As homeowners, we often get comfortable living in our homes after some time.
Familiarity breeds complacency, and after some time, we tend to forgo the prospect of selling and moving to a different home – let alone right-size to a smaller, more optimal property.
While not every homeowner intends to be a home seller when they first buy their homes, some factors – external or internal – may compel them to do so eventually.
One common scenario why homeowners would want to sell and right-size to a smaller home is when their children age, marry and leave their families to form their own. They realise they’re now living in a large, empty house, spending most of their time cleaning (or repairing) it and having little time for anything else.
In fact, they may decide to right-size closer to where their children live, at least to spend more time with their grandchildren.
This isn’t the only scenario, of course. Nowadays, younger homeowners – singles, couples and young families – are right-sizing for completely different reasons.
Here are seven reasons why anyone would want to right-size their property.
1. Lifestyle
One reason homeowners would want to list and sell their properties to right-size is a change in their lifestyles.
They may have first married and bought a large apartment with intentions to raise a large family (and have pets), but circumstances change, and they now find themselves with more room or empty spaces they don’t need (rare but not improbable).
Another lifestyle reason could be a career change.
Maybe your job now requires you to travel more often, so you don’t need that big a house to come home to (one that you hardly live in). You may live far from the airport, so perhaps right-sizing to a smaller unit near the airport might be a better option.
Another lifestyle reason could be you have a growing family, but your current home does not have enough bedrooms/ study rooms to accommodate everyone. This is because you’ve made the unfortunate decision to hack one or more of your bedroom walls or renovate some rooms into irreversible spaces (eg. for a larger living room, walk-in wardrobe, man cave, etc.).
So, now, you realise you need to right-size by selling your current home for an apartment with the right number of bedrooms (and bathrooms) for you and your family.
2. Financial
A far more common reason anyone would want to right-size is financial or monetary gains.
For example, one homeowner bought a 3,864-square-foot apartment at the Citylife@Tampines executive condominium nearly 9 years ago and decided to sell his property recently – the sale netted him a profit of S$1.38m. His timing warrants interest for sure, but his reasons even more so – maybe he’s right-sizing while earning a windfall?
Separately, in August, a seller at Marina Bay Suites sold his 2,691-sqft unit at a S$3.25m loss after buying it for S$8.25m 9 years ago. Once again, we won’t know his reasons for selling at a loss, but timing definitely has a part in this – and the seller may have had an urgent need for liquidity.
Beyond monetary gains, other financial reasons to right-size could be expense-driven.
Larger apartments usually mean higher monthly mortgage payments, maintenance, property tax and energy costs.
During the COVID circuit breaker and work-from-home/ home-schooling peak, many residents stayed home and utilised far more air-conditioning (ie. electricity) than the norm. Larger homes would presumably generate greater electricity costs.
For condos, there’s also the matter of high quarterly maintenance fees, depending on the unit’s size.
Lastly, another financial reason for right-sizing is the grants and subsidies you get, especially if you’re 55 years and above.
For example, the Silver Housing Bonus scheme rewards homeowners with a cash bonus incentive of up to S$30,000 if they right-size to a lower-value 3-room or smaller HDB flat. They have to put a specified sum of their cash proceeds from selling their existing flat into their CPF Retirement Account (CPF-RA) – a life annuity scheme using CPF-RA for monthly retirement payouts.
3. Practical
Another reason why a homeowner may want to right-size could be practical.
Maybe the house requires heavy maintenance, such as constant cleaning or repairs. For example, you may right-size from a landed home to an apartment because you realise too much time is taken to maintain and repair your roof, flooring or drainage.
On the same thread, you may sell your remotely located landed house or private condominium because you want to be within walking distance to heartland amenities like a mall, wet market or transportation hub.
In this scenario, you may right-size to an HDB Community Care Apartment (if you’re an eligible senior) or move into a car-lite housing neighbourhood with nearby medical facilities where everything you need is within reach.
Another practical reason is the condo amenities. Maybe you realise you’ve not been using the amenities all that much (but you’ve been funding the monthly maintenance fees without question).
This realisation hit many during COVID, where residents remained mostly at home but could hardly use any of the facilities (and still had to pay for maintenance).
4. Location
Right-sizing due to neighbourhood changes is another plausible reason.
Perhaps a new building is being constructed in front of your block, and you foresee your beautiful unblocked view (or favourable feng shui) will soon disappear. The area may have heavy construction noise due to roadworks and developments over the next couple of years that may disrupt the peace in your home.
Another reason could be moving closer to the city (or away from the city). You’re right-sizing from a larger 5-room apartment in a suburban condo to living in a 4-room HDB resale flat nearer to town. Some may do so to be closer to a specific facility, transport hub or school.
5. Investment
Some homeowners may own several apartments – one for owner-occupation and the rest to invest and rent out. It is possible that after living in, say, a 4-bedroom condo for years, a family may now want to move back to their 4-room HDB flat and list their condo for sale.
Just a few days ago, Minister for National Development Desmond Lee said that about 3% of HDB flat owners own private property, and around 45% rent out their entire HDB flats.
Considering how much property prices have appreciated over the past year, some private property owners may sell their larger apartments to move into their existing HDB flats.
6. Lease
More often than not, homeowners would list their property for sale because of its lease. The property may have 70 or 60 years left on its lease, and the property’s appreciated to a level where it’s the right time to sell. He may then move to a smaller property with a fresh 99-year lease.
Existing HDB flat owners with shorter leases may apply for smaller units in BTO exercises because they want to right-size. In these situations, they will need to sell their existing HDB flats within 6 months of collecting the keys to their new BTOs.
The benefit here is that you can utilise HDB’s Contra Payment Facility or Temporary Loan Scheme (TLS) if you need to finance your BTO flat while waiting to sell your existing flat. After the sale, you’ll use the cash proceeds to repay the loan.
The difference is that Contra Payment Facility is an additional loan on top of your HDB housing loan (because of insufficient CPF Ordinary Account funds), and TLS is a temporary loan you intend to repay using the sale proceeds from your existing flat sale (without taking a housing loan).
7. Preemptive
Lastly, some homeowners list their properties for sale because they foresee difficulties or challenges ahead and would prefer to realise their asset’s wealth before it’s too late. An example would be the prospect of cooling measures, which could come at any time.
These restrictions are meant to tighten buying and selling, which may make it harder for a seller to find a willing buyer to match his or her asking price.
Furthermore, with geopolitical uncertainty, inflation and higher housing loan rates, homeowners may want to list their properties for sale early and realise their appreciated gains sooner. By doing so, they may be able to right-size to a smaller unit and have additional profits to tide their families through sudden financial difficulties or a potential loss in income.
An astute home seller foresees restrictions or challenges ahead of everyone else. He’s the guy who lists his home before everyone else in a buoyant market and right-size before a potential downturn or recession.
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Do you plan on listing, selling and right-sizing your property? Let us know your reasons in the comments section below.
If you found this article helpful, 99.co recommends Lease Buyback vs Rightsizing to a 2-Room Flexi HDB flat: Which is better for retirement? and Can Downsizing Your Home Give You $1,379 Per Month After Retirement?
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