties||S$60,686|
From the above calculations, without touching their cash savings of S$250,000, they can afford up to an S$1,827,142 private condominium. With an S$1,800,000 budget, they do have plenty of housing options too. Furthermore, with cash savings of S$250,000, they are well-covered if there are financial headwinds.
Option 4: Upgrade to Executive Condo
If they put in all their cash and CPF, their budget for an Executive Condominium can go up to S$1,615,062. With a budget of S$1,600,000, executive condominium of various sizes will be within their range. At the time of writing, they can afford a 5-bedroom Premium in Piermont Grand at Punggol.
|Maximum Property Value Buyable||S$1,615,062|
|Total Downpayment Required (Cash/CPF)||S$713,148|
|Total Fees and Duties||S$52,202|
Option 5: Upgrade to Executive Condo (Keep Cash-on-Hand)
What if they decide to keep their cash?
Well, if they do not want to use their cash savings, they can still afford up to a 4 Bedroom Premium at Piermont Grand.
|Maximum Property Value Buyable||S$1,372,343|
|Total Downpayment Required (Cash/CPF)||S$470,429|
|Total Fees and Duties||S$42,494|
Option 6: Sell 1 and Buy 2 Private Condominium
Can this be done?
Yes, it can. Here how it goes:
|Maximum Property Value Buyable||S$1,009,549|
|Total Downpayment Required (Cash/CPF)||S$252,387|
|Total Fees and Duties||S$27,982|
|Maximum Property Value Buyable||S$1,068,934|
|Total Downpayment Required (Cash/CPF)||S$267,233|
|Total Fees and Duties||S$30,357|
Looking at their purchasing power individually, they can sell their HDB and purchase two private properties separately. Not only this, cash available after getting two private properties is estimated at S$190,000, which can help them during rainy days. Plus, one of the properties will be considered as an investment property where there should have a rental income to cover the mortgage comfortably.
What you need to know
The above example showed the numbers for the various options of upgrading from HDB to a private condominium or executive condominium. There are other considerations you may want to take note when deciding which option is the most suitable for you (please note that the list is not exhaustive and there are many other considerations out there):
- Family Plan
Every family have their plans.
For example, I have clients who have plans to have one of the spouses taking an extended non-paid leave from their career to care for their children. This plan may affect the financial position of the family, and a more conservative option is wiser when upgrading.
- Transition Period
HDB to Brand New Private Condominium
For those planning to sell HDB and upgrade to a brand new private condominium which will be ready in 2 to 3 years’ time, to avoid ABSD and secure up to 75% loan, you may have to find a temporary accommodation between the sale of your HDB and collection of the keys to your new place.
HDB to Resale Condominium
If you plan to get a resale condo and do not want to move into a rented condominium, you have to manage the sale of your HDB and purchase of your resale condo well to avoid incurring the unnecessary cost or unwanted stress.
HDB to Executive Condominium
Upgrading to an Executive Condominium is the most “seamless” route as you can collect the keys for your Executive Condo, then sell your HDB. Furthermore, at the point of booking, you do not have to pay ABSD and can secure loan up to 75%.
- Investment Horizon
Executive Condominium may sound like a better option when you want a smoother transition from your HDB to a new home, i.e., you have the time to sell your HDB, does not have to fork out ABSD and can loan up to 75. However, you may be “locked-in” by the Executive Condo for close to 8 years – Executive Condo takes around 3 years to build, and after it TOP, you need to fulfil the minimum occupation period of 5 years before you can sell your EC or purchase your next residential property.
I hope this article sheds some light on the financial behind upgrading from an HDB to private condominium or executive condominium and some of the considerations that need to be taken into account when selecting the option best suited for oneself. The topic is hard to be covered in one blog and is meant to give you a glimpse of how you can upgrade from HDB to a private condo or executive condo. So, before you proceed to upgrade from your HDB to private condominium or executive condominium, please speak to a real estate salesperson (i.e. property agent) you can trust, explore all options and the risks involved and craft out a plan tailored to your specific needs. If you do not know of anyone to approach, feel free to get in touch with me via the contact form below or WhatsApp me at (65) 9004 5827. Cheers!