We Have $5 Million In Cash And Live In A 3-Room HDB: Should We Buy A Larger Condo Or HDB?
My wife and I are celebrating our 50th year, still cherishing our humble beginnings in the resale 3-room HDB flat we bought in 1997, shortly after tying the knot. With three grown children, aged 17, 20, and 22, still under our roof, our home has been witness to countless family milestones. Although we once dreamed of relocating to the U.S. for my work in the early 2000s, life had other plans, and we chose to remain rooted here.
I’ve dedicated myself to my professional role, striving to provide for my family as the sole breadwinner, while my wife has poured her heart into homemaking, ensuring our children grow into respectful and well-adjusted individuals. She’s as radiant and caring as she was 30 years ago, a constant source of strength and love in our lives.
Despite our stability, I’ve always been cautious about job security, which led us to be frugal, especially when it comes to significant expenses like buying a house. However, the relentless rise in property prices over the past two decades, compounded by the impact of COVID-19, has forced us to confront the reality of our cramped living situation. Our children are now adults, and the need for more space is palpable.
Yet, finding a suitable property that meets our size and location preferences has proven elusive. As novices in the property market, navigating the myriad options feels overwhelming, particularly with my wife’s discerning eye for layout and design.
Now, at 50, with reasonable financial resources including over 5 million SGD in cash reserves, passive income of 100,000 to 200,000 SGD annually, and a stable salary of 400,000 SGD per year, I believe we have the means to make a move. However, the challenge lies in finding a property that aligns with our needs and preferences.
We’ve explored various options, from renovating our current centrally located flat to considering a move to a larger condo or HDB flat. Each decision comes with its own set of trade-offs, as we weigh the appeal of our current neighborhood against the inflated property prices.
Like many others, we find ourselves at a crossroads, grappling with the fear of making the wrong choice or falling victim to unscrupulous sellers. It’s a dilemma that resonates with countless individuals who, like us, are not well-versed in property matters and fear the consequences of a misstep.
So, we seek guidance and wisdom as we navigate this pivotal moment in our lives. What course of action should we take to secure a brighter future for our family?
Hi there,
Thank you for writing in with such a heartwarming message. Also, happy 50th!
I understand your family’s sentimental attachment to your current flat, as is common with many families who have lived in a property for an extended period.
Your substantial cash reserves and annual passive income do put you in a favourable position, offering you a lot of flexibility in terms of your next steps. Considering your current age, I would presume that you would prefer to avoid taking on a significant loan.
As such you would need to utilise your cash reserves for your property purchase. This approach would help reduce the loan amount, thereby lowering the monthly financial commitment, minimising interest expenses, and preserving more of your passive income. If you were to exhaust your cash reserves for the purchase, you could still access emergency funds through an equity term loan if the need arises.
Additionally, it’s worth noting that utilising your CPF funds for the purchase would be advantageous now, as a portion of these funds will be locked in your Retirement Account (RA) once you reach 55 years old.
These are the pathways I will run through:
- Buy a bigger HDB flat
- Buy a condominium in the RCR or OCR
- Buy a condominium in the CCR
- Buy a landed property
Performance of the various options
Given your 27-year tenure in your current property, I presume you intend to stay in the next property for a long time (possibly even being your last property purchase). Additionally, considering that your family of five has been residing in a 3-room flat, it seems you may not prioritise purchasing the largest property available, but rather something that provides adequate space for your family’s needs while maintaining its long-term value.
Considering this, I’ve limited the property sizes for the following comparisons.
- For a bigger HDB, we will look at Executive Flats
- For a condominium in the RCR or OCR, we will look at those sized between 1,300 – 1,600 sq ft (A quick search on PropertyGuru shows that the most comfortable 4-bedders fall under these sizes. This includes all freehold and leasehold condominiums.)
- For a condominium in the CCR, we will look at those sized between 1,700 – 2,200 sq ft (Likewise, the listing data shows that the most comfortable 4-bedders fall under these sizes. This includes only freehold condominiums.)
- For a landed property, we will look at terraces with land sizes between 1,700 – 2,000 sq ft (This includes only freehold terraces.)
| Year | Executive HDB | YoY | Condo RCR/OCR (freehold & leasehold) | YoY | Condo CCR (freehold) | YoY | Landed (freehold terrace) | |
| 2013 | $419 | – | $1,057 | – | $1,787 | – | $1,450 | – |
| 2014 | $407 | -2.86% | $1,031 | -2.46% | $1,573 | -11.98% | $1,378 | -4.97% |
| 2015 | $392 | -3.69% | $997 | -3.30% | $1,768 | 12.40% | $1,339 | -2.83% |
| 2016 | $391 | -0.26% | $1,016 | 1.91% | $1,762 | -0.34% | $1,267 | -5.38% |
| 2017 | $393 | 0.51% | $1,028 | 1.18% | $1,770 | 0.45% | $1,356 | 7.02% |
| 2018 | $394 | 0.25% | $1,090 | 6.03% | $1,977 | 11.69% | $1,452 | 7.08% |
| 2019 | $384 | -2.54% | $1,118 | 2.57% | $1,926 | -2.58% | $1,434 | -1.24% |
| 2020 | $395 | 2.86% | $1,100 | -1.61% | $1,782 | -7.48% | $1,519 | 5.93% |
| 2021 | $443 | 12.15% | $1,178 | 7.09% | $2,001 | 12.29% | $1,686 | 10.99% |
| 2022 | $487 | 9.93% | $1,314 | 11.54% | $2,132 | 6.55% | $1,894 | 12.34% |
| 2023 | $521 | 6.98% | $1,429 | 8.75% | $2,212 | 3.75% | $2,030 | 7.18% |
| Average | – | 2.34% | – | 3.17% | – | 2.48% | – | 3.61% |
The data presented indicates that among the four segments, freehold terraces have demonstrated the highest average growth rate over the past 10 years. They are generally considered the most secure option for long-term investment, plus they offer ample space and flexibility in configuration. However, they are often situated in less convenient locations, further away from public transportation and amenities. Additionally, it’s important to consider the potential expenses for renovation, alteration and addition (A&A), or rebuilding if the current structure and furnishings do not meet your living requirements.
Condominiums situated in the Rest of Central Region (RCR) and Outside Central Region (OCR) exhibited the next highest average growth rate. These condos may offer enhanced convenience due to their proximity to amenities compared to landed properties. However, their appreciation rates could be moderated by the overall affordability of Singaporeans. Nonetheless, condos in such locations benefit from a pool of aspiring HDB upgraders and enjoy greater loan eligibility leverage compared to HDBs. This is because loans for private properties are assessed based on the Total Debt Servicing Ratio (TDSR) which is up to 55% of one’s monthly income, while HDB loans are assessed based on the Mortgage Servicing Ratio (MSR) which is at 30%. As a result, condos in these areas potentially have a broader appreciation potential compared to HDBs.
Condominiums with freehold tenure in the CCR come next in terms of average growth rate. Due to their higher price tag, these properties typically attract a smaller pool of potential buyers and are more likely to be owned by foreigners compared to condos in the RCR and OCR. Consequently, the potential for significant appreciation in value for such properties largely hinges on government policies, such as the Additional Buyer’s Stamp Duty (ABSD).
Moreover, CCR condominiums were grossly inflated in the earlier years and it took a long time for prices to correct, thus affecting the annualised performance.
Finally, Executive HDB flats exhibited the lowest average growth rate but it’s not too far off from freehold condominiums in the CCR. A closer look at the year-on-year performance reveals that most of the growth occurred before 2013 and during the onset of the pandemic. In 2013, apart from the three rounds of cooling measures introduced, which impacted all property categories, HDB also implemented a change in transaction procedure. Under this change, the valuation for a property is conducted only after the Option To Purchase (OTP) is issued, as opposed to before. This adjustment effectively stabilised HDB prices until the emergence of the pandemic, during which demand for larger units, in particular, surged. As the market begins to recover, the sustainability of this growth rate remains uncertain.
Now, let’s delve deeper into the potential impact of ABSD on foreign buyers.
Cooling measures introduced:
| Year | ABSD on foreign purchasers/entities | Impact |
| 2011 | 10% | Minimal impact on price and volume |
| 2013 | 15% | Coupled with the introduction of the TDSR caused a significant impact with CCR taking the largest hit |
| 2018 | 20% on foreign purchasers, 25% on entities | Significant impact on volume of sale |
| 2021 | 30% on foreign purchasers, 35% on entities | |
| 2023 | 60% on foreign purchasers, 65% on entities |
While the CCR demonstrates the most erratic price fluctuations, this could stem from the diverse range of properties it encompasses compared to other segments. It’s important to note that not all properties in the CCR exhibit the same level of instability.
Certain factors help some developments to stand out more than others, such as particular units with a large floor plate, and projects seated on a large land plot (just to name a few). The following are some examples of freehold condos in the CCR which have been performing well over the last 10 years.
| Year | Melrose Park | YoY | Belmond Green | YoY | Rivergate | YoY |
| 2013 | $1,780 | – | $1,788 | – | $2,085 | – |
| 2014 | $1,537 | -13.65% | $1,752 | -2.01% | $2,059 | -1.25% |
| 2015 | $1,403 | -8.72% | $1,645 | -6.11% | $1,909 | -7.29% |
| 2016 | $1,670 | 19.03% | $1,514 | -7.96% | $1,942 | 1.73% |
| 2017 | $1,672 | 0.12% | $1,702 | 12.42% | $2,033 | 4.69% |
| 2018 | $1,881 | 12.50% | $1,892 | 11.16% | $2,233 | 9.84% |
| 2019 | $1,708 | -9.20% | $1,909 | 0.90% | $2,206 | -1.21% |
| 2020 | $2,122 | 24.24% | $1,657 | -13.20% | $2,284 | 3.54% |
| 2021 | $2,038 | -3.96% | $2,038 | 22.99% | $2,477 | 8.45% |
| 2022 | $2,081 | 2.11% | $2,270 | 11.38% | $2,744 | 10.78% |
| 2023 | $2,555 | 22.78% | $2,332 | 2.73% | $2,807 | 2.30% |
| Average | – | 4.53% | – | 3.23% | – | 3.16% |
The data presented earlier suggests that ABSD may exert a more pronounced effect on this property category than others. That said, it’s worth mentioning that landed properties may be exempt from these impacts as they are restricted to Singaporeans and specially approved individuals.
Given your inclination toward caution and conservative financial management, I gather you may prefer to limit the property purchase to a modest option that meets your family’s requirements while directing the remaining funds towards alternative investments.
With that in mind, let’s delve into the potential expenses associated with the four different pathways, enabling you to make a more informed decision about which option aligns best with your comfort level.
Potential costs
Considering a longer-term view, I will presume a holding period of 10 years and that you opt for the maximum loan available in each scenario. Given an annual income of $400,000 at the age of 50 and an interest rate of 4.8%, your estimated maximum loan amount is $1,280,089 for an HDB purchase and $2,346,830 for a private property, both with a 15-year tenure. I am also using hypothetical purchase prices since I am unsure of the specific areas you’re considering, so note that these figures will vary based on location and tenure.
Buying an Executive HDB
| Description | Amount |
| Purchase price | $1,000,000 |
| 25% down payment | $250,000 |
| 75% loan | $750,000 |
Costs incurred
| Description | Amount |
| BSD | $24,600 |
| Interest expense (Assuming 4% interest) | $216,952 |
| Property tax | $8,800 |
| Town council service & conservancy fees (Assuming $107/month) | $12,840 |
| Total costs | $263,192 |
Assuming you were to put the remainder of your cash reserves (after deducting the 25% down payment) into other investment avenues with a conservative return of 4% annually.
| Time period | Investment amount | Gains |
| Starting point | $4,750,000 | $0 |
| Year 1 | $4,940,000 | $190,000 |
| Year 2 | $5,137,600 | $387,600 |
| Year 3 | $5,343,104 | $593,104 |
| Year 4 | $5,556,828 | $806,828 |
| Year 5 | $5,779,101 | $1,029,101 |
| Year 6 | $6,010,265 | $1,260,265 |
| Year 7 | $6,250,676 | $1,500,676 |
| Year 8 | $6,500,703 | $1,750,703 |
| Year 9 | $6,760,731 | $2,010,731 |
| Year 10 | $7,031,160 | $2,281,160 |
Buying a condominium in the RCR or OCR (Freehold/leasehold 4-bedder)
| Description | Amount |
| Purchase price | $2,800,000 |
| 25% down payment | $700,000 |
| 75% loan | $2,100,000 |
Costs incurred
| Description | Amount |
| BSD | $109,600 |
| Interest expense (Assuming 4% interest) | $607,465 |
| Property tax | $78,800 |
| Maintenance fees (Assuming $450/month) | $54,000 |
| Total costs | $849,865 |
Assuming you were to put the remainder of your cash reserves (after deducting the 25% down payment) into other investment avenues with a conservative return of 4% annually.
| Time period | Investment amount | Gains |
| Starting point | $4,300,000 | $0 |
| Year 1 | $4,472,000 | $172,000 |
| Year 2 | $4,650,880 | $350,880 |
| Year 3 | $4,836,915 | $536,915 |
| Year 4 | $5,030,392 | $730,392 |
| Year 5 | $5,231,607 | $931,607 |
| Year 6 | $5,440,872 | $1,140,872 |
| Year 7 | $5,658,507 | $1,358,507 |
| Year 8 | $5,884,847 | $1,584,847 |
| Year 9 | $6,120,241 | $1,820,241 |
| Year 10 | $6,365,050 | $2,065,050 |
Buying a condominium in the CCR (Freehold 4-bedder)
| Description | Amount |
| Purchase price | $4,500,000 |
| Maximum loan | $2,346,830 |
| Cash + CPF required | $2,153,170 |
Costs incurred
| Description | Amount |
| BSD | $209,600 |
| Interest expense (Assuming 4% interest) | $678,866 |
| Property tax | $231,800 |
| Maintenance fees (Assuming $600/month) | $72,000 |
| Total costs | $1,192,266 |
Assuming you put the remainder of your cash reserves (after deducting $2,153,170) into other investment avenues with a conservative return of 4% annually.
| Time period | Investment amount | Gains |
| Starting point | $2,846,830 | $0 |
| Year 1 | $2,960,703 | $113,873 |
| Year 2 | $3,079,131 | $232,301 |
| Year 3 | $3,202,297 | $355,467 |
| Year 4 | $3,330,388 | $483,558 |
| Year 5 | $3,463,604 | $616,774 |
| Year 6 | $3,602,148 | $755,318 |
| Year 7 | $3,746,234 | $899,404 |
| Year 8 | $3,896,083 | $1,049,253 |
| Year 9 | $4,051,927 | $1,205,097 |
| Year 10 | $4,214,004 | $1,367,174 |
Buying a landed property (Freehold terrace)
| Description | Amount |
| Purchase price | $6,000,000 |
| Maximum loan | $2,346,830 |
| Cash + CPF required | $3,653,170 |
Costs incurred
| Description | Amount |
| BSD | $299,600 |
| Interest expense (Assuming 4% interest) | $678,866 |
| Property tax | $375,800 |
| Maintenance costs (Assuming $5,000/year)* | $50,000 |
| Total costs | $1,404,266 |
*The maintenance costs for a landed property can be hard to determine as maintenance is probably done periodically or whenever needed. This is just a rough estimate.
Assuming you put the remainder of your cash reserves (after deducting $3,653,170) into other investment avenues with a conservative return of 4% annually.
| Time period | Investment amount | Gains |
| Starting point | $1,346,830 | $0 |
| Year 1 | $1,400,703 | $53,873 |
| Year 2 | $1,456,731 | $109,901 |
| Year 3 | $1,515,001 | $168,171 |
| Year 4 | $1,575,601 | $228,771 |
| Year 5 | $1,638,625 | $291,795 |
| Year 6 | $1,704,170 | $357,340 |
| Year 7 | $1,772,336 | $425,506 |
| Year 8 | $1,843,230 | $496,400 |
| Year 9 | $1,916,959 | $570,129 |
| Year 10 | $1,993,637 | $646,807 |
What should you do?
Let’s do a quick recap of the numbers.
| Property type | Property value | Costs incurred | Cash reserves left for investment |
| Buy a bigger HDB flat | $1M | $263,192 | $4,750,000 |
| Buy a condominium in the RCR or OCR (freehold/leasehold) | $2.8M | $849,865 | $4,300,000 |
| Buy a condominium in the CCR (freehold) | $4.5M | $1,192,266 | $2,846,830 |
| Buy a landed property (freehold) | $6M | $1,404,266 | $1,346,830 |
From the above, you can see that the potential profits are greatest when purchasing an HDB and lowest when acquiring a landed property largely due to the interest cost on the loan. There aren’t many investment opportunities that offer a relatively safe loan quite like property, but if the interest rate is on the high side, you can expect it to eat into your investments.
Thus, it’s inevitable that investing your cash could provide better returns than real estate so long as interest rates are high.
However, this hinges on your investments appreciating at a faster rate than the property. Therefore, outcomes will vary depending on how you manage your remaining cash reserves.
Furthermore, you mentioned that your wife is particular about layout and design. Should you purchase a landed property, you can expect renovation costs to go up which can further eat into gains. Older properties have a much bigger space that you can renovate to your liking, but that’s again where costs go up.
Since we’re discussing real estate, how the cash portion is managed is really beyond our scope here. Instead, I’ll offer another way to view the costs associated with property. Based on my cost calculations above, here’s a look at the required appreciation rate to break even over a 10-year period:
| Scenario | Purchase Price | Cost | Sale Price 10 years later | Appreciation to breakeven in 10 years |
| Buy Executive HDB | $1,000,000 | $263,192 | $1,263,192 | 2.36% |
| Condo in RCR/OCR | $2,800,000 | $849,865 | $3,649,865 | 2.69% |
| Condo in CCR | $4,500,000 | $1,192,266 | $5,692,266 | 2.38% |
| Freehold Landed | $6,000,000 | $1,404,266 | $7,404,266 | 2.13% |
After putting in the purchase price, cost and price to sell to break even, we can get the compound annual growth rate (CAGR) for each scenario. You’ll notice that they’re quite similar to each other. What matters here is that these appreciation rates are not far-fetched. 2+% is in fact, bordering along inflation. The reason why the appreciation to breakeven for landed is lower is due to the smaller loan relative to the purchase price which would be the reality in your situation. In other words, all 4 of these scenarios paint a realistic and safe picture for you.
Now I must highlight that profitability is but one factor to consider. You mentioned “secure a bright future”. This could mean very different things to different people. Some considerations you could make
- In terms of legacy planning, what type of property would you like to leave behind? An HDB could complicate matters due to the stricter regulations, particularly when it comes to the Minimum Occupation Period and the fact that no one can own more than one HDB. This complication can make things difficult for your children in the future.
- What does your family want? It may be important to know the preferences that your family member has. A landed home may be prestigious to someone, but more trouble than it’s worth to another. They are usually situated in areas not very accessible by MRT or bus. Amenities may be hard to come by too. Understanding the lifestyle needs of each family member and considering it in your home purchase would help.
Considering your significant cash savings and passive income, you’re in a very comfortable position and not exposed to high-risk scenarios regardless of which option you choose. From an investment perspective, holding a freehold property could prove advantageous, and could be a part of your legacy planning. As the property market regulations get tighter, willing over a freehold landed property to your children means unlocking a second property for them without having to put up any additional tax – something that would have attracted a large tax if they tried purchasing it themselves.
As such, I’m leaning towards either a freehold condominium in the CCR or a freehold landed property. While these options come with more cost, they offer greater potential, particularly as a long-term investment and legacy tool.
We hope that our analysis will help you in your decision-making. If you’d like to get in touch for a more in-depth consultation, you can do so here.
Why not buy 2-3 more properties in their children’s names? They can be in the same or neigbouring development if the family wants to stay close.
Either you are a property agent or a fanatic. Why would anyone put their entire asset from 1 class to another? There should be a balance isn’t it?
Because this is just another meaningless “I have xxx I cash and stay in HDB, should I buy a condo or HDB” article. Almost every 1-2 weeks, there will be such article. It doesn’t bring anything new.
Totally agree with Bluehorizon! Nobody in their right mind holds $5,000,000 in cash in this day and age, unless they happen to be awaiting trial for money laundering…
I love this. 10m net worth living in 3 room flat with 3 adult kids. Suggest to downgrade to a smaller flat to grow the nest egg further but more importantly to keep the family more close-knit.
I love the thoughtful response to this wonderful letter.
Letter feels like it received an assist from ChatGPT though?
The math don’t math. How can know each other for 50 years then eldest is 22? Something don’t add up.
They are both 50 years old.Have known each other for 30 years.Makes sense.
Most humblebrag post yet
anyone with $5 m cash on-hand, at 50 years old, aint gonna to invest the $4.7 mil if they buy another bigger HDB flat. so better off put it in landed property , given your low risk appetite for investment. thank me later.
Assuming the story is genuine, I think it’s quite refreshing that a family that can certainly afford a more luxurious lifestyle are happy to live modestly. Personally, I think that upsizing at a time when children are all about to get married and move out is not really necessary. There is also sentimental value attached to their family home. Continue investing the money wisely and help your kids out with their respective property purchases later. Enjoy your retirement.