Can You Still Afford To Upgrade To A Condo In 2024? Here’s A Reality Check For HDB Upgraders

The tried and true way of getting a condo is to start with an HDB BTO flat, save every penny you can, and eventually sell it for a tidy profit and move up to a private condo; or at the very least an EC. But with private home prices higher than ever these days, does the old method still work? We took a look at the realities of upgrading to a condo, in the 2024 Singapore property market.

Disclaimer: Since we’re at the start of 2024, we’ll be relying on 2023 prices to determine private property affordability.

Edit: Article updated to reflect the MSR usage for the purchase of new Executive Condominiums.

Scenario 1: Upgrading a three-bedder

Most HDB upgraders are families, so they have no use for shoebox apartments or small two-bedders. As such, it is fair to say that they will need at least a three-bedder condo unit, which is typically in the 900 to 1,100 sq. ft. range. That is, something that isn’t a massive drop in size from a 4-room flat (which is around 970 sq. ft. by the way). You do have some three-bedder condos that go even smaller, but those usually come with common bedrooms that can only fit a single bed (and don’t even think about a utility or yard).

One option here is to look at Executive Condominiums (ECs).

First, let’s look at how much an upgrader may get for a typical 4-room flat. For this example, we are going to assume our upgraders bought their 4-room flat sometime in 2013, as BTO flats. We assume an average time of four years for construction, and then 10 years before selling and upgrading. This is the most common timeline we tend to see among upgraders:

Flat prices would have been around $256,000, as new flats back in 2013. 

After around a decade, the same 4-room flats could fetch around $540,000 on the resale market.

Let’s take a look at the numbers involved if this flat is sold to upgrade. Note that the following doesn’t factor in CPF usage for simplicity’s sake (because if CPF was used to pay for the flat, there’s an added factor: the seller would have to refund the CPF monies used, including the accrued interest. This can lead to much less of the sale proceeds being left over in cash.)

$365,000 is available to fund their EC purchase. This is important for the down payment of the EC.

(As an important aside, note that there are no HDB loans for ECs, you must use a bank loan, so the first five per cent of the EC must be paid in cash – it’s not like HDB where it’s possible to use CPF entirely for the down payment). 

Next, we’ll assume our upgraders have a combined income of $10,394 per month (that’s assuming a median income of $5,197 per month, for a dual-income family. Don’t blame us if you disagree, it’s what the news reports claim). 

Assuming our upgraders can get the full 30-year loan tenure, and factoring in the TDSR limit (this caps your monthly loan repayments to 55 per cent of your monthly income, inclusive of other debts), our upgraders can borrow $1,108,667 for their EC purchase; and this means the maximum price on their EC is around $1,478,223.

(Note: we’re assuming they don’t have other debt obligations like car loans, personal loans, etc., which could lower the TDSR ceiling for them. Also, note that our upgraders are pushing things to the limit. In practice, we would suggest you try to keep the debt to about 30 per cent of your monthly income, so do save more money if you can). 

Their cash from their sale proceeds ($365,164) is roughly enough to cover the remaining down payment of the EC (a minimum down payment of 25 per cent, as we’re using a bank loan).

Based on the above, what are some of the 3-bedroom ECs our upgraders could buy?

There are quite a few options above, so making the jump to an EC is quite possible; although again, we’d suggest you save up more first, and not push the TDSR to its very limit.

What about upgrading to fully private condos?

This is frankly tougher in 2024, and we have to keep it to resale condos to make it realistic. We’ll explain this below. For now, here are the cheapest resale three-bedders we can find:

The only freehold development on the list is Crystal Lodge, which is not actually a condo (it’s an apartment so there are no common facilities). It’s also too close to the Geylang vice area, and is frankly more of a rental asset than a family home. 

The other projects are okay, but they tend to be far from MRT access, or are quite old. So our upgraders do need to temper their expectations. 

Nonetheless, let’s cast a wider net, and look at private, non-landed three-bedders in various planning areas:

Even if they’re not new launches, you can see the overall quantum of many of these areas is pushing close to $2 million, if the price isn’t there already. There are some areas that may still be viable, such as Choa Chu Kang, Woodlands, and Yishun; and with median income, we think upgraders could also look at Pasir Ris, Punggol, and Sembawang. 

We don’t think the names come as any surprise though, as these are all the old standbys for affordable housing (i.e., they are in less developed areas, where prices are lower). 

That said, just from the above, we can see that it’s definitely more practical for HDB upgraders to look at ECs first. And whilst they’re not entirely priced out of private condos, it is becoming a big reach for them.

If you insist on upgrading to a new launch condo…

Well, it’s true. Upgrading to one is an even tougher prospect in recent months. Ever since the aftermath of Covid, prices of around $2,000+ psf have become a new norm, even for new launches that are in fringe regions:

The average quantum of a new launch three-bedder is around $2.537 million. That would be a stretch even if you just sold an $800,000 flat in Queenstown, let alone a regular 4-room flat. 

So if you really want a new launch three-bedder, you need to be making way above median income, or have a huge amount of accrued wealth already (especially for the deposit).

That said, if you want a new launch EC, you could consider North Gaia, Altura, or Lumina Grand. These new ECs have three-bedders that could be in the range of $1.2 million; but remember that for new ECs, you are taking on a five-year MOP all over again, and ECs are only fully privatised after their 10th year.

Moreover, the Mortgage Servicing Ratio (MSR) would apply for the purchase of new Executive Condominiums. This is at 30%, not 55% unlike the TDSR, making it more difficult to obtain a loan. As such, those earning the median income would have to put up more funds upfront to reduce the loan amount.

So are HDB upgraders priced out of private condos?

We feel the most accurate response – given that upgraders are increasingly restricted to ECs or cheaper resale options – is that they almost are. 

They’re not entirely priced out but we’re more than halfway there, given that new launches are now out of the question for most median-income Singaporeans.