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In the past few decades, we have seen a dynamic Singapore property market. The ever-changing property regulations, fluctuations in mortgage interest rates and uncertainty of the economic future have led some to take a pragmatic approach of "downgrading" to affordable housing as opposed to over-leveraging financial facilities for acquiring a property that puts them in greater debt.
The truth is, buying and selling property takes a lot of careful calculations, and any misguided move can lead to major financial mishap that can impact one’s financial stability for a long time.
If you are planning to move from a condo to an HDB flat, there are several factors that will require consideration.
Downgrade Condo to HDB Eligibility
It is important to start by checking your eligibility for owning an HDB flat. The local housing authority has very stringent guidelines for who is eligible and what buyers are eligible for. A single buyer must be at least 35 years old and a Singapore Citizen before he or she is permitted to purchase a 2-room BTO flat or a bigger resale HDB flat.
For couples planning to downgrade to an HDB flat, do note that at least one spouse must be a Singapore Citizen or both must be Singapore Permanent Residents before you can be approved for buying a new or resale HDB flat.
For both categories of buyers, it is mandatory for them to dispose of any private properties (in Singapore or overseas) within six months of purchasing a resale HDB flat. If you are considering downsizing, it is also worth checking to see if you are eligible for the Silver Housing Bonus.
Sell Condo Buy HDB: 30 Month or 15 Month Waiting Period
The next criterion is trickier and most down graders who wish to purchase a new BTO flat tend to get disheartened by this—single or couple buyers must wait 30 months before they are eligible for purchasing a new BTO flat (and 15-month waiting period before they can buy a resale HDB flat).
This implies that buyers must have an alternative place to live in during the 30-month period. If bunking in with friends and family is not an alternative, then renting a residential home, for the time being, will be a quick fix but is the rental cash outlay worth it?
Is the waiting period worth it?
For those who are adamant about downgrading, here is a simple calculation to help you decide if buying a resale or brand new BTO flat is a better option for you. Let’s take an example of a Singaporean couple, ready to sell their 2-bedroom condo apartment and eventually move into a $500,000 resale HDB or new $300,000 BTO flat in Sengkang.
There is a significant S$140,000, nearly 28%, saving if buyers are willing to go through the hassle of the 30-month waiting period. It is also worth noting that HDB grants have not been factored into the calculation.
Depending on the eligibility of the buyers, they can claim for as high as S$40,000 to $80,000 grant subsidy after the 30-month period. Of course, these savings are subjected to buyers’ available cash funds to pay for the monthly rental during the entire period.
If your rental apartment costs you $2,000 per month, you will need to budget $30,000 (for 15 months) or $60,000 (for 30 months).
The 30-month waiting period may seem like a difficult choice at one glance. But if we can take some time to examine the details, there can be value in waiting.
Whether it turns out to be a more viable choice to buy a resale HDB or new BTO flat, looking into the various options and comparing the cost and effect will allow you to make more informed decisions.
Seeking the advice of a property agent who is well versed in the downgrading process or sitting down with an HDB officer who can provide details of your eligibility will open up a lot of possibilities that you may not have seen before.
First published in Value Champion.