We own 2 condos in D10 and make $400k per year: For primary school reasons, should we sell one to move or just rent?

Dear Stackedhomes,

I have a daughter who will enter primary school in six years, and my wife is an alumni of Methodist Girls' School (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 one kilometre of the school.

Our question is: Is it better to spend $1.5 million 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 $3,000 to $4,000 a month now in the condos close by, and we may need to rent for two 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 Additional Buyer's Stamp Duty (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 (dual income, no kids) 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 $400,000 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 $500,000 in the pot there. 

I was thinking if we sell the smaller unit, it will fetch $1.8 million to $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. 

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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 one kilometre 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 three years to simplify calculations/projections.

We will run through:

• Performance of Viz at Holland
• Performance of units under $1.5 million within one kilometre of MGS
• The three pathways you're considering

Let's start by taking a look at how Viz at Holland is performing!

Viz at Holland

We can see from the graph above that since 2014, prices have appreciated by 25 per cent but if we were to look at the annualised growth rate, it's at 2.8 per cent 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 two bedder, let's examine the growth rate of the two bedders (800 square feet to 1,200 square feet) 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 per cent	$1,794	-5.63 per cent	$1,377	-5.43 per cent
2016	$1,552	5.79 per cent	$1,784	-0.56 per cent	$1,366	-0.80 per cent
2017	$1,557	0.32 per cent	$1,850	3.70 per cent	$1,442	5.56 per cent
2018	$1,714	10.08 per cent	$1,803	-2.54 per cent	$1,508	4.58 per cent
2019	$0 (no sale)	-100.00 per cent	$2,006	11.26 per cent	$1,657	9.88 per cent
2020	$1,653	–	$2,135	6.43 per cent	$1,632	-1.51 per cent
2021	$1,643	-0.60 per cent	$2,240	4.92 per cent	$1,749	7.17 per cent
2022	$1,855	12.90 per cent	$2,516	12.32 per cent	$1,892	8.18 per cent
Annualised	–	2.64 per cent	–	2.07 per cent	–	1.87 per cent

From this table, it is evident that the annualised growth rate of a two-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 1km of MGS

With a budget of $1.5 million, the options available within one kilometre of MGS are sadly, rather limited. You will most likely be looking at a one bedroom or one plus study unit.

Let’s take a look at how one-bedroom units (<700 square feet) are performing within one kilometre 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 per cent	$1,590	-3.11 per cent
2016	$1,647	-6.37 per cent	$1,721	8.24 per cent
2017	$1,557	-5.46 per cent	$1,682	-2.27 per cent
2018	$1,566	0.58 per cent	$1,575	-6.36 per cent
2019	$1,516	-3.19 per cent	$1,614	2.48 per cent
2020	$1,608	6.07 per cent	$1,468	-9.05 per cent
2021	$1,779	10.63 per cent	$1,527	4.02 per cent
2022	$2,001	12.48 per cent	$1,619	6.02 per cent
Annualised	2.92 per cent		1.23 per cent

The performance over the past three years has catapulted one-bedders within the one kilometre radius of MGS to a high of $2,001 psf. From 2014, this is an annualised return of 2.92 per cent — 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 one kilometre are quite limited. However, it is a good sign when even small one-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 1km of MGS

As you mentioned that your mother is staying with your family, we assume that she will remain in the three-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 one bedder.

Let's do a projection assuming you were to purchase a $1.5 million one bedder in District 21 today, taking a 75 per cent loan with a 15-year tenure at 4.25 per cent interest and hold it for nine years (six years until your daughter goes to primary school and an additional six 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 per cent growth rate, at the end of nine years, you'll make a gain of $22,660.

Pathway 2: Renting a place within 1km of MGS

The average rent for a two or three bedroom unit within one kilometre of MGS over the last three 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 February 2023)
KAP Residences	$4,325	$5,400 (Rented in September 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 per cent
2014	$2.80	-3.78 per cent
2015	$2.67	-4.64 per cent
2016	$2.55	-4.49 per cent
2017	$2.49	-2.35 per cent
2018	$2.48	-0.40 per cent
2019	$2.51	1.21 per cent
2020	$2.53	0.80 per cent
2021	$2.66	5.14 per cent
2022	$3.26	22.56 per cent
Annualised	–	1.53 per cent

Since your daughter will only be attending primary school in six years time, here's what the numbers would look like assuming you rent five years from now in 2028 and stay for three 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 three 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 three 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 per cent
2014	$4.08	-3.32 per cent
2015	$3.87	-5.15 per cent
2016	$3.54	-8.53 per cent
2017	$3.45	-2.54 per cent
2018	$3.44	-0.29 per cent
2019	$3.48	1.16 per cent
2020	$3.50	0.57 per cent
2021	$3.61	3.14 per cent
2022	$4.40	21.88 per cent
Annualised	–	0.76 per cent

Rental income earned if you were to rent out both units at Viz at Holland in 2028 for three 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 two bedroom unit in D21:

Total rental income: $391,385

Total rental costs: $168,819

Total gains: $222,566

If you were to rent a three 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, Management Corporation Strata Title (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 1km of MGS and pay ABSD

At the moment, the only option for a unit within one kilometre of MGS under $1 million 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 nine 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

Note that non-owner occupied tax rates are applied here due to the rental income

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 Buyer's Stamp Duty and $170,000 ABSD).

The Stamp Duty for this purchase is pretty hefty which makes up for most of the losses, taking you around seven to eight year to break even with an annualised return of 2.92 per cent.

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 three months is $2,950. Assuming you can collect this rental, here's what your profit looks like with an annualised return of 2.92 per cent:

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 two 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 two bedder and rent out the three bedder instead.

If you were to rent it out in 2028 at $6,049 for three years, that will amount to $217,768.

At the end of nine 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 two 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.

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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 per cent for properties within one kilometre of MGS may not continue this way over the next nine 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 three 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 three different pathways we've looked at:

Pathway 1 – Sell the 2-bedroom at Viz at Holland and purchase a 1-bedroom within 1km of MGS

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We’ve looked at the annualised returns for properties 700 square feet or less within one kilometre of MGS. From here, we derived an annualised return of 2.92 per cent which is quite good.

However, this choice is still not very clear because the annualised return of two-bedders at Viz at Holland stands at 2.62 per cent — not too far off at all. It's also outperforming other freehold/999-year leasehold two-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 1km of MGS and keeping both existing property

Leasing a property for a period of three years will undoubtedly incur significant expenses, but with the advantage of having two 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 two-bedroom) and $149,241 (if you rent a three-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.

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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 nine years is up $735,118 — the highest among all three 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 two may be the best course of action moving forward for the following reasons:

1. You get to keep your property in D10 which performs generally well and is a safe asset to hold.
2. You don't have to incur taxes buying another property.
3. 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.
4. 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.

ALSO READ: 6 new launch condos with interesting selling points

This article was first published in Stackedhomes.