Your HDB flat has finally completed its Minimum Occupation Period (MOP) of five years.

Of course, you’re not planning to sell it and cash in. Instead, you’re going for the “Singaporean Dream” of owning multiple properties.

You plan to keep it and buy a second property.

So, you started watching YouTube videos and seminars that claim to show you how to own two properties, even if you earn only a few thousand dollars a month. But property expert Avis Wong warns there is no get-rich-quick scheme that can turn you into a multiple-property owner after a $2,000 weekend workshop.

So, before you gleefully count your imaginary rental income, here are six things you should first know about buying a second property in Singapore.

1. You can only have one HDB at any time

We shouldn’t have to say this, but you’ll be surprised that some people are blithely blur about it. When we say ‘buy a second property’, we mean private property.

We’ve actually heard several people boast that they intend to flip their Build-to-Order (BTO) flat for a handsome profit and buy two flats. Uh, no.

Everyone is allowed to own only one HDB flat at any one time. These are subsidised public flats, so why would the government sell you an extra one for you to make rental income? 

2. Property Cooling Measures

The latest property stamp duty revisions by the Monetary Authority of Singapore were on the 16 December 2021, these measures are: 

Higher Additional Buyer’s Stamp Duty (ABSD)

For Singapore citizens buying a second property, ABSD is now 17 per cent (up from 7 per cent in 2013).

For Permanent Residents, it’s 25 per cent (up from 10 per cent in 2013).

For foreigners, a flat rate 30 per cent (increased from 15 per cent in 2013) applies regardless of the number of properties you’re buying.

Loan-to-Value (LTV) Limits for 2nd Property: 45%

This means you can borrow less money than before, resulting in a higher down payment. If you are getting a second property loan, your LTV limit has decreased from 50 to 45 per cent.

LTV Limits for loan tenures longer than 30 years (or past age 65)

If you’re thinking of stretching out your home loan longer than 30 years (or if you will exceed 65 years old) your LTV will be 25 per cent (for second property), and 15 per cent (for 3rd property onwards).

Basically, the LTV limit is forcing you to take lesser loan and pay more cash upfront.

That 5 per cent difference in ABSD for a $1m property means a whopping $50,000 extra in cash – money that could have gone into renovation. And that’s just for the ABSD. Don’t forget to add another 5 per cent, thanks to the lowered LTV!

Basically, it all boils down to one thing: get ready to pay more cash upfront.

3. You cannot buy a private property while waiting for your BTO!

#TRUESTORY. We know of a couple who had been waiting for their BTO flat for a few years. Supported by their wealthy parents, they shopped for a condominium that would be completed a few years after they received the keys to their BTO flat.

Their grand plan was to stay in the flat for a while and then move to the condo while getting a nifty early start to their double properties dream.

They thought they’d done their calculations. By the time their condo would be ready, it would have been over five years since they started queuing for their BTO flat, so all is fine, right? Sorry, no.

According to HDB’s website, “The MOP is calculated from the date the sellers collect the keys to the flat.” This means the clock starts ticking only on the day they receive official ownership of the BTO flat, not the day they selected the flat. They would need to fulfil their five years before they can put down money for their private property.

The sad result? The couple had to give up their BTO application. Ah well, at least they had their wealthy parents’ home to crash in till they moved into their condo.

4. Should You Pay your HDB Loan First?

You don’t have to, but we recommend paying off your HDB loan ASAP if you can afford it.

Generally speaking, unless you live in one of those million-dollar HDB flats, yours should cost less than the private property. For some, the HDB flat’s remaining HDB loan amount can be relatively low at under $100,000, which they can afford to pay off.

However, they are quite happy to leave it alone if the monthly deduction comes entirely from their CPF account since they don’t feel the pinch of having to pay cash.

Another common reason: “I already plan to rent out my private property. If the rental income can cover that loan, why would I trouble myself by running to HDB to pay off my flat?” Here’s why:

Two housing loans = Lower loan amount

If you pay off your HDB flat’s loan, your private property’s loan will now be counted as your only loan. This allows you to borrow 75 per cent instead of just 45 per cent if it were a second loan.

Want to stretch that loan to over 30 years or extend it past age 65? Your LTV (amount you can borrow from the bank home loan) will be reduced to 55 per cent.

Banks may offer better interest rates for new loans

My husband and I were paying 2.6 per cent on our HDB loan. When we bought our second property years ago, banks offered interest rates as low as 1.38 per cent for the first year!

You do the math.

Of course, we had to wipe out a big part of our cash to clear the HDB flat’s loan and thus take a bigger bank loan for the condo. But money, no matter where you borrow it from to pay off something, is still the same money. It was a no-brainer since we saved 1.22 per cent in interest alone.

Another home loan = More paperwork

Because we all want the best deal, we keep tabs on the lock-in period of our bank loans so we can shop around for better interest rates. But it’s such a pain keeping up with the paperwork and logistics!

Keep things simple. Stick to one bigger loan instead of one small and one medium-sized loan.

Use CPF Ordinary Account to pay your condo’s monthly payment

You may think you can count on rental income to finance your bank loan, but you never know. If you are not using your CPF to pay for your HDB flat, you can now use that to help finance your private property

During rental lull periods, having part of the loan covered by CPF will cut down on your upfront cash.

Can I Rent Out My HDB Flat to Pay For My Condo?

5. Can I Rent Out My HDB Flat to Pay For My Condo?

For PRs: No

You need to dispose of your HDB flat within six months of buying a completed or off-plan private residential property in Singapore.

For Singapore citizens: Theoretically no.

You’re supposed to stay in your HDB flat unless you apply for and receive permission from HDB to sublet your entire flat. You have to meet the five-year MOP first. (Then again, if you didn’t, you wouldn’t have been able to buy your second property!)

Besides, short-term accommodation is not allowed, so no turning it into an Airbnb, please.

Tenants must rent your flat or bedroom(s) for at least six months. There is a small administration charge of $20 for the application. Pay it and stump up the rental income when you report your annual income tax.

Besides, short-term accommodation is not allowed, so no turning it into an Airbnb, please.

Your property tax for the HDB flat will also be higher now that you don’t enjoy the Owner-Occupier tax rate.

Also, don’t pretend you’re living in your HDB flat when you are actually renting it out.

If HDB catches you, thanks to noisy tenants who piss off your neighbours or jealous neighbours green-eyed about your extra moolah, you will definitely be charged in court and risk your HDB flat being confiscated! Trust me, I know someone who went through the same thing.

6. Make use of your existing home

One common way to own a second property in Singapore is to first leverage your current property, says Ms Avis Wong, associate marketing director at PropNex Realty.

“Unlock your profits from your existing property by selling your flat and use the proceeds to upgrade to a condominium and buy a second investment property.”

This way, you get to keep your savings and use the proceeds from your current property to work for you. Couples who had brought their flats brand new would likely get a higher cash payout. Of the two properties you buy, one should be sufficient to meet the family’s needs while the second one should be of investment grade.