We Have $600k In Cash: Should We Wait 15 Months For An HDB Or 2 Condos Instead?

Hi Stackedhomes,

I have been following you for awhile and always enjoy your insights and advice.

We are a couple in our early 40s who had just sold our condo (joint name). Currently we are staying in a rental unit as we would like to purchase a resale hdb which we can only do so after the 15 months waiting period.

We would like to seek your advice as we were also thinking of a getting a condo each where 1 is for rental purpose and the other is for staying purpose. 

our combine cpf is about 500k and cash is about 600k.

We do have a young daughter at age 3.5 and our next priority is her primary school.

(This is part of an ongoing series where we answer reader questions about the property market. If you have one of your own, send it to stories@stackedhomes.com.)

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Hi there,

We’re happy to hear that you enjoy the content.

The two options you’re considering come with significantly different costs and potential gains, each with its own set of pros and cons. In the article, we’ll explore these aspects along with some relevant numbers to give you a clearer understanding.

Let’s start by looking at your affordability. 

Affordability

Since we don’t have all your financial details, we will provide an estimate based on what you’ve provided. 

With your available cash and CPF savings, purchasing an HDB property shouldn’t pose an issue. To calculate your affordability in acquiring two private properties, we will assume that your CPF funds are equally divided between both you and your partner, and we will allocate a larger portion of cash towards the purchase of your own residence.

Let’s assume you use $650,000 from your CPF and cash for the 25% down payment on your own stay property. Based on this, the maximum purchase price would be approximately $2.6M. After factoring in the Buyer’s Stamp Duty (BSD), your actual affordability would be approximately $2.25M. Keep in mind, however, that this estimate depends heavily on the loan quantum you are eligible for.

Purchase price	$2,250,000
BSD	$82,100
CPF + cash	$650,000
Loan required	$1,682,100

Assuming you are 42 years old and using a 4.8% interest rate for the stress test calculation, you would need to have a monthly income of approximately $18,500 to qualify for a loan of $1,682,100.

For the investment property, with a 25% down payment of $450,000 and after factoring in the BSD, the maximum purchase price would be around $1.58M, depending on the loan amount the purchasing party qualifies for.

Purchase price	$1,580,000
BSD	$48,600
CPF + cash	$450,000
Loan required	$1,178,600

Similarly, assuming that the buyer is 42 years old and using a 4.8% interest rate for the stress test calculation, they would need a monthly income of approximately $13,000 to qualify for a loan of $1,178,600 for the investment property.

Since we don’t have details on your income, we can’t confirm the feasibility of this option. Additionally, depending on the location and unit size you’re considering, you may not need to stretch your budget to the maximum.

Before we go into the options you’re exploring, let’s first compare the performance of HDB flats against private properties.

Performance of HDB vs private property

Here we are only looking at non-landed private properties. 

Year	HDB Resale Price Index (RPI)	Non-landed Property Price Index (PPI)
2013-Q4	145.8	147.6
2014-Q4	137	142.5
2015-Q4	134.8	137.4
2016-Q4	134.6	133.8
2017-Q4	132.6	135.6
2018-Q4	131.4	146.8
2019-Q4	131.5	149.6
2020-Q4	138.1	153.3
2021-Q4	155.7	168.4
2022-Q4	171.9	182.1
2023-Q4	180.4	194.2
Average	2.30%	2.90%

This table shows that on average, non-landed private property prices have outperformed HDB flats over the past decade. Notably, non-landed private property prices rebounded more quickly following the post-2013 downturn, whereas HDB prices only saw substantial growth during the pandemic.

This difference is largely due to the distinct purposes and regulatory frameworks governing each property type. HDB flats are designed as affordable housing for the general population, so their prices are more strictly regulated to ensure affordability remains within reach. As a result, their price growth is often more gradual and stable.

On the other hand, private properties are subject to fewer regulations and are more accessible to a wider pool of buyers, including both local and foreign investors. This makes private property prices more sensitive to economic conditions and capable of greater price fluctuations.

While HDB flats offer the advantages of affordability and price stability, they generally don’t see as much appreciation as private properties. This makes HDBs more suitable for own-stay purposes rather than serving as an investment. Private properties, on the other hand, while riskier, offer higher potential returns and are seen as a form of investment. 

Year	HDB average PSF	Non-landed private property average PSF	% difference
2013	$469	$1,245	165.46%
2014	$441	$1,190	169.84%
2015	$423	$1,191	181.56%
2016	$424	$1,248	194.34%
2017	$425	$1,292	204.00%
2018	$419	$1,325	216.23%
2019	$416	$1,344	223.08%
2020	$431	$1,294	200.23%
2021	$488	$1,345	175.61%
2022	$532	$1,455	173.50%
2023	$564	$1,562	176.95%

We observe here that the price gap between HDB flats and private properties has steadily widened over the years, making it more difficult for HDB owners to upgrade to private properties without a substantial top-up. Although HDB prices have shown consistent growth over the past three years, private property prices have risen at a similar rate, preventing any significant narrowing of the gap.

Now let’s take a look at the pathways you’re considering. 

Potential pathways

Buying an HDB now and buying a condo later

Seeing as you’re also considering the option of purchasing two private properties, you might explore buying the HDB under the owner-occupier arrangement. In this scenario, one of you would be the owner while the other acts as the occupier. After the flat has fulfilled its Minimum Occupation Period (MOP), the occupier can then proceed to buy a private property without incurring Additional Buyer’s Stamp Duty (ABSD). However, keep in mind that the occupier’s CPF funds cannot be used for the HDB purchase.

This approach would enable you to ultimately own two properties. However, it comes with certain drawbacks, such as the 15-month wait-out period and the 5-year MOP, which could result in lost opportunities. Additionally, since the party planning to buy the investment property can only do so after six years, this would shorten the loan tenure, potentially affecting the loan quantum.

Considering the timeline, if you wish to enrol your daughter in a primary school with priority admission under the Home-School Distance category, the HDB you purchase will need to be within 1 km of your preferred school.

Now let’s take a look at the numbers.

Since there are a few uncertainties—such as the exact location of your purchase, your current rent, how far you are into the 15-month wait-out period, and your loan amounts—we’ll need to make some assumptions for the calculations:

• You still have 12 months remaining before you’re eligible to purchase an HDB.
• Your current rent is $3,000 per month.
• The purchase price of the HDB is estimated at $885,000 (based on the average price for a 4-room flat in Bukit Merah in Q2 2024; we’re using a higher estimate to be safe).
• The purchase price of the investment property is estimated at $1.5 million.
• The investment property will generate a rental yield of 3%.

For these calculations, we’ll consider a 10-year timeframe. This means you’ll be renting for 1 year before purchasing and staying in the HDB for 9 years. Likewise, the investment property will be purchased after the HDB’s MOP and rented out for 4 years.

Buying the HDB

Purchase price	$885,000
BSD	$21,150
CPF + cash	$350,000*
Loan required	$556,150

*For this purchase we only utilised $100K from your cash savings to leave more funds for the purchase of the investment property

Cost of holding the HDB for 9 years

Interest expense (Assuming 4% interest and 23-year tenure)	$173,441
BSD	$21,150
Property tax	$6,678
Town council service & conservancy fees (Assuming $72/month)	$7,776
Rent cost (during the wait-out period)	$36,000
Total costs	$245,045

Buying the investment property

Purchase price	$1,500,000
BSD	$44,600
CPF + cash	$750,000
Loan required	$794,600

Cost of holding the investment property for 4 years

Interest expense (Assuming 4% interest and 17-year tenure)	$116,342
BSD	$44,600
Property tax	$26,400
Maintenance fees (Assuming $280/month)	$13,440
Rental income	$180,000
Agency fees (Assuming it’s paid once every 2 years)	$8,176
Total costs	$28,958

Total cost if you were to take this pathway: $245,045 + $28,958 = $274,003

Another option to explore is the possibility of moving into the private property while renting out the HDB. Once the HDB reaches its MOP, you will have satisfied the 30-month requirement for the Home-School Distance priority admission category, which means you won’t be restricted to staying within a 1km radius of the school.

Let’s examine how this approach impacts the numbers, assuming you rent out the HDB at a 5% yield. 

Cost of holding the HDB for 9 years (staying for 5 and renting for 4)

Interest expense (Assuming 4% interest and 23-year tenure)	$173,441
BSD	$21,150
Property tax	$29,510
Town council service & conservancy fees (Assuming $72/month)	$7,776
Rent cost (during the wait-out period)	$36,000
Rental income	$177,024
Agency fees (Assuming it’s paid once every 2 years)	$8,038
Total costs	$98,891

Cost of holding the investment property for 4 years

Interest expense (Assuming 4% interest and 17-year tenure)	$116,342
BSD	$44,600
Property tax	$7,920
Maintenance fees (Assuming $280/month)	$13,440
Total costs	$182,302

Total cost if you were to take this pathway: $98,891 + $182,302 = $281,193

Opting for this route will result in slightly higher overall costs, but it comes with the benefit of living in a private property, allowing you to enjoy the facilities and lifestyle that come with it (if that aligns with your preferences).

Buying 2 private properties

Purchasing two private properties offers greater flexibility with the timeline, as you won’t have to adhere to the 15-month wait-out period, and you will be able to buy both properties simultaneously. Additionally, since there’s no MOP, you have the option to sell your own stay property after three years, once the Seller’s Stamp Duty (SSD) period is over and purchase a property within 1km of your preferred primary school. While this timeline may be tight, it provides flexibility in not having to commit to a property near the school immediately.

The downside, of course, is the higher upfront cost of buying two private properties. However, renting out one of the properties will help to offset some of the ongoing expenses, making it more manageable.

As we do not know your income, we cannot determine if you can fully maximise your budget based on your available CPF funds and cash. As such, let’s assume the following:

• The purchase price of your own stay property is $1.8M.
• The purchase price of the investment property is $1.2M.
• The investment property will generate a rental yield of 3%.

Buying the own stay property 

Purchase price	$1,800,000
BSD	$59,600
CPF + cash	$650,000
Loan required	$1,209,600

Cost of holding the own stay property for 10 years

Interest expense (Assuming 4% interest and 23-year tenure)	$410,858
BSD	$59,600
Property tax	$28,800
Maintenance fees (Assuming $350/month)	$42,000
Total costs	$541,258

Buying the investment property

Purchase price	$1,200,000
BSD	$32,600
CPF + cash	$450,000
Loan required	$782,600

Cost of holding the investment property for 10 years

Interest expense (Assuming 4% interest and 23-year tenure)	$265,821
BSD	$32,600
Property tax	$48,000
Maintenance fees (Assuming $280/month)	$33,600
Rental income	$360,000
Agency fees (Assuming it’s paid once every 2 years)	$16,350
Total costs	$36,371

Total cost if you were to take this pathway: $541,258 + $36,371 = $577,629

What should you do?

Given that we don’t have a complete picture of your financial situation, it’s challenging to determine which option might be the best fit for you or whether either option is feasible. While the first option seems to present a more prudent choice based on the costs involved, your ultimate decision will hinge on your comfort level with your financial situation and the level of flexibility you desire.

Opting to purchase an HDB flat first can provide more financial breathing room. This approach will allow you time to save up which could open additional options for you, or enable you to reduce your loan quantum. While the costs associated with purchasing an HDB are significantly lower, it’s important to recognise that the appreciation potential is also more limited. By delaying the purchase of an investment property, you may have more time to observe market conditions but it’s crucial to consider the opportunity cost associated as you’ll be missing out on potential appreciation during that time.

On the other hand, choosing to buy two private properties will involve higher costs due to the larger loans you’ll need to take on. However, this approach offers higher growth potential, if you choose the right properties. By purchasing both properties simultaneously, there is a greater opportunity for capital growth over time. Additionally, the absence of a 15-month wait-out period allows you to avoid extra rental costs. 

Another consideration is the timeline for your daughter’s education. If you choose the HDB option and wish to apply for priority admission under the Home-School Distance category, you’ll need to decide on a school before purchasing the HDB which could limit your options.

Ultimately, your decision should reflect not just the financial implications but also your long-term goals and lifestyle preferences. If you prioritise investment growth and can manage the associated costs and risks, purchasing two private properties may be the way to go. However, if you prefer a more gradual approach that allows for greater financial stability and less immediate pressure, starting with an HDB would be more suitable.