We own a 5-room HDB flat & a 2-bedder condo. With the 15-month rule, how can we move to an executive HDB flat?

Hello!

I hope to seek Stacked Homes advice as we are really in a dilemma especially after the change of ruling (15month after selling pte pty).

We are a family of three currently residing in a 5 room HDB flat in Serangoon North Area.

We are also holding to a 2 Bedder Condo in Yishun which is currently the 2nd year of holding and being tenanted out. Original plan was to earn some income from rental and sell it away in about 5 years time and upgrade.

Recently there’s been a change of plans since my parents have asked about moving in with us.

Total income for both myself and spouse: $20,000

Current CPF for both: $100,000

HDB no outstanding loan

Condo: O/S approx. $600k

Before the 15 months ruling, we intended to purchase a EA/EM (to have 4 bedrooms done up) after selling our HDB flat and the condo (after the SSD period). However with the 15 months ruling, we are really in a dilemma on what should be the plan.

Appreciate your advice.

Thank you.

Hi there,

For the sake of those who haven’t heard, the 15-month wait-out period was one of the unexpected cooling measures implemented in September last year. This was where individuals who own private residential properties must observe a mandatory 15-month wait-out period after selling their private properties before they become eligible to purchase a non-subsidised resale flat.

There was certainly an impact on the market, and at that time 1,284 private homeowners appealed to try to waive the 15-month wait-out period.

Do note that while the ruling is a temporary measure, there is currently no clear indication of when it will be lifted. As a result, those who intend to move from a private property to an HDB are encountering challenges due to the 15-month wait-out period, especially considering the high rental costs at present.

Let’s begin by assessing your affordability. Once we have a clear understanding of your financial capacity, we can explore the various options that are available to you.

Affordability

From the beginning of the year to date, 5-room HDBs in Serangoon North have transacted in the range of $615K – $725K. Since we don’t have information about the specific block you live in, we will consider the average selling price of $670K for calculation purposes.

Seeing as there is no outstanding loan for the HDB, we assume you will receive the entire selling price in the form of cash and CPF funds.

Here are a few recent transactions of 2-bedroom units in your condominium located in Yishun (the name of the condominium will remain undisclosed as per the enquirer’s request).

Considering that we do not have information about the size of your unit, we will use the average selling price of $989,400 for this calculation.

Selling price	$989,400
Outstanding loan	$600,000
Proceeds (cash and CPF)	$389,400

Affordability after selling both properties

Maximum loan (We are using the age of 45 with a fixed monthly income of $10K for both parties and a 4per cent interest)	$1,815,240 (20 year tenure)
Cash and CPF funds (Current OA + proceeds from both properties)	$1,159,400
Total loan + cash + CPF	$2,974,640
BSD based on $2,974,640	$118,332
Estimated affordability	$2,856,308

To err on the side of caution and adopt a conservative approach in calculating the loan, we are assuming an age in the mid-40s instead of a younger age. However, below are the estimated loan amounts for various age groups. This is also calculated based on a monthly combined income of $20K and a 4per cent interest.

Age	Estimated loan
34	$2,304,074 (30 year tenure)
36	$2,263,498 (29 year tenure)
38	$2,177,320 (27 year tenure)
40	$2,083,977 (25 year tenure)
42	$1,982,874 (23 year tenure)
44	$1,873,364 (21 year tenure)
46	$1,754,749 (19 year tenure)
48	$1,626,272 (17 year tenure)
50	$1,487,114 (15 year tenure)

Let’s also calculate your individual affordability in the event you decide to buy 2 separate properties.

Maximum loan (We are using the age of 45 with a fixed monthly income of $10K and a 4per cent interest)	$907,620 (20 year tenure)
Cash and CPF funds (Here we are assuming the $1,159,400 is split equally)	$579,700
Total loan + cash + CPF	$1,487,320
BSD based on $1,487,320	$44,092
Estimated affordability	$1,443,228

Now that we have a better understanding of your finances, let’s consider the possible pathways.

As mentioned at the beginning, while it is possible to submit an appeal to HDB for a waiver of this requirement, it’s important to note that these waivers are evaluated on a case-by-case basis (they will take into consideration individual circumstances and factors).

If you are unable to secure the waiver, what alternatives are available to you?

Option 1 – Sell both properties and buy another private property

To circumvent the 15-month wait-out period, one potential (and obvious) solution is to purchase another private property.

With your combined incomes, you have the financial capability to purchase a property valued at up to $2.8M. Assuming that your in-laws will be residing with you for the foreseeable future and your children are still of school-going age, it is likely that you will reside in this next property for a longer time.

As such, perhaps it’s good to look at a freehold property and downsize in the future when a larger space is no longer necessary. Freehold properties generally exhibit better value retention and appreciation potential over longer holding periods, as they are not subject to concerns related to lease decay. However, it may not necessarily be the case for all freehold properties so it is crucial to evaluate individual projects as their performances may vary.

These are some freehold/999-year leasehold 4-bedders on the market that fall under $2.8M:

Project	District	Completion year	Size (sqft)	Price
Euro-Asia Park	13	1996	1453	$2,650,000
Parc Palais	21	2000	1582	$2,780,000
Springdale	21	2000	1345	$2,125,000
Seletaris	27	2001	1884	$2,600,000
The Verandah Residences	05	2023	1249	$2,580,000

Do note that the selection of these developments is solely based on their characteristics of being freehold or having a 999-year leasehold, with 4 bedrooms, and falling within your affordability range. You will have to do a deeper analysis to find out whether there are more suitable options.

We will do a simple projection using a 15-year horizon.

Year	Freehold/999 year leasehold non-landed (resale)	YoY
2012	$1,289	7.78 per cent
2013	$1,427	10.71 per cent
2014	$1,366	-4.27 per cent
2015	$1,365	-0.07 per cent
2016	$1,396	2.27 per cent
2017	$1,466	5.01 per cent
2018	$1,543	5.25 per cent
2019	$1,575	2.07 per cent
2020	$1,504	-4.51 per cent
2021	$1,592	5.85 per cent
2022	$1,714	7.66 per cent
Annualised	–	2.89 per cent

Based on data from the last 10 years, resale prices of freehold/999-year leasehold non-landed properties appreciated at a rate of 2.89 per cent annually.

Let’s say you were to purchase the unit at Euro-Asia Park for $2.65 million, using all your cash and CPF funds of $1,057,300 (after deducting $102,100 for BSD) and taking up a loan of $1,592,700 for 20 years with a 4per cent interest.

Costs include interest expense, BSD, property tax and estimated MSCT fees of $450/month.

Period	Total Cost	Total Gains	Profit
Starting point	$102,100	$0	-$102,100
Year 1	$177,222	$76,585	-$100,637
Year 2	$250,182	$155,383	-$94,798
Year 3	$320,891	$236,459	-$84,432
Year 4	$389,258	$319,878	-$69,380
Year 5	$455,187	$405,707	-$49,480
Year 6	$518,579	$494,017	-$24,563
Year 7	$579,332	$584,879	$5,547
Year 8	$637,336	$678,367	$41,031
Year 9	$692,481	$774,557	$82,076
Year 10	$744,649	$873,527	$128,877
Year 11	$793,720	$975,356	$181,637
Year 12	$839,567	$1,080,129	$240,562
Year 13	$882,059	$1,187,930	$305,871
Year 14	$921,059	$1,298,846	$377,787
Year 15	$956,425	$1,412,968	$456,542

Upon reaching the 15-year mark, there is a possibility of generating a profit of $456,542. At this point, you could consider downsizing to a smaller unit or transitioning to an HDB flat, allowing you to liquidate the accrued profits for alternative investments or allocate them as retirement funds. Alternatively, you may wish to continue staying in the property and eventually pass this down to your children.

Option 2 – Sell both properties and buy another 2 properties separately

Here, we are assuming that both properties are jointly owned since you mentioned the need to adhere to the 15-month wait-out period. You also mentioned that the original plan for the private property was to generate some rental income and possibly capital gains in order to upgrade in a couple of years. By selling both your properties, you can unlock a substantial amount of cash and CPF funds.

Given your respective affordability, each of you will be able to purchase a property valued at up to $1.4 million (based on our assumptions). With this budget, you can consider purchasing a 4-bedroom resale EC to accommodate your family’s housing needs and another smaller property for investment.

If you are looking to stay in the longer term, we will look at newer properties to mitigate any lease concerns.

These are some newer 4-bedroom ECs (99-year leasehold) on the market that fall within $1.4 – $1.5 million:

Project	District	Completion year	Size (sqft)	Price
Parc Life	27	2018	1109	$1,399,000
Westwood Residences	22	2018	1238	$1,500,000
The Criterion	27	2018	1119	$1,500,000
Symphony Suites	27	2019	1023	$1,350,000

Since you may not require as much funds for purchasing the investment property, you can consider allocating a larger portion of cash towards your own stay property. By doing so, you can increase your budget which would expand your range of options and provide more flexibility in selecting a desirable property.

Assuming a budget of $1M for the investment property, these are some newer 2-bedders (99-year leasehold) on the market:

Project	District	Completion year	Unit type	Size (sqft)	Price
Kingsford Waterbay	19	2018	2b2b	678	$980,000
Sol Acres	23	2019	2b2b	732	$999,999
High Park Residences	28	2019	2b2b	678	$999,888
The Alps Residences	18	2019	2b2b	700	$960,000

We have specifically picked out 2-bedroom, 2-bathroom units due to their potential appeal to a larger pool of potential buyers compared to 1-bedders or 2-bedroom, 1-bathroom units. This is based on the understanding that 2b2b configurations tend to offer more versatility and accommodate the needs of various individuals or families.

The inclusion of an additional bathroom enhances convenience and functionality, making such units attractive to a wider range of prospective buyers.

Similar to previous recommendations, the choice of these developments is primarily driven by their relatively recent construction and alignment with your affordability range.

We will also do a 15-year projection for this.

Year	99 year leasehold non-landed (resale)	YoY
2012	$986	6.36 per cent
2013	$1,057	7.20 per cent
2014	$1,029	-2.65 per cent
2015	$1,033	0.39 per cent
2016	$1,130	9.39 per cent
2017	$1,115	-1.33 per cent
2018	$1,153	3.41 per cent
2019	$1,178	2.17 per cent
2020	$1,174	-0.34 per cent
2021	$1,207	2.81 per cent
2022	$1,337	10.77 per cent
Annualised	–	3.09 per cent

Based on data from the last 10 years, resale prices of 99-year leasehold non-landed properties appreciated at a rate of 3.09 per cent annually.

For your own stay property, let’s assume you were to purchase a unit at Symphony Suites for $1.35 million, using all your cash and CPF funds of $541,100 (after deducting $38,600 for BSD) and taking up a loan of $808,900 for 20 years with a 4 per cent interest.

Costs include interest expense, BSD, property tax and MSCT fees of $300/month.

Period	Total Cost	Total Gains	Profit
Starting point	$38,600	$0	-$38,600
Year 1	$75,595	$41,715	-$33,880
Year 2	$111,493	$84,719	-$26,774
Year 3	$146,247	$129,052	-$17,195
Year 4	$179,811	$174,755	-$5,057
Year 5	$212,138	$221,869	$9,731
Year 6	$243,176	$270,440	$27,264
Year 7	$272,873	$320,512	$47,638
Year 8	$301,175	$372,131	$70,955
Year 9	$328,024	$425,344	$97,320
Year 10	$353,362	$480,203	$126,840
Year 11	$377,127	$536,756	$159,629
Year 12	$399,254	$595,057	$195,803
Year 13	$419,677	$655,159	$235,482
Year 14	$438,327	$717,118	$278,791
Year 15	$455,131	$780,992	$325,861

For your investment property, let’s assume you were to purchase a unit at The Alps Residences for $960K, using all your cash and CPF funds of $556,300 (after deducting $23,400 for BSD) and taking up a loan of $403,700 for 20 years with a 4per cent interest. We will calculate the rental based on a 3per cent yield.

Costs include interest expense, BSD, property tax, MSCT fees of $250/month and agency fees payable every 2 years.

Period	Total Cost	Total Gains	Profit
Starting point	$25,992	$0	-$25,992
Year 1	$48,351	$58,464	$10,113
Year 2	$72,754	$117,845	$45,090
Year 3	$93,995	$178,170	$84,175
Year 4	$117,234	$239,470	$122,236
Year 5	$137,263	$301,774	$164,511
Year 6	$159,241	$365,113	$205,872
Year 7	$177,958	$429,519	$251,562
Year 8	$198,570	$495,026	$296,456
Year 9	$215,866	$561,667	$345,801
Year 10	$234,999	$629,477	$394,479
Year 11	$250,755	$698,493	$447,738
Year 12	$268,286	$768,751	$500,466
Year 13	$282,374	$840,291	$557,917
Year 14	$298,170	$913,151	$614,981
Year 15	$310,452	$987,372	$676,920

Since this is an investment property, you may not necessarily hold it for an extended duration due to the leasehold nature of the project. The above calculations are more for illustrative purposes.

Total potential profits after 15 years: $325,861 + $676,920 = $1,002,781

It is crucial to take into account potential depreciation, which has not been factored in. Considering that the 99-year lease for both developments commenced in 2014 and 2015 respectively, after 15 years, they will be 24 and 25 years old.

While this is not considered significantly old, it is essential to note that the future selling price will be influenced by various factors, including prevailing market conditions and the supply and demand dynamics in the area. Depending on these factors, the properties may or may not fetch a significantly higher price at that time.

Owning two separate properties provides several advantages. Firstly, it ensures that your living situation remains unaffected if your investment property yields a profit and you decide to cash out. This is in contrast to holding a single property that serves as both your residence and investment, where the decision to sell may disrupt your living arrangements.

Furthermore, having two properties allows you to distribute the risk. Your investment property can be dedicated to generating rental income, which can potentially cover part or all of its mortgage loan while you wait for property prices to appreciate. This rental income acts as a buffer, reducing the financial burden of owning a second property.

By diversifying your real estate portfolio through the ownership of two properties, you can effectively manage risk, maintain your living stability, and potentially benefit from the rental income while waiting for favourable market conditions and property price appreciation.

Option 3 – Sell the condo first and stay in the HDB during the 15-month wait-out period

If your mind is set on purchasing an EA/EM, one possible approach is to sell the condominium first and reside in your current HDB flat during the mandatory 15-month wait-out period.

Once the wait-out period is completed, you can proceed with the purchase of the EA/EM, with one of you as the owner and the other as the essential occupier. This arrangement allows the essential occupier to explore the possibility of acquiring another property once the Minimum Occupation Period (MOP) is fulfilled. With this strategy, you can still maintain ownership of two properties.

ALSO READ: Quick guide to BTO and resale HDB grants for singles

Choosing to purchase an HDB flat for own stay purposes can alleviate some financial burdens compared to buying a private property. However, it is important to note that most EA/EM flats are older in age as the construction of these unit types was phased out in the early 2000s. As such, holding onto an older HDB flat for a prolonged period may not offer the best investment potential. Nevertheless, it will undoubtedly provide the space required for a larger family.

As EA/EMs are no longer being built, they may still hold a certain level of demand, particularly from buyers like yourself who are seeking a more spacious home. However, it is still essential to consider the potential impact of lease decay, especially as the property continues to age.

Similarly, we will do a projection over a 15-year timeframe.

Year	Executive HDB	YoY
2012	$409	9.36 per cent
2013	$426	4.16 per cent
2014	$413	-3.05 per cent
2015	$401	-2.91 per cent
2016	$402	0.25 per cent
2017	$405	0.75 per cent
2018	$406	0.25 per cent
2019	$397	-2.22 per cent
2020	$403	1.51 per cent
2021	$453	12.41 per cent
2022	$499	10.15 per cent
Annualised	–	2.01 per cent

Based on data from the last 10 years, resale prices of HDB Executive units appreciated at a rate of 2.01 per cent annually. We can see from the table above that there is a notable price surge over the past two years, which can be attributed to an increased demand for larger homes during and following the pandemic.

This trend is likely influenced by the shift towards remote work, leading to a greater emphasis on spacious living environments that accommodate work-from-home arrangements.

When buying an HDB, the loan is calculated based on the Mortgage Servicing Ratio (MSR) instead of the Total Debt Serving Ration (TDSR). Under the MSR guidelines, your monthly mortgage payment must not exceed 30 per cent of your income. In comparison, the TDSR sets a limit where your total monthly debt obligations, including mortgages, should not exceed 60per cent of your income. This means the loan granted for an HDB will be reduced.

If you were to purchase the HDB using the 1 owner 1 essential occupier arrangement, your affordability will be as follows:

Maximum loan (We are using the age of 47 with a fixed monthly income of $10K and a 4per cent interest)	$461,398 (18 year tenure)
Cash and CPF funds (Here we are assuming the $1,159,400 is split equally)	$579,700
Total loan + cash + CPF	$1,041,098
BSD based on $1,041,098	$26,243
Estimated affordability	$1,014,855

We are using the age of 47 as you can only purchase the HDB after 15 months

With a budget of $1 million, you’ll have many EA/EM options to choose from. Let’s assume you purchase one at $1 million, using all your cash and CPF funds of $555,100 (after deducting $24,600 for BSD) and taking up a loan of $444,900 for 18 years at 4 per cent interest (since we do not know how many HDB loans you have taken prior to this, we will assume you take up a bank loan).

Costs include interest expense, BSD, property tax and town council service and conservancy fees of $100/month.

Period	Total Cost	Total Gains	Profit
Starting point	$24,600	$0	-$24,600
Year 1	$44,162	$20,100	-$24,062
Year 2	$63,023	$40,604	-$22,419
Year 3	$81,153	$61,520	-$19,632
Year 4	$98,522	$82,857	-$15,665
Year 5	$115,100	$104,622	-$10,478
Year 6	$130,855	$126,825	-$4,030
Year 7	$145,752	$149,474	$3,722
Year 8	$159,757	$172,579	$12,821
Year 9	$172,834	$196,147	$23,313
Year 10	$184,945	$220,190	$35,245
Year 11	$196,050	$244,716	$48,666
Year 12	$206,109	$269,735	$63,626
Year 13	$215,078	$295,256	$80,178

We are looking at the 13th year in order to account for the same time period as previous calculations because you can only purchase the HDB 15 months later

Assuming that five years after this when the HDB fulfils its MOP, the essential occupier goes on to purchase a private property for investment. Let’s say the same $960K unit at The Alps Residences appreciates at 3.09per cent annually during this period.

Starting point	$960,000
Year 1	$989,664
Year 2	$1,020,245
Year 3	$1,051,770
Year 4	$1,084,270
Year 5	$1,117,774
Year 6	$1,152,313
Year 7	$1,187,919

15-month wait-out period + five year MOP

During this seven year period, the essential occupier’s CPF funds would have accumulated some interest but since the precise amount of CPF funds is unknown, we will exclude any interest earned from this calculation for the sake of simplicity. It is also important to note that the loan quantum and tenure will be reduced seven years later. Based on a fixed monthly income of $10K and age 52, the maximum loan for a private property is $668,192 with a 13 year tenure.

Let’s say the essential occupier was to purchase the unit for $1.19 million, using all the cash and CPF funds of $547,500 (after deducting $32,200 for BSD) and taking up a loan of $642,500 for 13 years with a 4 per cent interest. We will calculate the rental based on a 3 per cent yield.

Costs include interest expense, BSD, property tax, MSCT fees of $250/month and agency fees payable every two years.

Period	Total Cost	Total Gains	Profit
Starting point	$35,407	$0	-$35,407
Year 1	$69,135	$72,344	$3,210
Year 2	$104,439	$145,823	$41,383
Year 3	$134,841	$220,471	$85,630
Year 4	$166,684	$296,324	$129,639
Year 5	$193,484	$373,420	$179,936
Year 6	$221,578	$451,797	$230,218
Year 7	$244,475	$531,494	$287,019
Year 8	$268,509	$612,553	$344,044

Total potential profits after 15 years: $80,178 + $344,044 = $424,222

As before, it is important to note that this calculation does not factor in the rate of depreciation. With a seven-year gap before the essential occupier can acquire the investment property, the potential profitability is significantly reduced.

To conclude

Before making any decisions, it is crucial for you to carefully consider your ultimate objective. Are you more inclined to retain a freehold property for a long-term stay and potentially cash out in the future or pass it on to your children? Or, would you prefer to hold two properties and keep your home and investment separate?

On top of that, consider whether it is essential for your own stay property to have strong value retention potential, or would you prioritise a comfortable living space that doesn’t impose excessive financial burdens?

Understanding your priorities and objectives will greatly assist you in making an informed decision. Let us quickly recap the options once more.

In order to avoid the 15-month wait-out period, you’ll have to purchase a private property that you can afford based on your financial capabilities.

The first option is to sell both properties and acquire a jointly owned freehold property. This choice is ideal if you intend to stay for the long term as it eliminates any concerns with regard to lease decay and freehold properties generally tend to appreciate over time, though this varies depending on the specific project.

The second option is to sell both properties and purchase two separate properties, each under individual ownership. This strategy helps diversify the risk and ensures that your living situation remains unaffected if you choose to sell the investment property in the future. However, it’s important to note that acquiring leasehold properties might be necessary in this case. While there are newer resale ECs within your budget, holding a leasehold property for the long term may not be the most ideal choice, as prices tend to decline as the remaining lease decreases.

If you are inclined to purchase an HDB flat, you can explore appealing to HDB for a waiver of the 15-month wait-out period. However, this waiver is granted on a case-by-case basis, and there is no guarantee of approval. Alternatively, you can first sell your condominium while residing in your current HDB flat during the 15-month period.

Following this, you can purchase an EA/EM under the one owner, one occupier arrangement. This option provides the flexibility to consider acquiring a second property in the future without incurring the hefty ABSD. It’s important to bear in mind that most EA/EM flats are older, and holding onto them for extended periods is unlikely to yield favourable returns. However, they do offer a comfortable home and a lighter financial burden.

Have a question to ask? Shoot us an email at hello@stackedhomes.com – and don’t worry, we will keep your details anonymous.

Looking for a home? Feel free to reach out to us here for a more in-depth consultation.

This article was first published in Stackedhomes.