Upgrading from a HDB flat to a condo? The guide to end all guides

Congratulations! If you’re reading this article, you’re probably moving up and out from your starter home and upgrading to a condo, or thinking about doing so.

Reasons for upgrading to a condo

Better location: Upgrading might move you or your spouse closer to your workplaces, reducing the travelling distance and time.

Primary school: Suppose you're eyeing a specific primary school. Moving lets you choose properties within a 1km radius of your choice school for your child. 

Free from HDB’s rules: Some set HDB rules include having to wait out your Minimum Occupation Period (MOP). You’re also free to keep as many pets as you want, unlike HDB’s "one-approved-dog" per household rule. 

Also, the Ethnic Integration Policy (EIP) isn’t imposed on private properties. Should you choose to sell your condo in future, your pool of buyers won’t be limited to buyers of a specific race.

Condo amenities: Maybe you’re a gym buff who likes swimming laps or hitting the weights multiple times a day. With both the pool and the gym just a stone’s throw from your doorstep, you can do just that.

Condos are stepping up their amenity game, with some featuring swanky facilities such as karaoke rooms, a bowling alley and even an ice therapy room. 

Asset progression: If you’re upgrading to an executive condo (EC) with a freshly completed MOP of five years, you can find yourself in an immediately advantageous position. 

This is because the EC is already halfway to privatisation. In another five years, you’ll be able to sell it to foreigners or companies.

Being able to do so opens up a whole pool of prospective buyers, and with condo demand and prices rising over the years, you’re almost always guaranteed a profit. 

If you are in no rush to upgrade, you might also be considering new launch condos. Some new launches that might be suitable for HDB upgraders are:

• North Gaia (TOP: 2027)
• Parc Clematis (TOP: 2023)
• The Commodore (TOP: 2024)
• Urban Treasures (TOP: 2023)
• Pasir Ris 8 (TOP: 2026)
• Lentor Modern (TOP: 2026)

Here’s how you can upgrade from your HDB flat to a condo. 

You need to MOP before upgrading

The soonest you can upgrade is after completing your MOP, which is usually five years. Your MOP depends on the type of flat purchased.

During your MOP, you cannot do these four things:

• Sell your flat
• Buy another HDB flat
• Buy another private property
• Buy property abroad

To check your eligibility, you can go to My HDBPage and log in with your Singpass.

To buy or sell first?

Buy first, sell later: Pros

1. No need for temporary accommodation

Selling a HDB flat on the open market can take months and depends on a variance of factors.

• The current property market
• If your property requires renovation
• Proximity to educational institutes and amenities
• How far it is to the nearest MRT/LRT station
• If it’s on a high floor or low floor

You don’t need to worry about having a roof over your head if you’ve secured your condo prior to selling your HDB flat. 

Doing so saves you thousands of dollars on potential rental costs. Plus, if you decide to renovate your condo before moving in, you can continue living at your HDB while completing your renovations.

2. Deferred Payment Scheme (DPS) 

A big concern HDB upgraders have when taking the “buy first, sell later” approach is having to service the mortgage of two housing loans simultaneously until the condo receives TOP status. 

In reality, this isn’t a concern as many EC developers offer the Deferred Payment Scheme (DPS). Under this scheme, you only pay the initial 20 per cent downpayment of the property purchase price, with 5 per cent in cash and 15 per cent in either cash or CPF.

The rest of the 80 per cent is paid after two to three years. During these years, you’re free from having to make loan repayments, stamp duties and all other financial obligations (relating to the property, of course). 

Having a lower upfront cash outlay plus an extended deferment period will allow you to do these things:

• Move into your new house
• Pay off remaining home loans
• Get extra time to raise cash 

As for condos, only those that have received TOP status or the Certificate of Statutory Completion can be sold under DPS, so be sure to check with the developers before pulling the trigger. 

However, there’s a catch: The property’s price will also be higher by about 10 per cent, which is a fair trade-off for deferring your loan repayment.   

Cons

1. A lower LTV ratio

By buying a condo before selling off your HDB flat, it means you’ll be servicing two home loans at the same time.

Instead of the typical 75 per cent loan-to-value (LTV) ratio, you’ll be subject to an LTV ratio of 45 per cent for your second loan. It’s even lower at 25 per cent if the loan tenure exceeds 30 years, or if it goes beyond your 65th birthday.

Let’s say you’re buying a $2 million condo before selling your HDB flat. Assuming you’re taking a 30-year loan, and this is your second home loan, your LTV will be 45 per cent. This means your loan amount will be $900,000.

Your minimum cash downpayment also jumps 5 per cent to 25 per cent. This means you need to be prepared to expand a bigger cash downpayment when paying for your condo.

As the term loan-to-value suggests, how much you can borrow depends on the valuation of the unit, and not the purchase price.

This means that having a higher valuation will result in you being able to borrow more for your house. At the same time, it will also result in you paying higher stamp duties (since it depends on the higher amount of either the purchase price or valuation). Bear this in mind before actively looking for a higher valuation.

2. TSDR restrictions – You might not get your desired loan amount

Currently, the Total Debt Servicing Ratio (TDSR) threshold stands at 55 per cent. It applies to loans where the OTP of the property purchase was granted on or after Dec 16, 2021.. 

If your monthly income is $10,000, your outstanding debt repayments cannot be more than $5,500 per month.

TDSR considers your monthly loan repayment, plus all your outstanding financial obligations. These debts include car loans, student loans, credit card debts etc. 

This limits the total amount you can borrow, which in turn may affect the property you can afford.  

ALSO READ: I moved from a landed home to an HDB flat, and I wouldn't go back given the choice

3. Your MSR is limited (if you’re buying a new EC)

You might also be limited by the Mortgage Servicing Ratio (MSR), where you are allowed to only use up to 30 per cent of your monthly income to service your home loans. 

If your monthly income is $10,000, your maximum monthly home loan is capped at $3,000.

As if the TDSR cap wasn’t enough, the MSR might add another layer of difficulty when securing the loan amount required and impact your overall affordability if you’re purchasing a new EC. 

*MSR doesn’t apply to privatised ECs

If you’re unable to meet the MSR, you have a couple of options. You can make a bigger downpayment, increase the loan tenure, buy a resale EC or… simply make more money. 

Use 99.co’s affordability calculator to check the maximum loan you qualify for and the maximum property price you can afford based on the current loan limits, TDSR and MSR.

4. You need to pay ABSD

If you’re buying your condo before selling off your current HDB flat, you need to pay Additional Buyer’s Stamp Duty (ABSD) of 17 per cent when you purchase your second property (if you’re a Singaporean).

However, you can apply for ABSD remission and get your money back via the e-Stamping portal on IRAS’s website. The requirements are: 

• You need to be a married couple, and at least one spouse has to be a Singapore Citizen (SC)
• You must have bought the property jointly as a married couple 
• You must remain married at the time of application
• You must sell your first home within six months of buying your condo, or when your condo has received its TOP
• You must not have bought more properties since buying the second residential property 

ABSD is determined by the seller’s quoted price or property valuation, whichever is higher.

If the purchase price quoted by the seller is $2.3 million and the market value of the property is $2.2 million, the ABSD will be calculated based on $2.3 million.

Here are the current rates for ABSD.

Example: Buying a property valued at $2.3 million
ABSD payable: 17 per cent x $2.3 million = $391,000

ABSD must be paid within 14 days after signing the agreement (usually the Sale and Purchase Agreement), and the remission application must be made within six months after the sale of your HDB flat. 

To avoid ABSD altogether, you need to be legally contracted to sell your current HDB flat before signing the Option to Purchase for your new condo. 

5. Under pressure to sell quickly 

To receive ABSD remission, you need to sell your property within six months. This may throw a spanner in the works, especially if the property market is stagnant or, worse, on the downtrend. 

ABSD is non-deferrable and must be paid in full and on time. Failure to do so means incurring a penalty of four times the amount of unpaid duty under the Stamp Duties Act.

6. You have CPF restrictions

Your condo is considered your second property if you purchase it before selling off your HDB flat. This puts certain restrictions on using your CPF Ordinary Account (OA) to finance your condo.

If you’ve used your CPF for your first home and want to use the excess of your CPF OA for your second property, you’re required to set aside a Basic Retirement Sum (BRS).

Those below the age of 55 must set aside the BRS in their OA and Special Account (SA), while those above the age of 55 must set aside the BRS in their OA, SA and Retirement Account (RA).

There are two terms to familiarise yourself with: Valuation Limit and Withdrawal Limit. 

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Valuation Limit (VL): The market value of your property at the point of purchase or the purchase price of the property, whichever is lower.

If the market value of the second property is $2 million and the purchase price is $1.8 million, the VL will be $1.8 million. After setting aside the prevailing BRS, you can use your CPF OA savings to pay for your second home, up to the VL.  

Withdrawal Limit (WL): This is the maximum amount of CPF savings that can be used for your house. It’s capped at 120 per cent of the VL for the first property, and 100 per cent of VL for the second property. 

After tapping out your CPF WL, you’re no longer allowed to use your CPF to service your housing loan. The remaining loan will need to be financed with cash. 

You can use CPF’s Housing Usage Calculator to determine how much OA is available for your property purchase. 

Sell first, buy later: Pros

1. No ABSD

As stated above, you can avoid paying ABSD if you sign the option to purchase of your second property after selling your HDB flat.

This means having one less process of applying for ABSD remission in your upgrading journey.

2. No LTV cap

To prevent over-leveraging, your LTV ratio drops as you own more properties. As explained earlier, if you’re already servicing one housing loan, the bank can only give you a 45 per cent LTV ratio on your second, for loan tenures up to 30 years.

On the contrary, all this hassle can be avoided if you sell your HDB flat first before upgrading. So the amount of financing you can get will be up to 75 per cent of the property value.

3. More money for your next purchase

Upgrading is a hefty financial commitment that comes with a significant downpayment, especially if you’re taking a bank loan. Selling your HDB first frees up money to fund that downpayment so you can avoid tapping on your cash reserves or CPF.

Here’s why you shouldn’t use your CPF to pay for your house.

Cons

1. Finding alternative accommodation

Suppose you fail to secure your desired condo after selling your HDB flat. In that case, you’ll find yourself caught in the headache-inducing position of having to source interim accommodation for you and your family. 

You can always request an extension of up to three months from the buyers of your HDB flat. However, keep in mind that the buyers may not be agreeable to this as it might push back their moving or renovation plans. 

A generous friend or relative might offer their place for you to put up at while you search for your second home, but this means you’ll need to incur storage charges for your belongings and furniture. 

Think about it. You need to pay moving costs of your possessions to either your rental or storage unit, after which you need to pay to move it again to your condo. There’s always the risk of things getting damaged in the process of moving, not to mention the costs will start to stack up.  

ALSO READ: With recent property cooling measures, what can you upgrade to if you were to sell your existing property today?

2. Buyer’s Stamp Duty (BSD)

Regardless of which route you decide to take, you’ll need to pay Buyer’s Stamp Duty (BSD) to the Inland Revenue Authority of Singapore (IRAS). 

BSD is determined by your property’s purchase price or valuation, whichever is higher. If the purchase price stated in the Sale & Purchase Agreement is $2 million and the property’s market value is $1.8 million, the BSD will be calculated based on $2 million.

Here are the current BSD rates for properties bought on or after Feb 20, 2018.

Example: Calculating BSD for a $2 million condo 

The BSD must be paid within 14 days of signing the S&P agreement.

EC or condo?

When it comes to choosing between upgrading to an EC versus a condo, there are many pros and cons for each of them. Ultimately, it boils down to your preferences and financial standing.

New launch executive condos (EC) are considered subsidised public housing for the first ten years. The standard HDB rules still apply, such as selling your current HDB flat within six months of receiving the keys to your new EC. 

Executive condo

What are executive condos?

ECs are a public-private housing hybrid built and sold by private developers.

They come with all the bells and whistles of a private condo, but are subjected to some HDB restrictions when they’re first launched for sale.

They have the standard MOP period of five years, after which they can be sold on the resale market to Singaporeans and PRs.

This adds up to a total period of 10 years, after which they can be sold to anyone (including foreigners) on the open market.

Income ceiling

Your average gross monthly household income must not exceed $16,000 when buying an EC.

If it does, that’s a good problem to have, but it also means you’re priced out of new launch ECs and need to look to the EC resale market or condo market.

(Resale ECs aren’t subject to income ceiling.) 

ALSO READ: What an HDB second-timer must know before deciding to sell

More affordable

ECs, especially new launch ECs, are more affordable than condos at the outset due to the subsidies, making it a more attractive option for price appreciation.

Resale levy payable

Unless you’re buying a private condo, you’re subjected to a resale levy when you sell your subsidised HDB flat to buy an EC from a developer. 

According to HDB, the resale levy is put in place to maintain “a fair allocation of public housing subsidies between first-timers and second-timers by reducing the subsidy enjoyed for the second HDB flat or EC”. 

Here’s the resale levy amounts payable. 

First subsidised housing type	Resale levy amount
	Households	Singles Grant recipients
2-room/ 2-room Flexi flat	$15,000	$7,500
3-room flat	$30,000	$15,000
4-room flat	$40,000	$20,000
5-room flat	$45,000	$22,500
Executive flat	$50,000	$25,000
Executive Condo	$55,000	NA

Condo

What are condos?

Condos are built by private developers and aren’t subject to restrictions such as MOP and can be sold to anyone, including foreigners. 

No income ceiling

Private condos have no ceiling on income, so if your monthly household income is more than $16,000, you can buy condos without any problem.  

More options 

Location is important when choosing a place to live, and condos give you a wider range of projects to choose from.

Of course, the nearer to the Core Central Region (CCR), the higher the prices will be. Here’s the average price psf for condos in the Core Central Region, Rest of Central Region (RCR) and Outside of Central Region (OCR).

Various condos also come in different lease options of 99-year, 999-year or even freehold, unlike ECs, which have a 99-year lease. 

ABSD payable

Unlike an EC, there are upfront ABSD charges when upgrading to a condo, setting you back at least six figures. You can apply for ABSD remission later, but this means the added stress of selling your HDB flat within six months.

If you’re picking a condo as a potential investment piece, this article talks about the pros and cons of each property. We also cover the price gaps and trends between ECs and condos here.  

You can keep your HDB

As new launch ECs are subsidised housing, you have to dispose of your previous flat within six months of getting your keys to the EC. Whereas with condos (including resale ECs), you can have your cake and eat it too.

This means being able to lease out your HDB flat for rental income while living in your condo. 

Can you say monopoly? 

New launch or resale EC/condo?

Likewise, there are pros and cons to new launch versus resale units. Whether you want to buy your next home from the developer or the resale market should depend on your preferences and financial means.

New launch units

New amenities

Buying a new launch means enjoying spanking new facilities, such as the gym and the pool.

It doesn’t just end there – the fittings and fixtures in your unit are also untouched and in pristine condition, with a one-year warranty in the event any issues pop up. 

You get to bask in that new condo environment for many years before wear and tear sets in. 

Developer perks

Another upside of upgrading to a new launch condo directly at the condo showflat is getting access to perks, such as early-bird discounts and other incentives. Some incentives include developers absorbing the stamp duty payable. 

A wider choice of units is also available, such as picking from different stacks or floors versus choosing from whatever properties owners are listing on the open market.

Progressive Payments Scheme (PPS)

Only available to Buildings Under Construction (BUCs)*, the Progressive Payment Scheme (PPS) is great for buyers who don’t have a ton of upfront capital to spare. 

Under the PPS, buyers can space out their payment obligations over a longer period of multiple instalments as the condo isn’t constructed yet. Payments are only made when construction milestones are achieved, which makes it more manageable financially. 

*Until the condo receives its Temporary Occupation Permit (TOP), it’s referred to as a Building Under Construction (BUC).

Long waiting time

Construction of a condo can take anywhere from three to four years, during which they’re known as a BUC.

The wait is even longer for new launch ECs, as they can only be launched 15 months after the land acquisition, or after the completion of foundation works, whichever is earlier. 

With this in mind, it’s recommended to buy first and sell later for new launches to ensure you’ll have a place to live while you wait for your condo to be completed.

ALSO READ: 7 less obvious factors that can affect your property's selling price

Resale units

Shorter waiting time 

Perhaps the best thing about resale units is that once the transaction is completed, you can move in as soon as the renovation is completed.

This means if your renovation lasts for three months, and you’re only selling your flat later, you don’t have to find an interim accommodation in the meantime. This also saves you the hassle of moving (since you’re only going to move once).

Possible wear and tear

While new launch ECs and condos are brand new and come with a one-year defect liability period, resale units are older and thus exposed to wear and tear.

This means having issues such as water leakage, faulty air-con units, cracked tiles etc, that you need to factor into your renovation budget. 

The amenities and condo facade may also not be well maintained and look dated.  

Choosing between EC or condo, whether it’s a new launch or resale unit, pares down to you and your family’s personal housing needs and financial standing.

Hopefully, this article helps clear up any doubts you may have about the nitty-gritty details of upgrading.

ALSO READ: 7 useful questions to ask your property agent before you buy or sell your property

This article was first published in 99.co.