We Own 2 Condos In D10 And Make $400k Per Year: For Primary School Reasons, Should We Sell One To Move Or Just Rent?
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Stacked
- March 18, 2023
- 9 min read
9 min read
Dear Stacked Homes
I have a daughter who will enter primary school in six years, and my wife is an alumni of MGS. However with the recent changes, it is no longer a sure bet that we will get a place for her, and friends recommend moving within 1 km of the school. Our question is: Is it better to spend 1.5mil or so on a small two bed/one bed condo or to rent? Our aims are to get her into the school, but also to see which makes better economical sense.
It may be premature to consider options now, but some condos are only being built so we need your help early on. Renting can cost about 3-4,000 a month now in the condos close by, and we may need to rent for 2 years or more. Condos like “The Reserve” Or “The Linq” are only ready in a few years, or we can opt for an older condo.
Buying gives us the option of renting out the unit before and after we get into the school, so it can be a form of investment. However it means selling our existing investment condo which is being rented out for $4,200, and selling this unit can fetch us around 1.8 million. But there are transaction costs and fees to be paid.
The third alternative bandied is to use up our savings and buy a much smaller and older condo for around 1 million, and keep our existing condo, but pay the ABSD, which is quite considerable.
I hope that you can help us share which option can be the most viable, with the least financial burden.
We used to be DINKs until little baby came along
Each one of us has a unit and we bought Viz at Holland so it makes sense to keep only one I guess.
There’s about 400k income a year in total but I’m much older (50s) so I don’t want to stretch too as I can’t work that much longer
We will try not to touch CPF – there’s about 500k in the pot there.
I was thinking if we sell the smaller unit, it will fetch 1.8-1.9 million then get a 1.5 million unit near MGS
Use the rest for savings or investment
Then we stay in the larger remaining unit in Viz – we bought that at a high and we need the three bedrooms as my mum stays with us.
Thanks again for helping.
Hello there,
Thanks for reaching out!
That’s an interesting situation that you’re in, and one that we suppose that many parents would find themselves in given the priority of living within the 1 km proximity and also how it is now calculated.
Do bear in mind that if you intend to purchase a property with the aim of enrolling your child in a nearby primary school, you must reside in the property for a minimum of 30 months from the P1 registration date. For the purposes of this article, we will approximate this period as 3 years to simplify calculations/projections.
We will run through:
– Performance of Viz at Holland
– Performance of units under $1.5M within 1km of MGS
– The 3 pathways you’re considering
Let’s start by taking a look at how Viz at Holland is performing!
Viz at Holland
| Year | Viz at Holland | YoY |
| 2014 | $1,432 | – |
| 2015 | $1,434 | 0.14% |
| 2016 | $1,459 | 1.74% |
| 2017 | $1,447 | -0.82% |
| 2018 | $1,674 | 15.69% |
| 2019 | $1,435 | -14.28% |
| 2020 | $1,647 | 14.77% |
| 2021 | $1,658 | 0.67% |
| 2022 | $1,786 | 7.72% |
| Annualised | — | 2.80% |
We can see from the graph above that since 2014, prices have appreciated by 25% but if we were to look at the annualised growth rate, it’s at 2.8% yearly. To err on the side of caution, we will only look at the price trend since 2014 as that is after some of the major cooling measures were implemented in 2013.
As you are contemplating the sale of the smaller unit, which, based on recent transactions, appears to be a 2 bedder, let’s examine the growth rate of the 2 bedders (800-1,200 sq ft) in particular.
| Year | Viz at Holland (800-1,200 sq ft) | YoY | D10 Freehold/999 year non-landed (800-1,200 sq ft) | YoY | Overall SGP Freehold/999 year non-landed (800-1,200 sq ft) | YoY |
| 2014 | $1,506 | $1,901 | $1,456 | |||
| 2015 | $1,467 | -2.59% | $1,794 | -5.63% | $1,377 | -5.43% |
| 2016 | $1,552 | 5.79% | $1,784 | -0.56% | $1,366 | -0.80% |
| 2017 | $1,557 | 0.32% | $1,850 | 3.70% | $1,442 | 5.56% |
| 2018 | $1,714 | 10.08% | $1,803 | -2.54% | $1,508 | 4.58% |
| 2019 | $0 (no sale) | -100.00% | $2,006 | 11.26% | $1,657 | 9.88% |
| 2020 | $1,653 | – | $2,135 | 6.43% | $1,632 | -1.51% |
| 2021 | $1,643 | -0.60% | $2,240 | 4.92% | $1,749 | 7.17% |
| 2022 | $1,855 | 12.90% | $2,516 | 12.32% | $1,892 | 8.18% |
| Annualised | – | 2.64% | – | 2.07% | – | 1.87% |
From this table, it is evident that the annualised growth rate of a 2-bedroom unit in Viz at Holland is surpassing that of both freehold/999-year leasehold non-landed properties in District 10 and the entirety of Singapore.
Performance of units under $1.5M within 1 km of MGS
With a budget of $1.5M, the options available within 1 km of MGS are sadly, rather limited. You will most likely be looking at a 1 bedroom or 1 plus study unit.
Let’s take a look at how 1-bedroom units (<700 sq ft) are performing within 1KM of MGS:
| Year | 1KM Radius Of MGS (<=700 sqft) | YoY | Overall SGP resale 1-bedder (<700sqft) | YoY |
| 2014 | $1,589 | $1,641 | ||
| 2015 | $1,759 | 10.70% | $1,590 | -3.11% |
| 2016 | $1,647 | -6.37% | $1,721 | 8.24% |
| 2017 | $1,557 | -5.46% | $1,682 | -2.27% |
| 2018 | $1,566 | 0.58% | $1,575 | -6.36% |
| 2019 | $1,516 | -3.19% | $1,614 | 2.48% |
| 2020 | $1,608 | 6.07% | $1,468 | -9.05% |
| 2021 | $1,779 | 10.63% | $1,527 | 4.02% |
| 2022 | $2,001 | 12.48% | $1,619 | 6.02% |
| Annualised | 2.92% | 1.23% |
The performance over the past 3 years has catapulted 1-bedders within the 1 KM radius of MGS to a high of $2,001 psf. From 2014, this is an annualised return of 2.92% – more than double the annualised returns across Singapore for the same size criteria.
The numbers may not be reflective of the true value due to the lower transaction volume considering the condos within 1 KM are quite limited. However, it is a good sign when even small 1-bedroom units can perform well here considering the more popular units should be larger ones due to the family profiles in the area.
There’s also the upcoming Beauty World rejuvenation (which will enhance accessibility and convenience for residents) is likely to result in an upsurge in property values for developments in the vicinity.
Pathway 1: Selling your 2 bedder at Viz at Holland to buy a 1 bedder within 1 km of MGS
As you mentioned that your mother is staying with your family, we assume that she will remain in the 3-bedroom unit at Viz at Holland, and it will not be available for rent as it would obviously be impractical for the four of you to live in a 1 bedder.
Let’s do a projection assuming you were to purchase a $1.5M 1 bedder in District 21 today, taking a 75% loan with a 15-year tenure at 4.25% interest and hold it for 9 years (6 years until your daughter goes to primary school and an additional 3 years if you use the property address for the P1 registration):
| Period | Total Cost | Total Gains | Profit |
| Starting Costs | $44,600 | $0 | -$44,600 |
| Year 1 | $96,933 | $43,800 | -$53,133 |
| Year 2 | $146,891 | $88,879 | -$58,012 |
| Year 3 | $194,371 | $135,274 | -$59,097 |
| Year 4 | $239,266 | $183,024 | -$56,242 |
| Year 5 | $281,463 | $232,169 | -$49,294 |
| Year 6 | $320,846 | $282,748 | -$38,098 |
| Year 7 | $357,292 | $334,804 | -$22,488 |
| Year 8 | $390,675 | $388,380 | -$2,294 |
| Year 9 | $420,861 | $443,521 | $22,660 |
Costs include interest expenses, property tax, maintenance fees (which we have set at $300/month for this calculation), and the Buyer’s Stamp Duty of $44,600.
With a 2.92% growth rate, at the end of 9 years, you’ll make a gain of $22,660.
Pathway 2: Renting a place within 1 km of MGS
The average rent for a 2 or 3 bedroom unit within 1 km of MGS over the last 3 months:
| Project | Average 2 bedroom rent | Average 3 bedroom rent |
| The Sterling | $4,175 | $5,729 |
| Maplewoods | $4,125 | $5,979 |
| Casa Esperenza | $4,000 (Only 1 transaction in Dec 2022) | $6,100 |
| Floridian | $4,175 | $8,333 |
| The Cascadia | $4,969 | $6,163 |
| The Nexus | $5,000 | $5,956 |
| The Tessarina | $4,300 | $6,539 |
| The Blossomvale | $3,800 | $5,600 |
| Gardenvista | $4,600 | $4,725 |
| Jardin | $4,340 | $8,000 (Only 1 transaction in Feb 2023) |
| KAP Residences | $4,325 | $5,400 (Rented in Sep 2022, no other 3 bedders rented in the last 6 months) |
| Overall average | $4,346 | $6,229 |
Annualised rental growth in District 21 over the last 10 years:
| Year | D21 average PSF PM | YoY |
| 2012 | $2.80 | – |
| 2013 | $2.91 | 3.93% |
| 2014 | $2.80 | -3.78% |
| 2015 | $2.67 | -4.64% |
| 2016 | $2.55 | -4.49% |
| 2017 | $2.49 | -2.35% |
| 2018 | $2.48 | -0.40% |
| 2019 | $2.51 | 1.21% |
| 2020 | $2.53 | 0.80% |
| 2021 | $2.66 | 5.14% |
| 2022 | $3.26 | 22.56% |
| Annualised | – | 1.53% |
Since your daughter will only be attending primary school in 6 years time, here’s what the numbers would look like assuming you rent 5 years from now in 2028 and stay for 3 years:
| Year | Average 2 bedroom rent | 3 years rental | Average 3 bedroom rent | 3 years rental |
| 2023 | $4,346 | $156,456 | $6,229 | $224,244 |
| 2024 | $4,413 | $158,854 | $6,324 | $227,681 |
| 2025 | $4,480 | $161,289 | $6,421 | $231,171 |
| 2026 | $4,549 | $163,761 | $6,520 | $234,714 |
| 2027 | $4,619 | $166,271 | $6,620 | $238,311 |
| 2028 | $4,689 | $168,819 | $6,721 | $241,964 |
We will also assume that in the 3 years you are renting, you’ll also be renting out both your units at Viz at Holland.
Viz at Holland average rent over the last 3 months:
| Project | Average 2 bedroom rent | Average 3 bedroom rent |
| Viz at Holland | $4,644 | $5,825 |
Annualised rental growth in District 10 over the last 10 years:
| Year | D10 average PSF PM | YoY |
| 2012 | $4.08 | – |
| 2013 | $4.22 | 3.43% |
| 2014 | $4.08 | -3.32% |
| 2015 | $3.87 | -5.15% |
| 2016 | $3.54 | -8.53% |
| 2017 | $3.45 | -2.54% |
| 2018 | $3.44 | -0.29% |
| 2019 | $3.48 | 1.16% |
| 2020 | $3.50 | 0.57% |
| 2021 | $3.61 | 3.14% |
| 2022 | $4.40 | 21.88% |
| Annualised | – | 0.76% |
Rental income earned if you were to rent out both units at Viz at Holland in 2028 for 3 years:
| Year | Average 2 bedroom rent | 3 years rental income | Average 3 bedroom rent | 3 years rental income |
| 2023 | $4,644 | $167,184 | $5,825 | $209,700 |
| 2024 | $4,679 | $168,451 | $5,869 | $211,289 |
| 2025 | $4,715 | $169,728 | $5,914 | $212,891 |
| 2026 | $4,750 | $171,014 | $5,958 | $214,504 |
| 2027 | $4,786 | $172,310 | $6,004 | $216,130 |
| 2028 | $4,823 | $173,616 | $6,049 | $217,768 |
If you were to rent a 2 bedroom unit in D21:
Total rental income: $391,385
Total rental costs: $168,819
Total gains: $222,566
If you were to rent a 3 bedroom unit in D21:
Total rental income: $391,385
Total rental costs: $241,964
Total gains: $149,421
Do note that we have not taken property tax, MCST charges, agency fees, and interest expenses (if any) into consideration. This is also provided there is no period where the properties are left vacant.
Pathway 3: Buy a third property within 1 km of MGS and pay ABSD
At the moment, the only option for a unit within 1 km of MGS under $1M is a studio apartment at KAP Residences. As you’ve mentioned that you’ll have to exhaust all your savings, we are assuming you will be paying for this property in full. Let’s say you were to buy this property today and hold it for 9 years:
| Period | Total Cost | Total Gains | Profit |
| Starting Costs | $194,600 | $0 | -$194,600 |
| Year 1 | $199,404 | $29,200 | -$170,204 |
| Year 2 | $204,208 | $59,253 | -$144,955 |
| Year 3 | $209,012 | $90,183 | -$118,829 |
| Year 4 | $213,816 | $122,016 | -$91,800 |
| Year 5 | $218,620 | $154,779 | -$63,841 |
| Year 6 | $223,424 | $188,499 | -$34,925 |
| Year 7 | $228,228 | $223,203 | -$5,025 |
| Year 8 | $233,032 | $258,920 | $25,888 |
| Year 9 | $237,836 | $295,681 | $57,845 |
Costs include property tax, maintenance fees (which we have set at $300/month for this calculation), and the Stamp Duty of $194,600 ($24,600 BSD and $170,000 ABSD).
The Stamp Duty for this purchase is pretty hefty which makes up for most of the losses, taking you around 7-8 year to break even with an annualised return of 2.92%.
However, the breakeven can be achieved quicker by renting out the studio apartment. If you rent out the unit from now till 2028.
The average rent of a studio apartment at KAP Residences over the last 3 months is $2,950. Assuming you can collect this rental, here’s what your profit looks like with an annualised return of 2.92%:
| Period | Total Cost | Total Gains | Profit |
| Starting Costs | $197,786 | $0 | -$197,786 |
| Year 1 | $206,066 | $64,600 | -$141,466 |
| Year 2 | $217,532 | $130,053 | -$87,479 |
| Year 3 | $225,812 | $196,383 | -$29,429 |
| Year 4 | $237,278 | $263,616 | $26,338 |
| Year 5 | $245,558 | $331,779 | $86,221 |
| Year 6 | $257,024 | $400,899 | $143,875 |
| Year 7 | $265,304 | $471,003 | $205,699 |
| Year 8 | $276,770 | $542,120 | $265,350 |
In addition, you can continue to rent out your 2 bedder at Viz at Holland, which is currently renting at $4,200 per month, until 2028. That will amount to $252,000.
Then in 2028, perhaps you can consider moving your mum into the 2 bedder and rent out the 3 bedder instead.
If you were to rent it out in 2028 at $6,049 for 3 years, that will amount to $217,768.
At the end of 9 years:
| Description | Amount |
| Gains from KAP Residences (including rental) | +$265,350 |
| Rental income from 2 bedder at Viz at Holland (2023 – 2028) | +$252,000 |
| Rental income from 3 bedder at Viz at Holland (2028 – 2031) | +$217,768 |
| Total gains/losses | $735,118 |
Do note that we have not taken property tax, MCST charges and agency fees for the rental units, and interest expenses for the 2 units at Viz at Holland (if any), into consideration. This is also provided there is no period where the properties are left vacant.
So which is the best approach?
Before we identify one pathway that’s most favourable to your situation, we must add a strong disclaimer here.
Our models were based on relevant historical data and assumptions that may or may not hold true in the future. For example, an annualised gain of 2.92% for properties within 1 KM of MGS may not continue this way over the next 9 years. This is especially true given we are at a property market high now alongside an unfavourable interest rate environment for borrowers.
Moreover, most of the gains were made over the past 3 years, so projecting this into the future can be seen as far-fetched by some and we would advise you to consider your comfort level before taking a plunge.
On the other hand, you do have a lot of changes in the area to look forward to in the future. With the addition of more residential units at Holland Plain, to newer developments like The Reserve Residences, and the further plans to revamp the whole Turf City area, it is likely that there will be further upside to look forward to in and around the area.
That being said, here are our thoughts on the 3 different pathways we’ve looked at:
Pathway 1 – Sell the 2-bedroom at Viz at Holland and purchase a 1-bedroom within 1 KM of MGS
We’ve looked at the annualised returns for properties 700 sq ft or less within 1 KM of MGS. From here, we derived an annualised return of 2.92% which is quite good. However, this choice is still not very clear because the annualised return of 2-bedders at Viz at Holland stands at 2.62% – not too far off at all. It’s also outperforming other freehold/999-year leasehold 2-bedroom properties in District 10 and the overall Singapore market. Considering its larger quantum, there could be better gains too.
Moreover, you’re likely able to stick to your existing financing plans which could be cheaper than the existing mortgage rate. Taking a new loan would mean signing a package reflective of today’s market conditions.
Pathway 2 – Leasing a property within 1 KM of MGS and keeping both existing property
Leasing a property for a period of 3 years will undoubtedly incur significant expenses, but with the advantage of having 2 properties available for rent at Viz at Holland, these costs can be offset. We’ve calculated an estimated gain of $222,566 (if you rent a 2-bedroom) and $149,241 (if you rent a 3-bedroom). With that, do note that it’s probably going to be lesser than this if you include vacancy costs, utilities, and agent fees (if any).
Also, do bear in mind that if there are still outstanding mortgage loans on both properties, the potential profits may be impacted by the prevailing interest rates.
Pathway 3 – Buy a third property with ABSD and keep your existing properties.
Acquiring a third property would result in substantial ABSD payment and would also entail utilising all your savings, which poses a considerable risk.
However, if the property market does grow according to the past 10 years historical rate, then there is a case for this pathway. Furthermore, you’ll be able to generate rental income up until you need to move in.
Based on our calculations, your net position at the end of 9 years is up $735,118 – the highest among all 3 pathways.
But this hinges on a caveat – and a huge one too. This pathway only works if the annualised returns continue on this trajectory.
In our opinion, banking on optimistic past annualised returns is far too risky. If it doesn’t work out, you could be left financially worse off – not something to be taken lightly as you approach your retirement.
Taking both the hard and soft approach to your situation into consideration, we believe pathway 2 may be the best course of action moving forward for the following reasons:
- You get to keep your property in D10 which performs generally well and is a safe asset to hold.
- You don’t have to incur taxes buying another property.
- It’s a relatively safe pathway to take as you won’t be relying on your new property’s growth – instead, you can rely on rental which is more sustainable.
- If your daughter doesn’t make it into MGS, then you’re not stuck with a property that’s lost its main purpose.
Also, leasing a property keeps things the most flexible for your situation and accounting for your age. You won’t be saddled with another loan to worry about, and should your situation change for any reason (have to move school, etc), it keeps things relatively straightforward for you to plan around.
Have a question to ask? Shoot us an email at hello@stackedhomes.com – and don’t worry, we will keep your details anonymous.
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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.
