How to own two properties in Singapore?

Getting your hands on two properties in Singapore is definitely doable, but you’ve got to know the hoops to jump through. It’s not as simple as just having the money; the government has some pretty serious ‘property cooling measures’ in place to slow down property investors from purchasing many houses at once, and to prioritise first-time local home buyers.

“With 80 per cent of us living in HDB flats, there are many who are concerned about the ageing leases and are keen to buy private properties as a home and for investment,” Daniel Wong, an associate group director at Propnex Realty says.

So comes the idea of selling your 1 HDB flat to buy 2 condominiums.

He’s seen a jump in interest during the condo en-bloc craze back in 2017 and 2018, when sellers, flushed with cash, bought two condos with their pay-out. So how do you sell your HDB to buy two condos?

Here are five things you should know about this "sell 1 buy 2" or "sell 1, hdb buy 2 condo" trend and how you can own two properties in Singapore seamlessly:

1. Avoid ABSD by decoupling

Singaporeans who wish to buy a second property have to shell out 20% Additional Buyers Stamp Duty (ABSD).

The only way to avoid ABSD is to 'decouple' once you’re about to buy a new flat. Purchasing a new home under one person’s name, frees up your spouse’s name to invest in a second property. Thus, you will only own one property each and will not be subjected to the ABSD.

While a rare few of Daniel’s clients bought two properties immediately, the majority are taking it slower.

Most sell their HDB flats and settle down first in a new home – usually a 2- or 3-bedroom condo – and then bide their time to buy a smaller unit – often a 1-bedroom – as an investment.

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2. You'll have to finance a home loan on one person's salary

By decoupling, both parties can take on one home loan each.

However, that also means the bank will use only one person’s income to assess your eligibility to finance the loan, which will limit the loan quantum you can get.

The good news is if both parties successfully get loans, this will count as your first loan each, which qualifies you to borrow up to 75% of the property price; banks only offer up to 45% for second loans.

That helps significantly as you won’t have to dish out too much cash as a down payment for your properties.

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3. Old or new condo better?

If you want to stretch your buck, a resale condo between 5 and 10 years old can offer you more space for your dollar.

The loan amount you can take will depend on your age. If you buy at a younger age, you can take a longer loan term. For older buyers, their loan term may be shorter. However, if they have a healthy CPF account, they may have to cough up less cash or take a smaller loan.

Should I take a full home loan?

“We still encourage older clients to take the full loan but to not max out their CPF accounts,” he says. Why?

Firstly, the interest earned in CPF is higher than in the bank. Secondly, and very importantly, in case they face unexpected financial difficulties.

Seller’s Stamp Duty for Condos

Daniel usually plans for his clients to have enough excess CPF funds to last them two to three years to pay off the monthly loan. “This also tides them over the end of the three-year Seller’s Stamp Duty (SSD). That way, my clients can sell the property, if needed, without incurring extra SSD.”

Do note that Singapore’s property cycles usually last between five and eight years. “Most clients don’t sell immediately after three years. To make a better profit, it’s best to have longer holding power,” says Daniel.

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4. 1-bedroom or 2-bedroom condo better for investment?

Both have their pros and cons. A 2-bedroom can attract a bigger audience of tenants, such as small families, single tenants or friends, and a better rental yield. A 1-bedroom is more affordable but will fetch less monthly rental.

Lower rental yield

However, Daniel feels that, given today’s property climate, investors should seriously consider capital yield, too. “Times have changed. Previously, property prices were lower and rental yield was good. Achieving 4% to 5% was common,” he says.

These days, property prices are much higher but the competitive rental market means landlords don’t see much rent increase.

Hidden maintenance fees

Daniel also cautions that many inexperienced landlords don’t realise the hidden costs, such as the maintenance fees that start ticking the moment you buy the condo, property tax for rental properties that start from 10 per cent and so on that will further erode your rental yield.

He suggests looking for properties that offer greater capital appreciation, and feels that 1-bedroom condos in new projects tend to enjoy better capital yield.

“Look at the entry price and research the development around the area to make a good decision. Don’t be speculative. Don’t buy a current project at future value; buy it at a current value to make money,” he advises.

Buy within your means

Daniel also stresses that affordability is key. He tries not to change his clients’ lifestyle too much, so does not recommend over-stretching oneself to buy a bigger or more expensive unit by drastically cutting down on your needs and wants. Thus, it may be more prudent to buy a smaller unit.

For example, his friend bought a 1-bedroom in the Balestier area with a monthly instalment of $2,500. After deducting his CPF contribution of $1,000, his friend just needed to rent it out at about $1,700 – a reasonable amount – to cover the loan and maintenance fees, for the property to be self-funding.

Among the promising areas that Daniel has spotted, he says, “There are several condo projects along the newly announced Cross Island Line that will have about 30 stations across the island. These offer good potential for capital gains when the MRT line is completed.”

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5. Should I keep my HDB and buy another condo?

Firstly, without selling off the HDB flat you co-own with your spouse, you will be subjected to the 20% ABSD when you buy your second property – to be paid in CPF or cash. This will bring down your overall profit margin.

Secondly, if you have an outstanding loan for the HDB flat, taking a second one for a private property means you can only take a loan for up to 45%. Comparatively, if you buy two private properties under separate names, you can both take up to the full 75% loan.

Thirdly, you can rent out a private property immediately without being restricted by HDB’s rules such as the ethnic quota. Private property room rentals are also more flexible as it can be as short as three months while HDB decrees a minimum of six months.

On the other hand, keeping your cheaper HDB flat frees up your budget to buy a nicer or bigger condo unit. You also save on expenses such as lawyers’ conveyancing fees.

Of course, HDB flats being cheaper means your rental yield is better than renting out private property. And this may be why many have kept their flat while investing in a private property instead of selling it to buy two condo apartments.

Sell your ageing HDB flat

For those of us whose HDB flats are pushing 40 years old, there is a very real possibility of it depreciating instead – and soon. Thus, Daniel feels that selling your ageing HDB flat is still a better move.

Perhaps, it is time to pay heed to those Facebook ads and find out more about selling your HDB to fund your dream of doubling your property assets.

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This article contains updated information for accuracy.