We Make $300k Per Year And Are Nearly In Our 50s. Should We Sell Our 22-Year-Old HDB Or Investment Property To Upgrade?
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Stacked
- July 21, 2023
- 10 min read
10 min read
Hi Stacked Homes,
I always enjoy reading your detailed analysis and professional advice in response to readers’ questions to support their decision making. This time, I hope you could also help answer my questions.
We are approaching our 50s with combined yearly income of ~$300K with 2 teenage (15-19) kids. We own a 4-room HDB in one of the cheapest estate and a freehold one-bedder in D11 (in equal shares) with no outstanding loan. As our HDB is now over 22 years old, I have been wondering if we should still keep it. I am also considering moving into a 3-bedroom condo in a more central/convenient location but have been put off by the ever rising ABSD (One of us is SPR.)
With our combined cash saving of ~$300K and CPF OA of $400-500K, should we sell one of our current properties and/or decouple, and get a 3-bedder condo for own stay? Would it still be possible to also buy another investment property to generate rental income?
Looking forward to hearing your advice. Thank you in advance.
| Age | 50 (Citizen) | 49 (SPR) |
| Annual Income (S$K) | 170-190 | 156 |
| Monthly Salary (S$K) | ~13 | 13 |
| Property | 1-bedder in D11 | 4-room flat in Choa Chu Kang |
| CPF used + Accrued Interest (S$K) | 256 | 238 |
Editor’s Note: The condo and flat address has been redacted for privacy reasons.
Hi there,
We are happy to hear that you’ve enjoyed our content so far!
Given that both of you will turn 55 in 5-6 years and a portion of your CPF funds may be locked up in your Retirement Account (RA), now is an opportune time to begin planning if you intend to restructure your property portfolio. And as you might already know, delaying the purchase of a property will lead to a shorter loan tenure and subsequently a reduced loan quantum, impacting your affordability.
To begin, we will first assess your affordability before delving into the performance of your existing properties and exploring the available options.
Affordability
Let’s first look at the potential cash proceeds you’ll receive if you were to sell your existing properties.
The addresses of the properties have been omitted for privacy r
There haven’t been any 1-bedroom transactions in your 1 bedroom condo this year, the last one was in February 2022:
| Date | Size (sqft) | PSF | Price | Level |
| Feb 2022 | 700 | $1,658 | $1,160,000 | #02 |
For calculation purposes, we will assume the same selling price. However, do note that it would likely be higher given how the market has moved.
| Description | Amount |
| Selling price | $1,160,000 |
| CPF to be refunded into OA | $256,000 |
| Cash proceeds | $904,000 |
These are some of the recent transactions for 4-room flats along Choa Chu Kang Drive:
| Date | Block | Size (sqm) | Price | Level |
| Jun 2023 | 687C | 90 | $465,000 | 04 to 06 |
| Jun 2023 | 688B | 91 | $485,000 | 19 to 21 |
| Apr 2023 | 688A | 90 | $450,000 | 10 to 12 |
| Apr 2023 | 688B | 90 | $450,000 | 10 to 12 |
| Mar 2023 | 687B | 90 | $460,000 | 04 to 06 |
For our calculation, we will use the average transacted price of $462,000.
| Description | Amount |
| Selling price | $462,000 |
| CPF to be refunded into OA | $238,000 |
| Cash proceeds | $224,000 |
From what you have described to us, it seems that your intention is to ultimately still hold two properties if possible. So we will calculate your individual affordability assuming it’s the first property count.
Singapore citizen, 50 years old (Spouse A)
| Description | Amount |
| Maximum loan based on the age of 50, a monthly fixed income of $13K and 4.6% interest | $928,434 (15 year tenure) |
| CPF funds (not including CPF to be refunded from sale of existing properties and assuming an even split of the combined CPF funds of $500K) | $250,000 |
| Cash (not including cash proceeds from sale of existing properties and an even split of the $300K cash savings) | $150,000 |
| Total loan + CPF + cash | $1,328,434 |
| BSD based on $1,328,434 | $37,737 |
| Estimated affordability | $1,290,697 |
SPR, 49 years old (Spouse B)
| Description | Amount |
| Maximum loan based on age of 49, monthly fixed income of $13K and 4.6% interest | $970,471 (16 year tenure) |
| CPF funds (not including CPF to be refunded from sale of existing properties and assuming an even split of the combined CPF funds of $500K) | $250,000 |
| Cash (not including cash proceeds from sale of existing properties and an even split of the $300K cash savings) | $150,000 |
| Total loan + CPF + cash | $1,370,471 |
Even though your loan, CPF and cash add up to $1,370,471 (but due to the BSD and ABSD payable) your downpayment amount will be reduced, which lowers your overall affordability. If we were to work backwards, your maximum affordability is $1,181,428, with a BSD of $31,857 and an ABSD of $59,071.
Depending on which property you sell or decouple, your affordability will naturally adjust accordingly.
Now, let’s take a look at how your existing properties are performing.
Performance of existing properties
1-Bedder in D11
| Year | 1BR In D11 | YoY | Property Price Index (PPI) of residential properties | YoY |
| 2012 | $1,396 | – | 151.5 | – |
| 2013 | $1,504 | 7.74% | 153.2 | 1.1% |
| 2014 | $1,548 | 2.93% | 147.0 | -4% |
| 2015 | $1,387 | -10.40% | 141.6 | -3.7% |
| 2016 | $1,368 | -1.37% | 137.2 | -3.1% |
| 2017 | $1,352 | -1.17% | 138.7 | 1.1% |
| 2018 | $1,537 | 13.68% | 149.6 | 7.9% |
| 2019 | $1,510 | -1.76% | 153.6 | 2.7% |
| 2020 | $1,603 | 6.16% | 157.0 | 2.2% |
| 2021 | $1,532 | -4.43% | 173.6 | 10.6% |
| 2022 | $1,711 | 11.68% | 188.6 | 8.6% |
| Annualised | – | 2.06% | – | 2.21% |
Looking at the annualised and year-on-year growth rates over the past decade, we can observe that your 1-bedder’s prices are closely aligned with the overall private property market.
The fact that it has a freehold tenure does help to alleviate concerns about lease decay, so you can look to hold it for a longer term. Additionally, the development’s proximity to two reputable primary schools may contribute to its sustained demand. However, being a 1-bedroom unit may limit its appeal to families with children. Nonetheless, the project enjoys a central location and is within walking distance of the MRT station, making it attractive to investors or individuals/couples looking for a convenient living situation.
In Q2 2023, the average rent for 1-bedroom units in there was $3,188. With a price of $1,160,000, the rental yield is approximately 3.3%, which is fairly decent but not fantastic given the current rental market conditions.
4-Room Flat In Choa Chu Kang
| Year | 4-Room Flat In CCK | YoY | HDB Resale Price Index (RPI) – Q1 of each year | YoY |
| 2012 | $413 | – | 138.5 | – |
| 2013 | $422 | 2.18% | 148.6 | 7.29% |
| 2014 | $379 | -10.19% | 143.5 | -3.43% |
| 2015 | $350 | -7.65% | 135.6 | -5.51% |
| 2016 | $335 | -4.29% | 134.7 | -0.66% |
| 2017 | $320 | -4.48% | 133.9 | -0.59% |
| 2018 | $323 | 0.94% | 131.6 | -1.72% |
| 2019 | $307 | -4.95% | 131 | -0.46% |
| 2020 | $330 | 7.49% | 131.5 | 0.38% |
| 2021 | $368 | 11.52% | 142.2 | 8.14% |
| 2022 | $421 | 14.40% | 159.5 | 12.17% |
| Annualised | – | 0.19% | – | 1.42% |
We can see from the table that the annualised growth rate for your 4-room flat over the last ten years is much lower compared to the overall HDB resale market.
Following the introduction of three rounds of cooling measures in 2013 and the change in HDB’s valuation procedure, which shifted property valuation to occur after the issuance of the Option to Purchase (OTP), there has been a gradual decrease in HDB prices. Having said that, during the years preceding the pandemic, prices at your specific block witnessed a more significant decline in comparison to the rest of the market.
Considering that prices for the block have now reached nearly the same level as they were in 2013 before the decline began, it could be an opportune moment to contemplate selling while the market conditions are favourable.
Now that we have a better understanding of how your existing properties are performing, let’s consider the possible pathways you can take.
Potential Pathways
1. Sell HDB, decouple your 1BR and purchase a 3-bedroom unit under one name
Let’s say Spouse B were to buy over the shares for the 1BR condo and assume a selling price of $1,160,000.
Decoupling calculation
| Seller (Spouse A, Citizen) | Buyer (Spouse B, PR) | |
| Shares | 50% | 50% |
| Valuation | $580,000 | $580,000 |
| CPF to be refunded (for seller) | $128,000 (Assuming even split of $256,000) | – |
| Current CPF OA balance (for purchase) | – | $250,000 (Assuming even split of $500,000) |
| Option + Exercise fee (5%) | $29,000 (Received) | $29,000 (Paid) |
| Completion fee (20%) | – | $116,000 |
| Legal fees | $3,000 | $3,000 |
| BSD | – | $12,000 |
| ABSD | – | $29,000 |
| New loan (for buyer) | – | $345,000 |
| Cash proceeds (for seller) | $449,000 | – |
| Cash needed (for buyer) | – | $29,000 (Option fee) |
Since Spouse B will not need to fully utilise all the $150,000 of cash, we will put $100,000 towards Spouse A’s property purchase.
Spouse A’s new affordability
| Description | Amount |
| Maximum loan based on age of 50, monthly fixed income of $13K and 4.6% interest | $928,434 (15 year tenure) |
| CPF funds ($250,000 + $128,000) | $378,000 |
| Cash ($150,000 + $100,000 + $449,000) | $699,000 |
| Total loan + CPF + cash | $2,005,434 |
| BSD based on $2,005,434 | $69,871 |
| Estimated affordability | $1,935,563 |
With a budget of $1.9M, your options for a 3-bedder in the central region are rather limited, even if you were to look at older developments. These are some younger projects that fall within your affordability:
| Project | Tenure | Completion year | District | Size (sq ft) | Asking price |
| Centro Residences | 99 years | 2014 | 20 | 926 | $1,679,000 |
| Queens Peak | 99 years | 2020 | 03 | 840 | $1,850,000 |
Bear in mind that the sizes here mean that these are a compact size for a 3-bedroom, which typically would do without a yard or utility area.
Seeing as your youngest child is presently 15 years old, we presume that you will reside in the next property for at least the duration until he/she moves out, let’s say approximately 10 years from now. We will analyse the expenses involved as well as the potential gains or losses that may arise during this 10-year holding period.
The outcome from holding onto your 1-bedroom condo:
| Description | Amount |
| BSD + ABSD (incurred when decoupling) | $41,000 |
| Interest expense (Assuming loan of $345K with a 16 year tenure at 4.6% interest) | $119,677 |
| Maintenance fees (Assuming $250/month) | $30,000 |
| Property tax | $52,510 |
| Rental income (Assuming rent of $3,188/month with no vacancy period) | $382,560 |
| Agency fees (Payable once every 2 years) | $17,215 |
| Total profits | $122,158 |
Let’s assume you were to purchase a unit at Queens Peak. To date, there have been three 3-bedder transactions made in the project this year with an average price of $1.8M. We will use this for the calculation.
Cost of holding Queens Peak:
| Description | Amount |
| Purchase price | $1,800,000 |
| CPF funds + cash | $1,077,000 |
| BSD | $59,600 |
| Loan required | $782,600 |
| Description | Amount |
| BSD | $59,600 |
| Interest expense (Assuming loan of $782,600 with a 15 year tenure at 4.6% interest) | $263,122 |
| Maintenance fees (Assuming $350/month) | $42,000 |
| Property tax | $28,800 |
| Total costs | $393,522 |
Total costs incurred from holding both properties for 10 years: $393,522 – $122,158 = $271,364
We will use the annualised growth rate for private residential properties over the last 10 years of 2.21% to do a simple projection for the potential capital gains.
| Project | Property price in 10 years | Capital gains |
| 1BR In D11 | $1,443,417 | $283,417 |
| Queens Peak | $2,239,785 | $439,785 |
| Total profits | – | $723,202 |
After taking the costs incurred into consideration, the potential profits made over 10 years is $451,838.
Do note that these projections are rudimentary and intended solely as a general reference. They are dependent on market movements and will consequently vary. Additionally, depreciation has not been factored into these calculations.
2. Sell both properties and purchase another two separately
Given that a substantial amount of funds will be unlocked if you were to sell both properties, your options for the own stay unit may open up more. By selling both units, in addition to your current combined CPF funds of $500K and cash of $300K, you’ll have an additional $494K of CPF funds and $1,128,000 of cash.
Let’s run through the numbers again.
Spouse A’s affordability (Assuming he/she buys the own stay property, we will allocate more cash)
| Description | Amount |
| Maximum loan based on age of 50, monthly fixed income of $13K and 4.6% interest | $928,434 (15 year tenure) |
| CPF funds ($250,000 + $247,000) | $497,000 |
| Cash ($150,000 + $1,000,000) | $1,150,000 |
| Total loan + CPF + cash | $2,575,434 |
| BSD based on $2,575,434 | $98,371 |
| Estimated affordability | $2,477,063 |
Spouse B’s affordability
| Description | Amount |
| Maximum loan based on age of 49, monthly fixed income of $13K and 4.6% interest | $970,471 (16 year tenure) |
| CPF funds ($250,000 + $247,000) | $497,000 |
| Cash ($150,000 + $128,000) | $278,000 |
| Total loan + CPF + cash | $1,745,471 |
Although the sum of your loan, CPF, and cash reaches $1,745,471, the payable BSD and ABSD reduce your overall affordability by decreasing your downpayment amount. Working backwards, we find that your maximum affordability stands at $1,614,428. This includes a BSD of $50,321 and an ABSD of $80,721.
So with a budget of $2.4M, finding a freehold 3-bedder in the central region isn’t feasible, unless you are content with looking at boutique developments. As such, looking at younger leasehold 3-bedder units could be a more reasonable option. Here are some younger 3-bedroom units that fall within your affordability in the central region:
| Project | Tenure | Completion year | District | Size (sqft) | Price |
| Highline Residences | 99 years | 2018 | 03 | 904 | $2,150,000 |
| Stirling Residences | 99 years | 2022 | 03 | 1,055 | $2,380,000 |
| Avenue South Residence | 99 years | 2023 | 03 | 947 | $2,370,000 |
As for the investment property, here are some 2 bed 2 bath units under $1.6M with a decent rental yield at the moment:
| Project | Tenure | Completion year | District | Size (sqft) | Price | Avg 2 bedder rent (Apr-Jun) | Rental yield |
| The Clement Canopy | 99 years | 2019 | 05 | 732 | $1,380,000 | $4,223 | 3.7% |
| Margaret Ville | 99 years | 2021 | 03 | 700 | $1,600,000 | $5,088 | 3.8% |
| Parc Esta | 99 years | 2022 | 14 | 743 | $1,580,000 | $5,183 | 3.9% |
Similarly, let’s look at the cost incurred and potential profits or losses over a 10-year horizon.
Let’s assume that Spouse A purchases a unit at Stirling Residences for your own stay. To date, there were seven 3-bedroom units transacted in the development at an average price of $2,052,143. We will use this as the purchase price in our calculation.
Cost of holding Stirling Residences:
| Description | Amount |
| Purchase price | $2,052,143 |
| CPF funds + cash | $1,647,000 |
| BSD | $72,207 |
| Loan required | $477,350 |
| Description | Amount |
| BSD | $72,207 |
| Interest expense (Assuming loan of $477,350 with a 15 year tenure at 4.6% interest) | $160,492 |
| Maintenance fees (Assuming $350/month) | $42,000 |
| Property tax | $38,990 |
| Total costs | $313,689 |
As for Spouse B, let’s assume he/she purchases a unit at Parc Esta and rents it out for 10 years. To date, there have been 22 2-bedders transacted in the project at an average price of $1,464,682.
The outcome of holding Parc Esta for 10 years:
| Description | Amount |
| Purchase price | $1,464,682 |
| CPF funds + cash | $775,000 |
| BSD | $43,187 |
| ABSD | $73,234 |
| Loan required | $806,103 |
| Description | Amount |
| BSD + ABSD | $116,421 |
| Interest expense (Assuming loan of $806,103 with a 16 year tenure at 4.6% interest) | $279,630 |
| Maintenance fees (Assuming $250/month) | $30,000 |
| Property tax | $115,910 |
| Rental income (Assuming rent of $5,183/month with no vacancy period) | $621,960 |
| Agency fees (Payable once every 2 years) | $27,990 |
| Total profits | $52,009 |
Total costs incurred from holding both properties for 10 years: $313,689 – $52,009 = $261,680
As before, we will use the annualised growth rate for private residential properties over the last 10 years of 2.21% to do a simple projection for the potential capital gains.
| Project | Property price in 10 years | Capital gains |
| Stirling Residences | $2,553,533 | $501,390 |
| Parc Esta | $1,822,541 | $357,859 |
| Total profits | – | $859,249 |
After taking the costs incurred into consideration, the potential profits made over 10 years is $597,569.
While the total cost difference between the two options is around $10,000, opting to sell the existing properties and purchasing two separate properties can lead to significantly higher potential profits over a period of 10 years. This is mainly because more funds become available through the sale, allowing for investment in higher-valued properties.
Alternative pathway: Sell both properties and purchase a dual key unit
Combined affordability after selling both properties:
| Description | Amount |
| Maximum loan based on ages of 49 and 50, monthly fixed income of $26K and 4.6% interest | $1,856,868 (15 year tenure) |
| CPF funds | $994,000 |
| Cash | $1,428,000 |
| Total loan + CPF + cash | $4,278,868 |
| BSD based on $4,278,868 | $196,332 |
| Estimated affordability | $4,082,536 |
Another advantage of acquiring a dual key unit is that when the studio portion is rented out, it is not classified as renting out the entire unit. As a result, the property tax falls under the owner-occupied category, which incurs a lower tax rate compared to non-owner-occupied properties.
However, there are certain challenges associated with this option. Despite the significant increase in your budget, the market offers limited choices for 4-bedroom dual key units. Additionally, dual key units tend to cater to a more specific audience, such as families desiring to live together while maintaining separate private spaces or owners seeking rental income while preserving their privacy. Consequently, this may pose difficulties when attempting to resell the unit in the future. Another disadvantage is that in the event that the property becomes profitable and you wish to cash out, your living situation will be affected.
At the moment, there is just one 4-bedroom dual key unit in the central region that falls under $4M:
| Project | Tenure | Completion year | District | Size (sqft) | Price |
| Mon Jervois | 99 years | 2016 | 10 | 1,905 | $4,000,000 |
Let’s also look at the costs incurred and potential profits over a 10-year timeframe. There was a recent transaction for a unit of the same size in May, at $3.78M.
Cost of holding Mon Jervois:
| Description | Amount |
| Purchase price | $3,780,000 |
| CPF funds | $994,000 |
| Cash | $1,428,000 |
| BSD | $166,400 |
| Loan required | $1,524,400 |
| Description | Amount |
| BSD | $166,400 |
| Interest expense (Assuming a 15 year tenure at 4.6% interest) | $512,526 |
| Maintenance fees (Assuming $500/month) | $60,000 |
| Property tax | $162,680 |
| Rental income (Assuming rent of $2,000/month with no vacancy period) | $240,000 |
| Agency fees (Payable once every 2 years) | $10,800 |
| Total costs | $672,406 |
As before, we will use the annualised growth rate for private residential properties over the last 10 years of 2.21% to do a simple projection for the potential capital gains.
| Project | Property price in 10 years | Capital gains |
| Mon Jervois | $4,703,549 | $923,549 |
After taking the costs incurred into consideration, the potential profits made over 10 years is $251,143.
Comparing the 3 choices
Assuming a comparable growth rate, the second choice of selling the HDB and buying 2 separate units presents the highest potential profits. When considering the expenses incurred over a span of 10 years, the difference between the first and second choice amounts to approximately $10K, which in the grand scheme of things, is relatively minor. And as you’ve seen, the last option of buying a dual key unit will incur the highest cost.
Considering the less optimistic performance of the HDB unit, particularly given the still high current environment, it may be an advantageous time to sell and capitalise on a positive sale.
Your 1 bedroom condo, being in line with the overall market performance and being a freehold project, is better suited for a long-term hold. By decoupling from this property, Spouse B would incur lower ABSD compared to purchasing another property outright. However, it is important to note that this unit holds a substantial amount of cash proceeds, which could expand the range of options for your own residence. Without selling the condo, the choices for a 3-bedroom unit in the central region would be rather limited.
By selling both properties, a significant amount of cash would be unlocked, allowing for more flexibility in adjusting budgets for both properties. This pathway would provide more options for a preferred residence in the central region, while also enabling the acquisition of an investment property with a potentially better rental yield (at least at the present moment). Considering the minimal difference in costs incurred over 10 years between options 1 and 2, the latter choice appears more favourable.
While purchasing a dual key unit may appear viable, it is important to consider the drawbacks associated with this option. These include the limited availability of suitable units, potential challenges in the future when attempting to sell the property, the consolidation of your investment and personal residence, and the high cost of maintaining the property coupled with a low rental yield. Considering these factors, it may not be the most optimal choice.
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