5 ways you can upgrade from your HDB
“Singapore's Government introduced cooling measures to slow price increases in July 2018, including raising stamp duties for second homes and entities, and tightening loan-to-value limits for housing loans granted by financial institutions.”
"It was, as we had stressed then, not to bring down prices but to stabilize and moderate the cycle, and I think we have achieved that effect,"
said Mr Lawrence Wong – Minister for National Development
Source: Business Times
Previously, we discussed about 3 Simple Steps This Couple Used To Increase Their Wealth and how a couple in Punggol lost $180,000 in profit just because they sold their BTO flat 7 years later than their neighbour.
But as long as you plan properly and ride on the private property cycle, you will be able to grow your wealth through property systematically.
Whether you are upgrading from HDB to private property or Executive Condominium (EC), there are many factors you should consider other than the price of the next property you intend to purchase.
Besides Additional Buyer Stamp Duty, ABSD and Loan To Value, LTV, you should consider whether the property is in a good location, whether the entry price is right, are there any future developments in the area, your holding power etc.
You might have seen some advertisements telling you that you can “Upgrade to private property with a household income of $7,000 without using your savings”. You should be prudent, work out your sum and plan carefully, never rush into it. Explore various options that are available to you before deciding.
How to upgrade to EC or Private Property in 2020? Upgrade from HDB to Condo without touching your savings? It is important to understand Singapore's private property resale price trends, calculate your downpayment, absd, loan, stamp duty, ltv before you jump into it.
If you are planning to upgrade to a private condo or executive condo, it is important to know which option suits your family best. Here we will show you the calculations of 5 different upgrading options:
Sell HDB, Buy Executive Condo Using Up All Cash Proceeds and Savings
Sell HDB, Buy Executive Condo And Have Reserve Funds
Sell HDB, Buy Private Condo with Maximum Loan
Sell HDB, Buy Private Condo And Have Reserve Funds
Sell HDB, Buy 2 Private Condos Using OTP Concept
Comparison Between Executive Condominium EC and Private Condominium
The advantage of getting an Executive Condominium is considered a privilege for Singaporeans. It is subsidized by the government and priced 20-30% lower than a private condominium. First time buyers are also entitled to grants. The monthly household income cap has been raised from $14,000 to $16,000.
As compared to an EC, a private condominium has much lesser restrictions. Private property owners have an advantage, they do not have wait for 5 years Minimum Occupation Period (MOP) to sell their property to a local and 10 years to sell to foreigner. Single owners and non-related owners are allowed to buy a private property whereas for EC, you must form a family nucleus to be able to purchase an EC.
Private property buyers can loan up to 60% of their income based on Total Debt Servicing Ratio (TDSR) whereas EC is calculated based on 30% (MSR) of household income.
CASE STUDY OF A COUPLE WHO OWNED A HDB BTO FLAT:
KEN AND JANE OWNED A HDB 5 ROOM FLAT IN SENGKANG:
Option 1: Sell HDB, Buy Executive Condo (EC) Use Up All Proceeds and Saving
For EC, the loan calculation is based on Mortgage Servicing Ratio (MSR), which is 30% of their combined income less debt. Ken and Jane’s combined income allows them to loan up to $895,233. If they use all their proceeds (Cash & CPF) from the sale of their HDB and cash savings, they can buy an EC with a price tag of around $1,601,301. There are currently 3 ECs selling within this price range. They are Piermont Grand at Punggol, Parc Canberra at Canberra and OLA at Sengkang. They can choose between 3-5 bedrooms.
However, it is risky to use up all their proceeds and savings as this would mean they would not have enough to fall back on in the event they need a large sum of cash. We would recommend them to keep some savings in case of unforeseen circumstances like the current pandemic.
Option 2: Sell HDB, Buy Executive Condo And Have Reserve Funds
As Ken and Jane can loan up to $895,233, we recommend them to use part of their proceeds and keep $300k as a reserve fund for rainy days. They can EC around $1,300,000. They can get a 3-4 bedroom EC from Piermont Grand at Punggol, Parc Canberra at Canberra and OLA at Sengkang within this price range.
The reserve fund of about $300k acts as a safety net which could last them for the next 6-7 years.
Option 3: Sell HDB, Buy Private Condo with Maximum Loan
With Ken and Jane’s combined income, they can loan up to $1,679,121 or purchase a property priced at S$2,238,828. There are many options with this budget.
However, we do not recommend them to max out their budget due to unforeseen circumstances like Covid-19 which may cause financial difficulties that may require them to use their cash savings. They should set aside some reserve funds which can last them for the next 3 years.
Option 4: Sell HDB, Buy Private Condo And Have Reserve Funds
Good news! Ken and Jane are able to upgrade to a private condominium without touching their cash savings. The total proceeds from the sale of their HDB flat is sufficient to purchase a private condominium up to $1,800,000 without using their cash savings.
They can consider any private property priced between $1,500,000 to $1,800,000 without using their cash savings. Their cash savings of $200,000 can be set aside as a reserve fund in the event of unforeseen circumstances. They have a holding power of 3-4 years. The previous private property down cycle lasted about 2 years.
Option 5: Sell 1 and Buy 2 Private Condominium Using OTP Concept
Is it possible to own 2 private properties with their income? It is important to understand the reason behind owning 2 private properties. Wouldn't I need to pay 12% Additional Buyer Stamp Duty (ABSD) for my second property? Why own 2 private properties instead of one? This is because of OPM concept. The concept is to use “Other People’s Money” (OPM) to pay for your mortgage and create a passive income from your second property.
Let’s see how it works:
Based on the above financial calculation, they can afford to sell their HDB and buy two private properties and still have around $150,000 in reserve funds. We recommend them to work with an experienced agent who has a good track records of assisting clients in selling HDB and buying two private properties to ensure smooth upgrading process.
"Is it a good time to upgrade
from HDB to private property?"
Good news! Private property prices have dropped since 2018 cooling measures, and with the current pandemic, interest rates have also dropped, making the cost of financing cheaper.
Some homeowners even saved as much as $1000 on interest when they refinance. Find out how much is your monthly instalments, you might be surprised that you might not even need to top up any cash!
Upgrading to a private property is more than just selling your HDB and buying a condominium. It is about strategic planning and following an investment roadmap designed just for you.
Upgrading is not just finding the cheapest condo. It's about finding the best VALUE buy unit that suits your needs and lifestyle. It's about finding one located in an area where there is future transformation. It's about upgrading to a private property with higher potential growth.
Discover the 5 benefits through our sharing:
1. Understand your objective in upgrading and growing your wealth through in-depth analysis
2. Detailed Resale Calculation Worksheet
3. 8 Steps Analysis to choose the right property for you
4. RAM (Risk Analysis Method) to work out a plan to grow your wealth SAFELY
5. Real case study showing how our clients did it
Hi, I'm Terry Wee
CEA Reg. No.: R020146H
PropNex Realty Pte Ltd, License No.: L3008022J
ASSOCIATE DIVISION DIRECTOR
POWERFUL NEGOTIATORS GROUP
PROPNEX REALTY PTE LTD
"I have been in this industry for more than 15 years. I've helped many of my clients upgrade from HDB to Condo and Landed Properties. Some of my clients owned multiple properties for investment. I have also managed their investment properties. Using facts and figures coupled with my experience, they have made clear informed decisions to grow their wealth through property systematically."
My accolades for the past year:
2020 APR GOLD ACHIEVER AWARD
2019 NOV GOLD ACHIEVER AWARD
2019 AUG GOLD ACHIEVER AWARD
2019 JULY TOP 23 INDIVIDUAL PRODUCER AWARD
2019 APRIL SUPER GOLD ACHIEVER AWARD
2019 APRIL TOP 5 PRIVATE PROPERTY TRANSACTOR
2019 PAC TOP 42 INDIVIDUAL PRODUCER AWARD
2018 3QC TOP 93 INDIVIDUAL PRODUCER AWARD
2018 1QC TOP 7 INDIVIDUAL PRODUCER AWARD
2018 PAC TOP 196 INDIVIDUAL PRODUCER AWARD
2018 FEBRUARY TOP 4 STAR PERFORMERS
2018 FEBRUARY TOP 4 PRODUCER AWARD
2017 SEPTEMBER TOP 3 PLATINUM ACHIEVER
2017 SEPTEMBER TOP 5 PROJECT SALESPERSON
2017 JULY TOP 38 PLATINUM ACHIEVER
2017 MAY TOP 1 EXCLUSIVE LISTER
2016 H1 TOP 26 PRODUCERS
2016 Q2 TOP 33 PRODUCERS (PROPNEX)
2016 Q2 TOP 50 PRODUCERS (PNG)
2016 JUNE TOP 11 PRODUCERS (PROPNEX STAR)
2016 JUNE TOP 24 PRODUCERS (PNG)
2016 Q1 TOP 71 PRODUCERS (PROPNEX)
2016 Q1 TOP 30 PRODUCERS (PNG)
2016 FEB TOP 8 PRODUCERS (PROPNEX STAR)
2015 NOV TOP 5 PRIVATE PROPERTY TRANSACTORS
2015 NOV TOP 33 PRODUCERS (PROPNEX STAR)
2015 Q1 TOP 30 PRODUCERS (PROPNEX)
2015 FEB TOP 20 PRODUCERS (PROPNEX STAR)
2015 JAN TOP 17 PRODUCERS (PROPNEX STAR)
2014 AUG TOP 8 PRODUCERS (PROPNEX STAR)
TRUST AND SUPPORT FROM OUR CLIENTS
"With advice and guidance from Terry Wee, my wife and I sold our HDB flat back in 2015. That was a tough decision to make. However, we don't regret our decision, as we bought 2 condos after selling, and now we are appreciating the capital gain, just after more than 2 years."
- Yuzong & Xiaoyun
From 5RM HDB Owners to Investors of 2 Condos
"We contacted Terry through Facebook ad, he gave us an impartial view and it turned out to be a life changing decision. We can attribute the 6 Cs to his professionalism and exemplary service - Courteous, Committed, Competent, Communicative, Composed and Caring. He sold our property in less than a week and at a price higher than valuation. We would unhesitatingly recommend Terry to anyone."
- Kelvin & Kate
From EC Owners to Landed Owner and Condo Investor
"We wanted to keep our HDB EA, it is new and spacious but Terry shared with us the importance of Asset Progression. We took his advice and sold our HDB Flat, that was not an easy decision to make. However, we are glad that we made that decision because now our condo value has appreciated more than $300k and we are very happy that Terry has helped us throughout this upgrading process stress free."
- Hock Seng & Jessica