Promoting your flat quickly after MOP: Sensible transfer or dumb transfer?

Upgrading to a condominium is taken into account a ceremony of passage for some Singaporeans — like getting by means of NS, or showing on Stomp. However are these Singaporeans making a wise or dumb transfer, by speeding to sell their flat proper after MOP?

Listed below are the primary issues.

Why would anybody wish to promote quickly or proper after the MOP?

Principally, they imagine that point spent holding on to the flat — versus getting a condominium — is cash misplaced. That is primarily based on the premise that, with few exceptions, HDB flats don’t respect in addition to a condominium.

For instance, let’s take a look at how the costs have moved from 2012 to 2022:

HDB and condo price trend 2012 to 2022


On common, HDB flats island-wide have seen costs rise from round S$449 psf in 2012 to about $531 psf final 12 months. That’s up by round 18%. Conversely, condominium costs have risen by round 48% in the identical interval — from a median of S$1,214 psf throughout Singapore to simply over $1,801 psf by the tip of final 12 months.

In reality, right here’s one thing to notice about HDB costs during the last 10 years.

HDB price trend 2012 to 2022

Earlier than costs began growing in 2020, HDB costs had been struggling like an asthmatic grandma up the steep aspect of Bukit Timah hill, after a peak in 2013. The common worth of a resale flat was about S$475,000 in 2013, reaching a low of S$433,000 in 2019 earlier than rising to a peak of S$549,000 in 2022.

HDB resale costs are nonetheless growing, albeit slower at 0.2% in December 2022 as worth resistance begins kicking in. However given components corresponding to cooling measures, rising rates of interest and financial uncertainties, costs are anticipated to average this 12 months.

Right here’s the situation that some upgraders have inside their head

mortgage broker
I’ve labored out that, after repaying your CPF, your sale proceeds can solely cowl the downpayment of a 1-bedder condominium.

Say they purchase an HDB flat at S$430,000, and resale costs begin moderating. Roughly 10 years from now, if costs had been to proceed hovering across the similar worth vary, they might promote their property at near the identical worth (if not decrease).

As an illustration, they promote it at S$430,000, with an excellent mortgage of about S$160,000 (the excellent mortgage is owed to HDB). That leaves them with S$270,000.

However they’ve been paying the curiosity on their house mortgage as properly. And after 10 years, that quantities to roughly S$90,000*. Now, they’re left with S$180,000.

However we’re nonetheless not carried out. Bear in mind they should refund all of the CPF cash used for the down fee, month-to-month mortgage, Purchaser’s Stamp Responsibility (BSD), and so forth again into their CPF account. This must be refunded with the CPF rate of interest of two.5%. Assuming this comes as much as one other S$250,000, that would depart them with detrimental S$70,000 in money proceeds.

Now they don’t must pay again that remaining S$70,000 to their CPF account in the event that they don’t have it, however it does imply they’ll have zero money readily available after promoting their house.

This may make it laborious to improve to, say, personal property. A financial institution mortgage would require a minimal of 5% money down for a condominium or Govt Condominium. And whereas they will use their current CPF financial savings for an additional property once more, they might nonetheless have misplaced cash as a result of curiosity paid, conservancy charges, house upkeep, and so forth.

The individuals who imagine this thus favor to dump their HDB flat as quickly as they will, and improve to non-public property.

*10 years of curiosity estimated utilizing a full HDB mortgage of 80%, at 2.6% with a 25-year mortgage tenure. 

Condos on the market


However are they really being sensible?

If upgrading is an inexpensive transfer for them, then it comes all the way down to the place you imagine HDB and personal house costs are going.

There’s additionally concern that the 99-year leases of HDB flats loom greater in our consciousness at this time, and worries of the 99-year time bomb will develop because the nation ages. That may proceed to make resale flats much less engaging than earlier than.

Then again, some folks will level out that more liberal use of CPF and the brand new Enhanced CPF Housing Grant (EHG) will mitigate a few of these results. Another legitimate arguments are:

  • Upgraders usually find yourself buying and selling up in worth however down in measurement; the condominium items they will afford are typically smaller than their flats
  • Upgraders shouldn’t lose sight of the truth that condos imply greater property taxes, and common condominium upkeep charges of about S$1,200 to S$1,500 per quarter; that is even greater in additional premium developments. HDB flats could not respect as a lot, however HDB conservancy prices are normally two-digit figures each month.
  • We don’t know the way personal property costs will transfer both. Whereas flat costs don’t respect as sharply anymore, condominium costs could also be too excessive.

With this regard (i.e. making extra money or being extra snug), it’s a little bit of a toss-up.

It does develop into a dumb transfer, nonetheless, in the event that they find yourself going past their means

Mortgage bills
It’s simple to go overboard in case your money proceeds are sizeable.

For many who find yourself with large money proceeds from promoting the flat, it could possibly make them take go away of their senses. A few of them over-leverage by getting a condominium that’s means past their means, and even have one partner go and purchase a complete condominium on their very own*.

As we’re fond of claiming, the house you’re upgrading to shouldn’t value greater than 5 occasions your annual family revenue, seven occasions at most. And your own home mortgage repayments, plus excellent money owed, ought to stay at 40% of your month-to-month family revenue or beneath.

In the event you could be prudent whereas upgrading, it’s a viable technique. In any other case, it’s a dumb transfer; wait until you possibly can afford it, MOP or not.

*See our opinion on promote one, purchase two right here.

[Additional reporting by Virginia Tanggono]


In the event you discovered this text useful, recommends Full checklist of HDB BTO initiatives hitting MOP in 2023 (and do you have to promote proper after MOP?) and What are the charges it’s essential to pay (apart from the house mortgage) earlier than promoting your HDB flat?