The Ultimate Guide To Upgrading From A HDB

Welcome to the ultimate upgrading guide for HDB owners

We will be walking you through the common dilemmas and issues that plague HDB owners who want to upgrade or move to a new house.

Options

Options For Current HDB Owners

Before we jump in, here are the list of options that current HDB owners have when deciding whether they should or should not upgrade.

1. Stay put
2. Change to New HDB
3. Buy Resale HDB
4. Buy New Condo
5. Buy Resale Condo

Of these options, only the 4th and 5th are related to upgrading from a HDB to private property.

The Line @ Tanjong Rhu - facilities deck (1)

Simple Calculator

HDB Selling Price$600,000
Loans:$200,000
Legal Fees$2,600

Remaining Fees

$600,000
- $200,000
- $15,000
- $1,000
= $384,000

Thus, an excess of $384,000 is available for use in the purchase of the new house. This includes the CPF amount that was used to purchase the previous property.

Tools for determining value: X-Value of Flat

Property Worth

How Much Is My Property Worth

All HDB Owners are concerned with valuation of their property before moving to a condominium, as it directly affects the affordability of the new home. Using a useful calculator tool such as the HDB Resale calculator or tools on websites such as: SRX, you can find out how the market values property in and around the area you reside in. In addition, this allows you to accurately adjust for inflation, unreliable listings and proximity. It is advisable to take into account the others fees that will be incurred after selling the flat such as:

- Loans
- Property Agent Commission
- Legal Fees

This means that remaining fees are:

- CPF
- Leftover Fees from sale

Afford

Can I Afford A Condominium?

Condominiums generally cost more than HDBs, so it is wise to prepare the right amount of funds before making such an important investment. Before deciding on buying a condominium, ensure that the costs of purchasing, mortgage and bank loans can be covered. This includes CPF, Stamp Duty and any other additional funds that could be incurred. The prices of a condominium depend on the location, tenure and access to amenities, as well as the age of the condominium, hence finding one at a suitable price without sacrificing convenience is crucial. The current property market contains many barriers to entry, including:

- Stamp Duty Fees
- Total Mortgage Servicing Debt
- Bank Loans and Loan-to-Value Ratio

You can find condominium prices on listing portals or simply head over to New Condos Asia for a list of condominiums for sale.

Kingsford Waterbay - Living Room
James Yang

Things You Need To Know About Buyer Stamp Duty In Singapore

For many beginners in Singapore, the world of Real Estate and Property seems like a complex and difficult system to understand. With bank loans, interest rates and CPF to deal with, grappling with Buyer Stamp Duty(BSD) seems to add another burden to the already complicated information in one's head. However, it is not too difficult once the concept is broken down into bite-sized chunks.

Similar to Goods and Services Tax(GST) and Service Charge, Buyer Stamp Duty is the tax paid for signing documents and administration when purchasing property in Singapore. Essentially, it is dependent on whether or not the property being purchased is the 1st, 2nd, 3rd or subsequent property. Additional Buyer Stamp Duty(ABSD) is a surcharge imposed on top of BSD which affects those liable for it.

Buyer Stamp Duty

Basically, 3% is the flat rate for all BSD in Singapore(since most houses cost more than $360,000) which applies to all prospective homeowners. The 3% of the subsequent amount can be any sum depending on how expensive the property is. This amount is payable in cash or CPF OA money(link to CPF article), but sometimes the buyer has to pay cash first and then get reimbursed afterwards, due to lack of processing time to withdraw the funds from CPF.

First of all, a systematic breakdown of numbers(more info can be found on this IRAS page):

Purchase Price or Market Value of the Property BSD Rates for residential properties BSD Rates for non-residential properties
First $180,000 1% 1%
Next $180,000 3% 3%
Subsequent Amount 4% -

Additional Buyer Stamp Duty

Additional Buyer Stamp Duty has different rates based on Citizenship. The general overview of those rates can be seen as follows:

Property Singapore Citizen Permanent Resident Foreign Citizen
1st 0% 5% 20%
2nd 12% 15% 20%
3rd(and above) 15% 15% 20%

Singaporeans, enjoy more privileges due to a lack of ABSD on their first purchase, while PRs and Foreigners have to pay more ABSD. It is also interesting to note that members of the following nations also enjoy the same privileges as Singaporeans in the property market.

- Switzerland
- Liechtenstein
- Norway
- Iceland

These nations' citizens have benefitted from the Free Trade Agreement ABSD exemption policy, and thus are exempted from ABSD on the first property as well. A special case is US citizens, who only get the same benefits if they are not PRs.

In any case, ABSD exemption is a major incentive for people not from the aforementioned countries to convert to Singaporean citizenship. Singaporeans should take advantage of the discounted ABSD to invest in local property, as foreign government policies are not as stable, and Singaporeans will not enjoy the same discounts in other countries.

ABSD For 2nd Or More Properties

As seen in the table above, the Additional Buyer Stamp Duty tends to increase for purchases after the 1st property purchase. Singaporeans enjoy lower rates compared to Foreign citizens and PRs, due to the 0% ABSD for the initial property.

fees pertaining

Stamp Duty Remission

Alongside BSD and ABSD, Stamp Duty Remission is another administrative term that you need to know. Stamp Duty Remission is the exemption or relief for fees pertaining to BSD and ABSD. A full list of policies can be found here. This list also includes ABSD exemption for certain nationalities which were mentioned earlier, such as Switzerland, Liechtenstein, Norway and Iceland.

The importance of Stamp Duty Remission cannot be understated as it allows buyers to attain relief that they would otherwise not be able to.

The two most common categories of people eligible for Stamp Duty Remission are Married Couples containing either both Singapore Citizen or Married Couples containing at least 1 Singaporean who are buying their 2nd property and selling their 1st property. If you belong to these eligible categories, you are strongly advised to make the most of your ABSD exemption.

Let us compare married couples containing 2 SCs,2 PRs and 1 SC, using a property value of $1.5 Million as an example. This is their 2nd property.

SC+SC

BSD =$1,500,000 x 4% = $60,000 - $15,400 = $44,600
ABSD =$1,500,000 x 12% = $180,000
Total =$44,600 + $180,000 = $244,600

SC+PR

BSD =$1,500,000 x 4% = $60,000 - $15,400 = $44,600
ABSD =$1,500,000 x 15% = $225,000
Total =$44,600 + $225,000 = $269,600

PR+PR

BSD =$1,500,000 x 4% = $60,000 - $15,400 = $44,600
ABSD =$1,500,000 x 15% = $225,000
Total =$44,600 + $225,000 = $225,600

As you can clearly see, the benefit of ABSD exemption for the Singaporean couple and SC+PR is extremely useful, Both Singaporean couple has the option to raise ABSD remission of $180,000 and SC+PR $225,000. while PR+PR has to absorb the full ABSD amount of $225,000. 

Capitalising On Stamp Duty Remission

For many beginners in Singapore, the world of Real Estate and Property seems like a complex and difficult system to understand. With bank loans, interest rates and CPF to deal with, grappling with Buyer Stamp Duty(BSD) seems to add another burden to the already complicated information in one's head. However, it is not too difficult once the concept is broken down into bite-sized chunks.

Total Debt Servicing Ratio

For information about TDSR and MSR, visit this article to learn more: The Difference Between MSR & TDSR?

How To Purchase With CPF

To find out how to purchase a condo with CPF, visit this page: How to Buy Property with CPF

Useful Tools

Elite

https://elite.com.sg/

This is a handy app that allows you to calculate whether your home is within a 1km or 2km radius of any Primary School in Singapore.

Disclaimer: Since 2015, parents registering for Primary Schools are required to have resided in their registered address for at least 30 months, so start searching early if you are "kiasu".

OneMap

https://www.onemap.sg

This tool is useful in determining distance between locations of interest, such as your grandmother's house or your office building. It can also be used to track the distance covered on your daily path to school/work, or to determine total area of a plot of land. Simply use the sketch tool provided to draw a line on the map, tracing the path from your home to the location of interest, and the distance will be shown. You can also research population statistics, businesses and traffic of any region.

New Condos Asia

https://www.newcondos.asia/launches

The most updated list of new launches in Singapore, sorted by district and tenure. A very comprehensive website that offers consultation services and advice on where to invest in new condominiums, without any hassle. They even have their very own Mortgage Calculator!

leap of faith

Should I Upgrade?

The biggest question on the minds of "prospective upgraders" is whether or not they should make the leap of faith and invest in private property. The answer to that is simple: Upgrade to private property as soon as possible if you have the resources. This is due to a couple of reasons, which are shown below.

Top 5 Reasons You Should Upgrade Now

#1: Market Trends

#1

Market Trends

According to this graph of Private Property values over time, an obvious upward trend can be observed, starting from 1995. The small downward slopes occurred after financial crises, but they soon became insignificant due to the massive increase in property prices that followed.

Based on a combination of interpolation and extrapolation, it seems likely that the value of private properties will increase, despite government intervention and financial downturn. While prosepctive buyers have many barriers to entry such as BSD and ABSD. According to Morgan Stanley, Singapore's property prices are still expected to double by the year 2030,with prices predicted to increase by 10% in the year 2018 alone.

Additionally, the diminishing rate of oversupply has seen property values surge since 2011. With no issues with oversupply, Singaporean prospective homeowners are poised to raise their home valuations, leading to increased competition in prices, which creates a snowball effect whereby prices continue to grow incrementally.

Singapore's overall property market prices are growing gradually every year. Condominiums are now worth at least $800,000 at minimum. If you invest in one now while the prices are still (relatively) low, you can stand to profit from the eventual price hike in 10 or 20 years' time.

#2: Infrastructure

#2

Infrastructure

The most convincing reason that values for private property will continue to rise is the ever-increasing development of infrastructure in Singapore. Take a look at the map and see the whole host of upcoming projects in Singapore. With development going at lightspeed, the prices of residential properties in the neighbouring regions will definitely increase due to better amenities and accessibility.

Cynics might point out that Singapore is already one of the world's most developed cities, and that infrastructure development has always been on the rise and that this is nothing special. While that may be true to some extent, these new projects have the potential to make Singapore a more connected global economic hub, with projects such as the High Speed Rail connecting cities from all around Asia. The government's plan to decentralise Singapore's financial hubs will also lead to rising prices in peripheral areas such as Jurong and Punggol, with new residential and commercial development occurring in those regions. Combine that with two new MRT lines which will improve accessibility and ease congestion, and you get a highly connected superstate that has massive potential for investment, for locals and foreigners alike.

Thus, it is advised that homeowners upgrade to areas with promising development now to capitalise on the inevitable rising prices.

Kingsford Waterbay - facade (2)

#3: Inflation

#3

Inflation

Inflation always causes goods with a limited supply to become more expensive. As housing in Singapore(a tiny, overcrowded country with a high population density) is a limited resource, inflation will definitely cause prices to surge. This is caused partially by rising interest rates of banks, as well as general market prices set by homeowners which will increase due to inflation.

Hence, you should consider upgrading as soon as possible to capitalise on the 3 factors listed above. As we are not able to predict government intervention or a paradigm shift in the market, it is better to be prepared than to be left behind, having to play "catch-up" with the early birds who took decisive action and invested in the future.

Kingsford Waterbay - Landscape View

#4: En-Bloc Fever

#4

En-Bloc Fever

In recent years, a trend has been developing where En-bloc sales of properties have been all the rage. In 2017 alone, about 2444 units were sold En-Bloc, across all regions of Singapore, totalling $5,175,600,000. Several of those affected included Eunosville, Rio Casa and Normanton Park. As foreign investors(mainly from China) continue to bid astronomical prices for local private properties, pushing up land prices, these costs will be translated to higher property costs when developments are eventually completed.

This trend has also seen a surge in displaced homeowners looking for new homes, with about 1,500 homeowners having received between $1,000,000 to $2,400,000 in compensation.

With this in mind, it should be no surprise that property prices will continue to increase, due to the domino effect that En-bloc sales tends to have on the property market.

#5: Global Bubble Index

#5

Global Bubble Index

If we take a look at the UBS Global Real Estate Bubble* Index, we can see clearly that housing prices are increasing everywhere in the world, and Singapore is no exception. In fact, as the Global Real Estate Bubble Index measures the Bubble risk of real estate prices in cities worldwide, it is safe to say that Singapore's rising prices will continue with no "bursting" in the near future. Compared to cities which have a high Bubble risk such as Toronto or Hong Kong, Singapore has relatively low risk of Bubbling. This means that it is a good idea for investors to buy properties now, while the risk of Bubbling is still low, to capitalise on the eventual upward trend of market prices.

*A "Bubble" is an economic cycle that can be described as a rapid increase in asset price followed by a contraction.(That is to say, a gradual expansion followed by a "pop" which occurs when the Bubble bursts.)

Singapore remains low on the Bubble risk index, showing investment potential.

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