We Make $16k Per Month And Wish To Own 2 Properties: Should We Sell Our HDB Now And Buy 2 Condos Or Just Pay The ABSD?

Hi Stacked Homes,

I'm an avid reader of stacked home article and subscriber of Stacked Youtube videos. I hope this email finds you well. =)

Appreciate some advice on a property related issue that we are currently facing. Our situation are as follows:

• My husband and I purchased our 1st property, a resale HDB in Sep 2020. We did not register as "owner-occupier" for this property so both our names are tied to this property.
• We are 37 (wife) and 36 (husband) years old currently
• Our resale HDB is 40 years old 4-room flat located at Serangoon Avenue 2. Purchased at SGD 459K. We hope to ideally and hopefully sell our current place at SGD 700k to offset the extensive renovation work that we put into the house as we bought from 1st owner, the house was in original condition from 37years ago so all the re-wiring, tiles etc has to be done.

The outstanding loan as of now is SGD 210,374. We are paying the loan SGD 830 X 2 (husband and wife) per month.

CPF plus accrued interest used on the property?

Husband: SGD 11,703 wife: SGD 8,996.18 

Current OA

• CPF: SGD 52,268 (wife), SGD 38,883K (husband)
• Cash: 250K (total)
• Income: SGD 9K (wife), SGD 7K (husband)

We are both equity heavy at the moment and are looking into diversifying our investments into 2nd property. I would like to seek some advice when our property MOP in Sep 2025, we are thinking about these 3 options:

A. Sell our resale HDB, and purchase another resale HDB (5-room or 4-room premium apartment). 

Then wait another 5 years to purchase the next condo for investment. There's also concern that tenure will be shortened when we purchase the 2nd property if using this option.

B. Sell our resale HDB, and purchase 2 condos (ideally 3 bedroom for living and another condo for investment).

C. Pay ABSD, then purchase a 2nd condo

Thanks a lot for your time on this. Appreciate your advice.

---

Hi,

Thank you for writing in and for the support thus far. 

This is a typical scenario that many HDB owners find themselves in, and, understandably, there’s a lot to think about before making the next step. 

But before delving into the options you are considering, let's first assess your affordability.

Selling

Recent 4-room HDB transactions along Serangoon Avenue 2:

Date	Block	Level	Size (sqm) & Type	Completion year	Price
Feb 2024	238	10 to 12	84.00Simplified	1985	$658,800
Jan 2024	309	07 to 09	93.00New Generation	1985	$599,000
Jan 2024	315	07 to 09	103.00New Generation	1985	$690,000
Dec 2023	309	01 to 03	95.00New Generation	1985	$579,000
Dec 2023	315	07 to 09	93.00New Generation	1985	$620,000

Since your current block is unspecified, I will take the average price of these transactions as the selling price.

Description	Amount
Sale price	$629,360
Outstanding loan	$210,374
CPF used plus accrued interest	$20,699
Sales proceeds	$398,287

Obviously, your affordability hinges on the pathway you select. I will delve into this further as we explore the options you're contemplating.

Buying

Option A. Sell your current HDB and purchase another HDB under the owner-occupier arrangement, occupier to purchase the second property after MOP

Let's begin by examining your financial capacity.

Considering your higher income and eligibility for a larger loan amount, I will assume here that you will be listed as the occupier and proceed with acquiring the second property after the Minimum Occupation Period (MOP).

Husband’s affordability (Buying HDB)

Description	Amount
Maximum loan based on the age of 37 with a monthly income of $7K at 4.8% interest*	$366,494 (25-year tenure)
CPF funds	$50,586
Cash*	$250,000
Total loan + CPF + cash	$667,080
BSD based on $667,080	$14,612
Estimated affordability	$652,468

*Word on the ground is that the banks have revised their stress test interest rate to 4.8%

*I have allocated all your cash savings here

Wife’s affordability in 2030 (Buying a private property)

Description	Amount
Maximum loan based on the age of 42 with a monthly income of $9K at 4.8% interest	$826,312 (23-year tenure)
CPF funds	$61,264
Cash*	$398,287
Total loan + CPF + cash	$1,285,863
BSD based on $1,285,863	$36,034
Estimated affordability	$1,249,829

*I have allocated all the cash proceeds from your existing property here.

Do note that the Mortgage Servicing Ratio (MSR) of 30% applies to the husband when buying an HDB, unlike the Total Debt To Servicing Ratio (TDSR) of 55% which explains the large difference in maximum loan. 

Another thing to note is that since you will only be purchasing the second property in 6 years, it is likely that you will have a larger amount of CPF funds and possibly cash savings so your affordability may be higher. That being said, property prices may also go up, so this affordability is difficult to assess now.

HDB median resale prices for Q4 2023:

Towns	4-Room	5-Room
Ang Mo Kio	$594,000	$788,000
Bedok	$530,000	$695,000
Bishan	$707,000	$918,000
Bukit Batok	$593,000	$767,500
Bukit Merah	$856,000	$959,000
Bukit Panjang	$503,000	$620,000
Bukit Timah	*	*
Central	*	*
Choa Chu Kang	$508,000	$603,000
Clementi	$561,000	*
Geylang	$615,000	*
Hougang	$560,000	$655,000
Jurong East	$497,500	$628,000
Jurong West	$490,000	$588,000
Kallang/Whampoa	$830,000	$880,400
Marine Parade	*	*
Pasir Ris	$555,000	$663,000
Punggol	$605,000	$670,000
Queenstown	$928,000	*
Sembawang	$551,000	$602,900
Sengkang	$575,000	$610,000
Serangoon	$600,000	*
Tampines	$579,000	$685,000
Toa Payoh	$750,000	$881,900
Woodlands	$515,000	$598,500
Yishun	$520,000	$660,000

Both of your individual affordability in this scenario is pretty healthy, offering you several options for both your primary residence and investment property (at present). However, since the purchase of the second property is planned for 6 years from now, it's uncertain what options will be available within the $1.2M budget at that time.

Let's examine the expenses involved if you choose this approach. I will assume a holding period of 10 years (10 years for the HDB, 5 years for the private property).

HDB

Description	Amount
Purchase price	$650,000
BSD	$14,100
CPF + cash	$300,586
Loan required	$363,514

Cost incurred

Description	Amount
BSD	$14,100
Interest expense (Assuming 4% interest with 25-year tenure)	$126,139
Town council service & conservancy fees (Assuming $85/month)	$10,200
Property tax	$4,600
Total costs	$155,039

Private property

Description	Amount
Purchase price	$1,200,000
BSD	$32,600
CPF + cash	$459,551
Loan required	$773,049

Cost incurred

I will assume a rental yield of 3% for calculation purposes.

Description	Amount
BSD	$36,600
Interest expense (Assuming 4% interest with 25-year tenure)	$143,828
Maintenance fees (Assuming $250/month)	$15,000
Property tax	$24,000
Rental income	$180,000
Agency fee (Payable once every 2 years)	$9,720
Total costs	$49,148

Total cost if you were to take this pathway: $155,039 + $49,148 = $204,187

Option B. Sell current HDB and purchase 2 private properties

As before, I will start by looking at your affordability.

Husband’s affordability (Buying a private property)

Description	Amount
Maximum loan based on the age of 37 with a monthly income of $7K at 4.8% interest	$710,806 (28-year tenure)
CPF funds	$50,586
Cash	$250,000
Total loan + CPF + cash	$1,011,392
BSD based on $1,011,392	$25,055
Estimated affordability	$986,337

It's essential to note that when purchasing a private resale property, the Buyer's Stamp Duty (BSD) must be paid in cash first, and you can subsequently apply for reimbursement from IRAS. This is because the BSD must be settled within 14 days of exercising the Option To Purchase (OTP), and there isn't sufficient time to withdraw the funds from your CPF account.

Wife’s affordability

Description	Amount
Maximum loan based on the age of 38 with a monthly income of $9K at 4.8% interest	$898,014 (27-year tenure)
CPF funds	$61,264
Cash	$398,287
Total loan + CPF + cash	$1,357,565
BSD based on $1,357,565	$38,902
Estimated affordability	$1,318,663

Now let’s look at what are some available units on the market that match your affordability and requirements.

With a $980K budget (investment property)

Project	District	Tenure	Completion year	Unit type	Asking price	Avg 2b rent (Sep - Nov 2023)	Rental yield
High Park Residences	28	99 years	2019	2b1b	$950,000	$3,300	4.2%
Sol Acres	23	99 years	2019	2b1b	$928,000	$3,725	4.8%
Kingsford Waterbay	19	99 years	2018	2b1b	$899,000	$3,433	4.6%

With a $1.3M budget (own stay)

Project	District	Tenure	Completion year	Unit type	Asking price
High Park Residences	28	99 years	2019	3b2b	$1,300,000
Parc Life	27	99 years	2018	3b2b	$1,270,000
Kingsford Waterbay	19	99 years	2018	3b2b	$1,299,000

I’m not sure if you are familiar with these projects, but what’s great about these projects is that they’re mass-market developments with an array of facilities shared among many residents. As such, they’re suitable for families and your maintenance cost would be lower compared to boutique developments. However, it’s important to visit a couple of properties and consider their location, facilities and layout since this is an own-stay project and very subjective in terms of what’s suitable or not.

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That said, while it is feasible to find a young 3-bedroom unit for $1.3M, these options are relatively limited and typically located in the outskirts.

Now, let's examine the expenses associated with pursuing this path. I'll maintain the same 10-year holding period.

Let’s suppose your husband purchases a unit at Sol Acres for investment.

These are some of the recent 2b1b transactions:

Date	Size (sqft)	PSF	Price	Address
Jan 2024	614	$1,499	$920,000	14 Choa Chu Kang Grove #13
Oct 2023	614	$1,516	$930,000	14 Choa Chu Kang Grove #25
Aug 2023	614	$1,508	$925,000	14 Choa Chu Kang Grove #22

For calculation purposes, I willl employ the average transacted price of $925,000 as the purchase price, along with an average rent of $3,725.

Description	Amount
Purchase price	$925,000
BSD	$22,350
CPF + cash	$300,586
Loan required	$646,764

Description	Amount
BSD	$22,350
Interest expense (Assuming 4% interest with 28-year tenure)	$230,176
Maintenance fees (Assuming $250/month)	$30,000
Property tax	$65,400
Rental income	$447,000
Agency fee (Payable once every 2 years)	$20,115
Total gains	$78,959

For your own stay, let’s say you were to buy a unit at High Park Residences. 

These are some of the recent 3-bedroom transactions:

Date	Size (sqft)	PSF	Price	Address
Oct 2023	872	$1,454	$1,268,000	31 Fernvale Road #10
Sep 2023	872	$1,457	$1,270,000	29 Fernvale Road #12

For calculation purposes, I will use the average transacted price of $1,269,000 as the purchase price. 

Description	Amount
Purchase price	$1,269,000
BSD	$35,360
CPF + cash	$465,198
Loan required	$839,163

Description	Amount
BSD	$35,360
Interest expense (Assuming 4% interest with 27-year tenure)	$296,363
Maintenance fees (Assuming $350/month)	$42,000
Property tax	$13,640
Total costs	$387,363

Total cost if you were to take this pathway: $387,363 - $78,959 = $308,404

Option C. Pay ABSD and purchase a second property

It's important to note that when purchasing a second property the Loan To Value (LTV) ratio for your second loan will be reduced to 45% if you have an existing mortgage loan. And of the remaining 55%, 25% will need to be paid in cash.

Similarly, let's first assess your affordability. 

With $250,000 in cash on hand, which will cover the 25% cash down payment, your budget could potentially go up to $1 million. However, taking into account the substantial amount required for Additional Buyer's Stamp Duty (ABSD), let's adjust the budget to $800,000.

These are some of the younger available units on the market that fall within this price range:

Project	District	Tenure	Completion year	Unit type	Asking price	Avg 1b rent (Sep - Nov 2023)	Rental yield
High Park Residences	28	99 years	2019	1+S	$750,000	$2,644	4.2%
Sol Acres	23	99 years	2019	1b	$775,000	$3,079	4.8%
Kingsford Waterbay	19	99 years	2018	1b	$738,000	$2,783	4.5%

Again, I will assume you purchased a unit at Sol Acres. 

These are some of the recent 1-bedroom transactions:

Date	Size (sqft)	PSF	Price	Address
Nov 2023	495	$1,454	$720,000	6 Choa Chu Kang Grove #06
Oct 2023	495	$1,434	$710,000	6 Choa Chu Kang Grove #01
Oct 2023	495	$1,515	$750,000	6 Choa Chu Kang Grove #15

For calculation purposes, I'll utilise the average transacted price of $726,667 as the purchase price, along with an average rental rate of $3,079.

Description	Amount
Purchase price	$726,667
BSD	$16,400
ABSD	$145,333
CPF + cash	$621,000
Loan required	$267,400

Description	Amount
BSD	$16,400
ABSD	$145,333
Interest expense (Assuming 4% interest with 27-year tenure)	$94,436
Maintenance fees (Assuming $200/month)	$24,000
Property tax	$49,900
Rental income	$369,480
Agency fee (Payable once every 2 years)	$16,625
Total gains	$22,786

We will also consider the cost of holding the HDB.

Description	Amount
Interest expense (With an outstanding loan of $210,374 at 4% interest and assuming a 20-year tenure remaining)	$68,520
Town council service & conservancy fees (Assuming $85/month)	$10,200
Property tax	$4,350
Total costs	$83,070

Total cost if you were to take this pathway: $83,070 - $22,786 = $60,284

What should you do?

Let’s do a quick summary of the costs incurred for the 3 options.

Potential pathways	Costs incurred over 10 years	Properties
A. Sell current HDB and purchase another HDB under the owner occupier arrangement, occupier to purchase second property after MOP	$204,187	1 HDB, 1 private property
B. Sell the current HDB and purchase 2 private properties	$308,404	2 private properties
C. Pay ABSD and purchase a second property	$60,284	1 HDB, 1 private property

While all three options ultimately result in owning two properties, the type of property you hold could potentially impact your potential gains.

HDB

Year	RPI	% Change
2013-Q4	145.8	-
2014-Q4	137	-6.04%
2015-Q4	134.8	-1.61%
2016-Q4	134.6	-0.15%
2017-Q4	132.6	-1.49%
2018-Q4	131.4	-0.90%
2019-Q4	131.5	0.08%
2020-Q4	138.1	5.02%
2021-Q4	155.7	12.74%
2022-Q4	171.9	10.40%
2023-Q4	180.4	4.94%
Average	-	2.30%

Non-landed private property

Year	Index	% Change
2013-Q4	147.6	-
2014-Q4	142.5	-3.46%
2015-Q4	137.4	-3.58%
2016-Q4	133.8	-2.62%
2017-Q4	135.6	1.35%
2018-Q4	146.8	8.26%
2019-Q4	149.6	1.91%
2020-Q4	153.3	2.47%
2021-Q4	168.4	9.85%
2022-Q4	182.1	8.14%
2023-Q4	194.2	6.64%
Average	-	2.90%

The graph and data clearly show that prices of non-landed private properties have been increasing at a faster pace than HDBs since 2017. Therefore, in theory, retaining two private properties should offer better potential for capital appreciation compared to holding one HDB and one private property. 

As that much is obvious, the key factor really lies in selecting the right developments.

If we were to consider the average growth rates:

Potential pathways	Costs incurred over 10 years	Property value	Potential gains	Potential gains minus costs
A. Sell current HDB and purchase another HDB under the owner occupier arrangement, occupier to purchase second property after MOP	$204,187	HDB - $650,000PTE - $1,200,000	$350,350	$146,163
B. Sell the current HDB and purchase 2 private properties	$308,404	PTE 1 - $925,000PTE 2 - $1,269,000	$726,051	$417,647
C. Pay ABSD and purchase a second property	$60,284	HDB - $629,360PTE - $726,667	$401,164	$340,880

Given the higher growth rate of private properties, Option B would yield the highest profits.

Although Option C generates a higher profit than Option A due to the longer holding period for the private property and a lower loan quantum reducing the interest expense, it is not an optimal choice for several reasons.

Firstly, your existing HDB is already 40 years old, raising concerns about lease decay if held for an extended period. With the current HDB market at a peak, it might be opportune to divest and restructure your portfolio.

Additionally, one advantage of property investment lies in leveraging the loan. However, with an existing mortgage loan, the LTV is significantly reduced, limiting this leverage. Lastly, as the property must be purchased jointly, a hefty ABSD is payable. Assuming an ABSD of $145,333 and a monthly rent of $3,079, it would take around 4 years to recoup just the ABSD, which is a considerable time frame. This does not include vacancy risk either. Therefore, Option C would be my least preferred choice. 

Option A provides the opportunity to restructure your portfolio and potentially obtain a newer HDB flat with appreciation potential or better value retention. However, this comes at the expense of taking advantage of opportunities during the 5-year MOP. Nonetheless, this option offers a comfortable living space, potentially in a location of your choice, while maintaining an investment property and incurring lower costs compared to Option B.

Among the three options, Option B stands out as the most favourable on paper. With meticulously chosen properties, it presents a better potential for appreciation. While the costs are higher, primarily due to residing in one of the properties, the appreciation potential outweighs those of an HDB. The biggest drawback to this is the location though, as your own-stay project is limited to a budget of $1.3 million.