We Are In Our 60s And Own An HDB In Ang Mo Kio: Should We Downgrade To A 3-Room, Apply For A BTO, Or Buy An EC?

Hi Stacked Homes,

I am a fan of Stacked homes and really love your analysis in helping the readers decide on their futures homes. I hope you can help me and my husband too on our next phase of life.

Current Situation:

• My husband and I are approaching retirement (we’re in our 60s). I hope to retire by next year 
• We live in a 5-room HDB flat in Ang Mo Kio (AMK).

Options I’m Considering:

1. Sell our current 5-room HDB flat in AMK and downgrade to a 3-room corner unit.
2. Apply for a Build-To-Order (BTO) flat (second time for us).
3. Purchase a new Executive Condominium (EC) in Yishun.
4. Buy a 5-room maisonette at Hougang Ave 1 and rent out the upper floor for rental income.
5. Get a jumbo 3-room flat, renovate it, and rent out one unit.*
6. Stay in our current 5-room flat in AMK, even though it’s too big to maintain as we age.*

Considerations:

• Maintenance concerns as we get older.
• Potential rental income.
• Impact on our lifestyle and comfort during retirement.
• Financial implications and feasibility.

Request:

• Help me make an informed decision. We don’t want to rush into a decision because of our age and life stage.

Thank you so much in advance for your advice. 

Regards,

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Hi there,

We’re glad you enjoy our content and thank you for writing in.

Considering that you’re planning to retire soon, we assume this next property will be your permanent residence.

There are different perspectives on this, depending on whether you have children and are thinking about legacy planning.

Between an HDB flat and a private property, inheriting the latter is generally easier. If legacy planning is a priority, you might also want to consider the age of the property to ensure it retains its value over time.

However, if legacy planning is not a concern, the decision becomes simpler. In this case, choose a property that you prefer and that allows you to enjoy your retirement comfortably. After all, you’ve worked hard for it!

Since we don’t have your income details, we’ll assume that the options you’ve chosen can be paid for based on the proceeds of your flat and that both of you have met your Full Retirement Sum (FRS) in your CPF.

Now before we run through each option, we want to highlight that you could, at some point, engage in the Lease Buyback Scheme.

This scheme is eligible if you are aged 65 and older, and it applies to all flat types. Undergoing this scheme means that you must sell at least 20 years of the lease back to HDB to raise.

However, take note of the eligibility conditions such as meeting the age requirements and also the Minimum Occupancy Period. It cannot be done right away, but once your MOP is up, you would be eligible for this scheme that will allow you to raise more cash for your retirement. We suppose this is a huge benefit of purchasing an HDB, as you have the flexibility to monetise your flat.

You can read more on our thoughts of the Lease Buyback scheme.

We will now run through the numbers for the six options you are considering and address your considerations for each of them.

Potential pathways

1) Rightsize to a 3-room corner unit

Here are the median 3-room HDB resale prices for Q1 2024. 

HDB Town	3-room
Ang Mo Kio	$399,000
Bedok	$378,000
Bishan	–
Bukit Batok	$380,000
Bukit Merah	$400,000
Bukit Panjang	$390,000
Bukit Timah	–
Central	$500,000
Choa Chu Kang	–
Clementi	$390,000
Geylang	$345,000
Hougang	$404,000
Jurong East	$368,000
Jurong West	$370,000
Kallang/ Whampoa	$403,000
Marine Parade	–
Pasir Ris	–
Punggol	$490,000
Queenstown	$430,000
Sembawang	$452,500
Sengkang	$470,000
Serangoon	$402,500
Tampines	$440,000
Toa Payoh	$365,000
Woodlands	$393,000
Yishun	$403,400

( – ) refer to cases where there are less than 20 resale transactions in the quarter for the particular town and flat type. The median prices of these cases are not shown as they may not be representative.

Since you did not mention any preferred HDB town, let’s be conservative and assume the highest cost option – which is to stay in the Central Area. This way, your costs should only go lower. For calculation purposes, we will use a 10-year holding period. 

Here are the potential costs incurred. 

BSD	$9,600
Property tax	$2,800
Town Council service & conservancy fees (Assuming $50/month)	$6,000
Total costs	$18,400

Total Cost: $500,000 + $18,400 = $518,400

While you have mentioned wanting to rent out the property if there is a possibility of having separate living areas for you and the tenants, this would not be achievable with a 3-room HDB flat. Therefore, we assume that in this scenario, you will not be renting out the extra bedroom.

Considerations that you have:

Maintenance concerns	This will not be an issue since the unit will be smaller, it will be easier to maintain. However, if you buy an older flat, it’ll be prudent to get the fixes up right from the beginning and hire an inspection company to work out the issues from the start as it’s easier to deal with them earlier than later.
Potential rental income	There will be no rental income unless you’re open to sharing your living space.
Impact on our lifestyle and comfort during retirement	Going from a 5-room to a 3-room flat results in having 1 less bedroom, so if the extra bedroom is important to you now, your lifestyle would be impacted. There would also be less space in the living room which could reduce your quality of life, depending on how you use the space now.
Financial implications and feasibility	A 3-room flat is one of the most affordable resale HDB options. It’s definitely feasible and it’ll leave you with a substantial amount of funds, assuming you sell your 5-room flat in Ang Mo Kio (and if it’s paid up) which can support your retirement or you can also put into other investment avenues to generate some passive income.

2) Apply for a BTO

These are the prices for the last BTO launch in February this year:

The prices will differ depending on which location and the unit size that you intend to purchase. 

There are a few factors to consider with this option. 

• Resale levy – Since you are second-timers, you will have to pay a resale levy. The amount payable for a 5-room flat is $45,000, which will have to be paid in cash.

• Less priority – You have a lower chance of securing a unit since only a small portion of BTO flats are allocated to second-timers. Here are the allocation percentages:

• Non-mature estates

• Mature estates

However, if you’re considering a 2-room Flexi unit and have married children, you can apply under the Senior Priority Scheme (SPS) which will give you greater priority if the flat you’re applying for is within 4 km of your current flat or if it’s within 4 km of your married child’s property. 

At least 40% of 2-room Flexi flats are set aside for seniors and half of these are for eligible seniors under the SPS. Do note that if you’re buying a unit near your children, they will have to continue staying in their property for the duration of your flat’s Minimum Occupation Period (MOP).

Anyway, we would also avoid looking at 2-room flexi flats which are more suited to 1 occupant staying. It’s small and provides little privacy for both of you.

Some cons of this approach are:

• Element of luck – Since it is a balloting system, whether you’re able to select your choice unit will be dependent on getting a good queue number which is based on luck. As a second-timer, you’ll have the least amount of priority. 

• Locations depend on launch – The available locations will be dependent on where the launches are at so it may not necessarily be in your preferred estate/s.

• Longer waiting time – This may or may not be a concern depending on whether you have a certain timeline that you’re looking at.

For calculation purposes, let’s assume that you purchase a 3-room flat for $250,000 and that the waiting time is 4 years. During this period, you will continue to reside in your current property.

Resale levy	$45,000
BSD	$3,200
Property tax	$4,330
Town Council service & conservancy fees (Assuming $50/month)	$6,000
Total costs	$58,530

Funds remaining: $250,000 + $58,530 = $258,530

The considerations for this option are the same as buying a resale 3-room HDB as mentioned above. However, the difference is in the financial implications and feasibility.

In the BTO case, you’ll be stuck with your current residence while you wait for the BTO to be ready. This means you cannot unlock your current flat’s value until then. This can be seen as less efficient since your cash is tied up in the property rather than being invested elsewhere. And if you truly do not value the extra space of your 5-room flat now, waiting further means losing out on returns elsewhere.

3) Apply for a new Executive Condominium (EC) in Yishun

At the moment, there are three new launch Executive Condominiums (ECs) available: North Gaia in Yishun, Lumina Grand, and Altura in Bukit Batok. Among these, North Gaia offers the most affordable units, starting at nearly $1.2M for a 969 sq ft 3-bedroom unit.

We don’t know what your finances look like, but the median resale flat price of a 5-room flat in Ang Mo Kio is $905,000. If your flat is fully paid up and you sell it, you’ll still have to top up $295,000 (we’ve assumed you’re not taking a loan since the limit is at 65 and you’re only a couple of years short on this).

Since we have not factored in any additional CPF or cash savings you may have, we will assume for this calculation that you have sufficient funds for the purchase. As you are a second-timer, the resale levy will also be payable in this scenario.

Regarding payment, purchasing an EC differs slightly from buying a BTO flat. For a BTO, you need to pay an option fee, a 20-25% deposit depending on whether you are taking an HDB or bank loan, and the Buyer’s Stamp Duty (BSD). The remaining payments or loan disbursements occur upon key collection.

For a new EC, similar to a BTO, you must pay the 25% deposit and the BSD. However, the remaining payments are made progressively as the project is constructed. If you require the funds from selling your existing property, you may need to rent while waiting for the project to be completed. This could be extremely inconvenient as it means having to move twice. Once to your rental unit, and once again when you move in.

Alternatively, you could opt for a Deferred Payment Scheme (DPS), where the remaining payment is made upon the project’s Temporary Occupation Permit (TOP). Note that not all developers offer DPS, and purchasing under DPS usually involves a slightly higher purchase price compared to the Progressive Payment Scheme (PPS). However, DPS can save you the hassle of moving twice and incurring additional rental expenses.

Assuming you purchase a unit under the DPS at a 4% premium, a $1.2M unit would cost $1.248M. We will also assume a waiting period of four years for the EC, during which you will continue to reside in your HDB flat.

Resale levy	$45,000
BSD	$34,520
Property tax	$11,020
EC maintenance fee (Assuming $350/month)	$25,200
Total costs	$115,740

Total Cost: $1,248,000 + $115,740 = $1,366,140

Considerations that you have:

Maintenance concerns	Will unlikely be an issue since the unit will be smaller (even for a 3-bedder), so it should be easier to maintain. Plus it’s brand new.
Potential rental income	There will be no rental income unless you’re open to sharing your living space.
Impact on our lifestyle and comfort during retirement	You will have a comfortable place to live in with additional facilities, but given that a lot more funds are necessary for the purchase, it could potentially affect your lifestyle like being stressed about not having more passive income.
Financial implications and feasibility	This pathway is the least ideal in this category since it requires you to invest all of your HDB proceeds into the next property and also top up a substantial amount of additional funds. Given your plans to retire, this may not be a prudent choice unless you have separate retirement savings set aside.

4) Buy a 5-room maisonette in Hougang and rent out the rooms on the upper floor

You specifically mentioned Hougang Avenue 1, so here are some of the recent transactions along this stretch:

Date	Block	Level	Size (sqm) and unit model	Price
Jan 2024	238	10 to 12	138 Model A-Maisonette	$895,000
Nov 2023	238	01 to 03	138Model A-Maisonette	$900,888
Oct 2023	120	01 to 03	137 Improved-Maisonette	$780,000

The prices of these Maisonettes are quite similar to 5-room flat prices in Ang Mo Kio

This is a typical 5-room maisonette floor plan. On the upper level, there are usually 2 common bedrooms and a master bedroom. Let’s say you were to rent the common rooms at $800 each and the master at $1,200. As before, we will presume a 10-year holding period.

BSD	$21,450
Property tax	$7,540
Town Council service & conservancy fees (Assuming $85/month)	$10,200
Rental income	$336,000
Agency fees (Payable once every 2 years)	$15,260
Total gains	$281,550

Total gains = $281,550

Considerations that you have:

Maintenance concerns	Not much more maintenance is required as you’ll only have to clean the lower level as you’re renting out the upper level.
Potential rental income	Renting out 3 bedrooms will provide you with a decent amount of rental income monthly
Impact on our lifestyle and comfort during retirement	You’ll either have to renovate a bedroom on the lower floor, or find a layout that has one. Either way, you’ll be having 2 bedrooms less than before. You’ll also be sharing a common entrance with your tenant which could be less comfortable. The tenant would also be able to see through to the living area which results in less privacy unless you’re able to renovate it such that it’s like a dual-key layout.
Financial implications and feasibility	This pathway is feasible and you’ll have a monthly passive income, which can help support your retirement years. Renovation could be costly if major works need to be done.

5) Get a jumbo unit and rent out one side

Unfortunately, there’s no official classification for “Jumbo”, but the closest you can find is “Adjoined Flats” in HDB’s transaction database, so here are some of these recent transactions to give you an idea of their prices:

Date	HDB Town	Block	Street	Level	Size (Sqm)	Price
Jun 2024	Ang Mo Kio	441	Ang Mo Kio Ave 10	07 To 09	134	$1,260,000
Jun 2024	Bedok	1	Bedok Sth Ave 1	10 To 12	136	$800,000
Jun 2024	Marine Parade	64	Marine Dr	10 To 12	157	$1,380,000
Jun 2024	Hougang	124	Hougang Ave 1	10 To 12	161	$950,000
Jun 2024	Tampines	139	Tampines St 11	04 To 06	190	$1,140,000

Looking at the average price of adjoined flats over the last 6 months, the average price comes up to around $926,650. We will assume this to be the purchase price. 

This is a typical floor plan for a jumbo unit made up of two adjoining 3-room flats. 

Based on the Q1 2024 HDB rental statistics, the average rent for a 3-room flat is at $3,064. We will assume this to be the rental for one side of the property. 

BSD	$22,399
Property tax	$7,920
Town Council service & conservancy fees (Assuming $110/month)	$13,200
Rental income	$367,680
Agency fees (Payable once every 2 years)	$16,700
Total gains	$307,461

Total Gains: $307,461

Considerations that you have:

Maintenance concerns	This will not be an issue since the unit will be smaller, it will be easier to maintain. As the part of the unit you’re renting out is separate from yours, the tenant will be responsible for the upkeep. However, major repairs can be a concern since the landlord can be expected to fix structural issues.
Potential rental income	Renting out one side of the unit will provide you with a decent amount of rental income monthly
Impact on our lifestyle and comfort during retirement	It’s the same as the pathways above when you own a 3-room flat, except for the Adjoined Flat case, you could purchase one where the recess area is also bought as a separate entryway, or renovate the space so that it’s a dual-key layout at the entrance.
Financial implications and feasibility	This pathway is feasible but it may necessitate a top-up depending on the purchase price. It will provide a monthly passive income, which can help support your retirement years. Renovation could be costly if major works need to be done due to the larger size.

6) Remain status quo

As mentioned earlier, it seems you only prefer renting out the space if there is some kind of separation between you and the tenants. Therefore, we presume renting out the extra bedrooms in your current flat is not an option you are considering.

In this case, it makes more sense to cash out of the property rather than sitting on the funds and holding on to a flat that is too large for you to maintain. As mentioned, this is less efficient especially if you do not appreciate the larger space.

What should you do?

Let’s do a quick summary of the 5 options you’re considering. In this summary, we’ll also assume your 5-room flat is fully paid and is one of the older blocks which comes to around $750,000 in Ang Mo Kio. This allows us to see the hypothetical cash you have left which you can invest, or the difference you need to top-up:

Potential pathway	Property held	Total Cost/Gain	Cash Remaining/Top-Up Required	Position after 10 years
Rightsize to a 3-room corner unit	3-room HDB	$518,400	$250,000	$231,600
Apply for a BTO	3-room HDB	$258,530	N/A	$491,470
Apply for a new EC in Yishun	3-bedroom EC	$1,366,140	-$498,000	-$616,140
Buy a 5-room maisonette in Hougang and rent out the upper floor	5-room maisonette HDB	$498,450	-$30,000	$251,550
Get a jumbo unit and rent out one side	Jumbo HDB	$619,189	-$176,650	$130,811

Cash position refers to the investible funds after selling and buying the new property. It is N/A for the BTO option as you will not be selling the 5-room flat.

First off, we don’t think buying a new EC is feasible here. You mentioned “financial implications” as one factor, so we assume that the cost is important. Judging from your current residence, a large top-up would be required over your selling price (and this assumes the property is paid off too).

You’ll also be faced with a monthly maintenance fee of over $300 (estimated) which is quite the opposite of passive income during retirement.

Even if we consider legacy planning in mind, the financial implications outweigh the benefit of passing down a private property to your children (if any).

Therefore, this would be our last pick among the five options. The only reason this would be a good option is if you intend to sell right after MOP, allowing you to unlock capital gains. However, you’ll be approaching your 70s during this time and we assume moving homes at that age is the last thing on your mind.

Let’s now talk about the Maisonette/Jumbo options. Purchasing a 5-room maisonette or jumbo unit would provide a stream of passive income, but these properties are more expensive and could incur substantial renovation costs if major works are needed. A higher property price also attracts larger taxes, both property tax and stamp duties.

Additionally, managing tenants can be a hassle. In your older age, you might not want to deal with the renovations and maintenance. 

Lastly, the remaining funds (including rental income) are not higher than the first two options of rightsizing. The benefit of investing in property in Singapore is the price stability and the ability to take a loan. Since you won’t be taking a loan, we don’t think it makes sense to allocate your resources to earning a return on rental given the increased cost of ownership over investing the spare cash elsewhere.

This leaves us with the first two options.

Of the rightsizing options, applying for a BTO would make sense as it would leave you with a considerable amount of funds for your retirement. The main issue here is that you’d be sitting on your existing flat for another 4-5 years. This is a considerable amount of time to not unlock your flat’s value. Applying for a BTO could also be challenging due to the time it takes to get one, resulting in more time wasted locked up in your 5-room flat.

You might be wondering – wouldn’t the BTO allow you to earn the most later on? This is true, however, we’re inclined to think that this is going to be your last property move as mentioned. After all, having to move when you’re 70 can be stressful. You can’t take a home equity loan out of an HDB too, so there’s no way to unlock the growth unless you sell the flat which is not something you intend to do. Thus, this isn’t a consideration in our opinion.

This finally leaves us with the first option of rightsizing to a 3-room flat which we think is the best choice out of the five.

Although this option does not provide rental income, it does free up capital from your existing 5-room flat so that you can invest this elsewhere for passive income. You can also leave it in your CPF Retirement Account (RA), earning an interest of 4% annually. This can support your retirement and eliminates the need to manage tenants. Additionally, a smaller space will be easier to maintain, and as mentioned, unless you need the extra space in the living and the extra bedroom, there isn’t that much more difference in the quality of life. This is very subjective though, and something only you can decide. If this is a concern, you could consider a resale 4-room flat in a non-mature estate. You can still unlock a tidy sum from your existing 5-room flat in Ang Mo Kio and decide to either knock the walls of one bedroom down to create a larger living area or have that extra bedroom.