Property market is still heating up despite our latest round of cooling measures on 16 December 2021.

HDB resale price is moving up. Is it a good time to progress?

It depends. Has your HDB reached MOP? Is your HDB making any decent profit after paying back to CPF and HDB?

Before you rush to engage any real estate agent to sell your home, below are the 5 key factors that you should consider first.

1. Profit from the sale of Your HDB

Unless you have other interests, profit should be your priority when making any sale, HDB included. While considering your profit from the sale of your HDB, you also need to take other costs into consideration. Costs like an outstanding loan or a CPF return that you need to clear up. Apart from these, you will also want the net sales proceeds to cover at least 25% of the cost of your new private property and renovation costs if that is possible.

Before you have decided to sell your current HDB, it will be good to check out the HDB resale prices around the vicinity. After which, extract the total CPF return that is used by you and or your spouse on the HDB.

Do you still have any outstanding HDB loan to clear?

With that, you are able to do a rough calculation on your estimated sales proceed.

 

 

That will give you a good estimate on the profit from the sale of your HDB and whether the sales proceed is able to cover your initial down payment of your next property and even your renovation cost. In worse case, just make sure the selling price covers your CPF return and outstanding HDB loan.

If you decide to upgrade from your current HDB, make sure that you and your spouse have enough CPF in your Ordinary Account to cover the 20% of the initial down payment.

2. Probability of resale

Good properties tend to be able to sell better. However, there are other factors that could influence the sale of your HDB and the time it spends on the market. The major ones are the minimum occupation period (MOP) and the ethnic integration policy (EIP). These requirements determine if you can sell your HDB, who you can sell it to, and how long it will take to find a buyer.

With the minimum occupation period, you will only be allowed to sell your HDB flat if you have lived in it for at least five (5) years. The ethnic integration policy sets an ethnic quota that specifies to whom you can sell your flat. EIP streamlines sellers’ target market and potential buyers and, in effect, causes some HDB to spend more time on the market.

3. The Affordability of the Next Property

There are many reasons for moving to a new property; your family might have increased in size, you might have gotten a new job, or you just want more comfort. Regardless of what your reason is, affordability is a major consideration. After all, that is the reason you bought your HDB in the first place.

Check with a banker on the bank loan that you can get based on single income and combined income. Do you have enough CPF to pay for the initial 20% down payment?

Can you afford to buy your next property under a single name so that your spouse’s name can be used for the second property if opportunity arises? By doing so, you can avoid paying for the Additional Buyer’s Stamp Duty (ABSD). Else, just go ahead and buy under both names.

Do your math well at this stage. Buy within your financial capability.

4. To Sell First or Buy the New Property First.

Oftentimes, you have a price expectation for your HDB, but in the end, the price comes in does not match what you are expecting. Ideally, it will be a good option to sell first and take your time to source for your next property. Staying with a friend or family member in the interim is an option that many people choose.

After the successful sale of your HDB, and clearing of any outstanding HDB loan and CPF return, you are left with your net sale proceeds. You may then work within that amount to get better affordable housing.

Buying a new property first can be an option if you do not have a temporary accommodation or you just totally dislike the idea of moving so many times. Of course, by getting your new property first will mean that you need to have enough fund right now without the sale proceeds from your HDB.

However, you have to be careful whether you are going to buy under single name or under both names again since you are still holding on to your HDB as first property.

What is the difference?

If you decide to buy under a single name, you will need to pay for ABSD, depending if you are a local or permanent resident as the rate for each of them is different.

But if you choose to buy under both name and you will be selling off your current one and only property that you have, you can request for ABSD refund thereafter, provided you and your spouse meet the eligibility criteria by IRAS.

 

5. Choice of next property- executive condo vs. private condo

Individuals upgrading from an HDB flat usually will choose between an executive condo and a private condo. These are great options. However, we must weigh the pros and cons of both.

Many people perceive executive condos to be a better choice than private condos because of its lower price entry. The prices of executive condominium (EC) tend to be lower as compared to private condo. Not only that, CPF grants can be given on purchase of ECs if you meet their eligibility criteria. Overall, the cost of buying an EC is lower. But bear in mind that you are subjected to the HDB restriction on your EC as well. `

Private condos, on the other hand, have fewer restrictions and are great investments. Private condos can be sold after holding for at least 3 years (as to avoid Seller’s Stamp Duty). There is more room for potential price appreciation as compared to ECs. Not only that, you can rent out your condo right after you get the keys if you are buying for investment. There is no MOP period for renting the property. But needless to say, the cost of entry will definitely be higher.

So, to what extent can your financial allows you on your next property?

Conclusion

To conclude, proper planning is essential for you to move on to the next step.

How much sales proceed you are getting from the sale of your HDB and whether the profit is sufficient to cover the initial down payment.

CPF returns from selling of your HDB can be fully utilized for your next property if you have not reach age 55.

As I have mentioned above, do you have temporary accommodation if you sell first or you can afford to buy first? If you decide to buy first then sell later, you got to be careful of any ABSD involved. Buying under single name or both name makes a huge difference.

Buying your next property is a step forward in your asset progression journey. Right now, by selling your HDB to extract the profit from it so that it can be used for your next property is asset leverage.

So, it is important that your next property can be used as your future asset leverage when you want to restructure your wealth portfolio.