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With the government's successive implementation of cooling measures such as Additional Buyer Stamp duty (ABSD), Mortgage Servicing Ratio (MSR), Total Debt Servicing Ratio (TDSR) and the tightening of the Loan-to-Value (LTV) ratio weighing on buyers, upgrading from HDB to private condo or executive condo is no longer a decision that's simply based on the price of the next property you can afford.
As with any big financial purchases, we will always be on the lookout for the most cost-efficient way, i.e. Is it really possible to upgrade from a HDB to a condo without using cash on hand? How can I sell a HDB in time before buying a condo without incurring ABSD? Can I buy an EC before selling my HDB?
Timeline is crucial and the reality for HDB upgraders is that they must now take into account the ABSD involved in the purchase of your new property (in addition to other stamp duties) and the amount of mortgage loan they can secure from the banks due to MSR, TDSR and LTV.
In this article, we will show you the numbers behind the different upgrading options:
Read also: Upgrading From a HDB: Should You Get a Private Condo or an Executive Condo in Singapore?
Here’s a typical profile of HDB upgrader that we'll use as an example:
| Name | Kent | Jasmine |
| Age | 35 | 32 |
| Monthly Income | 7,500 | 6,000 |
| Monthly Debt Obligation | 1,100 | – |
| Current OA | 48,000 | 35,000 |
| Max Home Loan Allowed | Approx. $855,000 | Approx. S$800,000 |
| Cash on Hand | $250,000 |
| OA from sales of HDB | $302,000 |
| Cash Proceed from Sales of HDB | $135,000 |
If they plan to keep their HDB and own a private condominium, they are only able to afford a $460,000 condo at most. In today’s market, there is only a tiny handful of condos priced below $500,000.
Here are their numbers if they want to keeping their HDB flat and buy a private condominium:
| Maximum Property Value Buyable | $463,714 |
| Loan Required | $208,671 |
| Total Downpayment Required (Cash/CPF) | $255,043 |
| Total Fees and Duties | $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.
Of course, the maximum value of the private property they can buy changes if they fully pay up their existing HDB home loan. Therefore, for upgraders that to use their HDB as a springboard for a private home purchase but still wish to retain the flat, they might want to lower or minimise their financial outlay on their first flat while ensuring that the location of the rent has high rentability. In this instance, buying a HDB resale flat, instead of a fixed location HDB BTO flat, could be the way to go.
Taking this option, they can purchase a property up to $2,250,000. At $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 advisable to conserve funds to tide them through unforeseen financial difficulties.
| Maximum Property Value Buyable | $2,252,877 |
| Loan Required | $1,558,864 |
| Total Downpayment Required (Cash/CPF) | $694,013 |
| Total Fees and Duties | $77,715 |
It is also important to take note that, in times of financial distress, HDB flat owners taking HDB loans will get a bit of leeway they otherwise won't have with banks, should they be unable to service their mortgage. (The main reasons why upgraders are eager to cling to their HDB flats are for both rental income and a secure fallback.)
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 $135,000) from the sales of their HDB to purchase the private condominium.
| Maximum Property Value Buyable | $1,827,142 |
| Loan Required | $1,370,356 |
| Total Downpayment Required (Cash/CPF) | $456,786 |
| Total Fees and Duties | $60,686 |
From the above calculations, without touching their cash savings of $250,000, they can afford up to a private condominium costing $1,827,142. With an $1,800,000 budget, they do have plenty of housing options to upgrade to. Furthermore, by preserving their cash savings of $250,000, the upgraders are well-covered in times of financial need.
If they put in all their cash and CPF, their budget for an Executive Condominium (EC) can go up to $1,615,062. With a budget of $1,600,000, ECs 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 | $1,615,062 |
| Loan Required | $901,914 |
| Total Downpayment Required (Cash/CPF) | $713,148 |
| Total Fees and Duties | $52,202 |
What if Kent and Jasmine decide to keep their cash savings? Well, if they do not want to use their cash savings, they can still afford up to a family-sized resale condo. One of the largest private condos they can afford is a 4-bedroom premium unit at Piermont Grand EC.
| Maximum Property Value Buyable | $1,372,343 |
| Loan Required | $901,914 |
| Total Downpayment Required (Cash/CPF) | $470,429 |
| Total Fees and Duties | $42,494 |
Can this be done?
Yes, it can be done. Here how it would look like:
| Maximum Property Value Buyable | $1,009,549 |
| Loan Required | $757,162 |
| Total Downpayment Required (Cash/CPF) | $252,387 |
| Total Fees and Duties | $27,982 |
| Maximum Property Value Buyable | $1,068,934 |
| Loan Required | $801,701 |
| Total Downpayment Required (Cash/CPF) | $267,233 |
| Total Fees and Duties | $30,357 |
Looking at their individual 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 $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.
The above example showed the numbers for the various options of upgrading from HDB to a private condominium or an 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):
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.
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 EC, then sell your HDB. Furthermore, at the point of booking, you do not have to pay ABSD and can secure loan up to 75%.
Browse all new and resale executive condos listed on PropertyGuru.
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.
Well, there's no one-size-fits-all answer (and that's the beauty of property, if you ask us). Furthermore, it's likely that your financial situation defers from the example of Kent and Jasmine in the article. Additionally, factors such as your goals, life stage and the number of dependants you have will also affect how you should make your next move. Considering the complexity of upgrading from a HDB to a condo or EC, it's best to speak to a trusted property agent for advice!
Firstly, you'll need to ensure that your MOP has been met. After which, you should decide on what your timeline should be, whether you can afford to buy a second property before selling your HDB, or if you'd need to sell your HDB first before purchase.
Yes, it is possible to keep your HDB while purchasing a private property, as long as your MOP for your HDB has been met.
HDB is housing made affordable for people who are on a budget or are looking to save. Purchasing private properties should be considered if the capital is available.
The original version of this article first appeared on edwingoh.co and has been edited for Propertyguru.