Which property sorts to improve to after promoting your first BTO?

With HDB resale costs rising for the 29th straight month in November 2022, many owners could be planning to promote their property for some revenue. 

It’s not unusual for first-time householders to promote their BTO after hitting the 5-year MOP for his or her HDB flat. 

However what’s subsequent? After promoting your own home, you may marvel which property you may and will improve to. Should you’re planning to promote your property in future, you’ll additionally have an interest within the potential beneficial properties. 

The common Singaporean home-owner

The property sort you’re eligible for will rely in your funds and your revenue from promoting your own home. 

The median month-to-month family earnings from work in Singapore in 2021 is S$9,520. 4-room HDB flats are the most typical property sort, making up 31.5% of all resident households by sort of dwelling.  

Therefore, on this article, we’ll be taking a look at a persona of a pair with the abovementioned median family earnings and estimated money sale proceeds from a 4-room HDB BTO flat. Let’s name them the Tans. 

How a lot revenue would you get from promoting a 4-room HDB flat?

Right here’s the median worth of HDB resale flats in November 2022, break up by HDB cities:

We’ll use Punggol as the placement for the Tans’ first dwelling. Therefore, they’re planning to promote their flat for S$573,500.

Assuming their HDB flat MOPs in 2022, they might have purchased their dwelling in 2013 and moved into their dwelling in 2017. The common worth of Punggol BTOs in 2013 was S$328,000.

Contemplating that the median family earnings in 2013 was S$7,870, we’re assuming that the grant obtained by the Tans was round S$15,000. The Tans additionally paid a month-to-month instalment of S$1,324.32 with a 25-year HDB mortgage. The full HDB mortgage with curiosity is S$397,296. 

After promoting your home, you’d must refund the principal quantity you took out of your CPF account, together with accrued curiosity. Should you had obtained any housing grant, you’d must return it to your CPF Odd Account (OA) with accrued curiosity. 

Right here’s a calculation of how a lot funds the Tans must return to their CPF accounts: 

• Housing grant: S$15,000 + accrued curiosity = S$16,971.12
• CPF used to pay for BTO downpayment: S$32,800 (based mostly on 90% LTV ratio in 2013) + accrued curiosity = S$37,110.19
• CPF used to pay for mortgage up to now: S$79,459.20 + accrued curiosity = S$89,900.79

Complete quantity = S$143,982.10

With the S$573,500 from the sale of the flat, the Tans must use that sum to pay their remaining HDB mortgage of S$317,836.80 and return the CPF funds used. This would go away them with S$111,681.10 of sale proceeds. (You should utilize HDB’s sale proceeds calculator to learn the way a lot you may revenue from the sale of your property). 

Nevertheless, this isn’t the ultimate sum as sellers must consider different prices like agent commissions and administrative and authorized charges. Agent commissions are round 1-2% of the promoting worth, whereas administrative and authorized charges might be round S$3,000. 

After deducting these prices, the Tans can be left with round S$97,211. To not point out that they’ll additionally use the funds that they’ve put again into their CPF for his or her subsequent dwelling buy. This might give them about S$241,193.10 in money and CPF to finance their downpayment, purchaser’s stamp obligation (BSD) and different miscellaneous charges. 

Their month-to-month instalments can’t exceed S$2,856 because of the Mortgage Servicing Ratio (MSR) of 30% in the event that they purchase a resale HDB. In the event that they wish to purchase a resale EC or non-public condominium, their month-to-month instalment can’t exceed S$5,236 because of the Complete Debt Servicing Ratio (TDSR) of 55%. (In the event that they produce other month-to-month loans resembling automotive mortgage, this determine can be decrease.)

SELLING YOUR PROPERTY? Would you wish to know the way a lot your property is value? Or perhaps you’re contemplating itemizing your property on the market? Let us know, and we’ll have a consultant reach out to you!

State of affairs 1: Upgrading to an even bigger resale flat 

House sellers may need to improve to an even bigger flat for a number of causes. As an example, they could plan to start out a household. A 5-room HDB resale flat can be a potential selection on this case. 

A determine of round S$800,000 to S$850,000 is cheap for the Tans’ subsequent HDB buy. Nevertheless, this determine doesn’t embrace different money financial savings and CPF funds that they’ve, which suggests what they’ll afford is increased. 

Suppose the Tans wish to reside close to their dad and mom in a mature property like Tampines. They will count on the typical worth of a 5-room HDB resale flat to be S$655,888. 

Primarily based on the cooling measures in September 2022, the LTV ratio for HDB loans is 80%. Therefore, the HDB mortgage downpayment is S$131,177.60. The downpayment might be paid by money, CPF or a mix of each. This determine remains to be effectively inside the Tans’ CPF funds and money proceeds from their earlier sale. 

With the present HDB mortgage rate of interest of two.6%, the month-to-month mortgage cost for the couple can be S$2,380.45, which is under their MSR restrict. 

One other large cost that consumers want to think about is the Purchaser’s Stamp Responsibility (BSD), which is S$14,277. This may also be paid by money or CPF.  

Those that purchase resale flats are additionally eligible for added housing grants just like the Proximity Housing Grant (PHG), Household Grant and extra. On this case, the Tans are eligible for a S$20,000 PHG however received’t be capable of get the Enhanced Housing Grant (EHG) as they’ve beforehand loved housing subsidy with their BTO.

Alternatively, the Tans could need to discover a 5-room flat in additional central areas like Bishan or Toa Payoh because it nonetheless falls inside their finances. 

Worth appreciation of 5-room HDB resale flats 

The graph under exhibits the worth appreciation pattern of resale 5-room HDB flats in Tampines and Singapore. 

Common psf costs of 5-room resale flats have usually been on an upward pattern. Within the final 5 years, the rise was 23.65% for Singapore and 18.26% for Tampines. 

There have been slight dips from 2013-2015 and 2017-2018 as a result of cooling measures particular to HDB like MSR. 

Whereas this isn’t probably the most correct depiction of how a lot revenue you’re more likely to get from promoting a 5-room HDB flat in future, it offers a tough concept of the worth pattern in earlier years. 

Finally, how a lot you achieve will depend upon the demand and provide of 5-room flats in your property. As it’s now, the restricted provide of 5-room flats has already led to the rise of million-dollar transactions. Within the August 2022 BTO train, there was robust demand for 5-room flats in Ang Mo Kio despite the fact that costs have been as much as S$877,000. 

State of affairs 2: Upgrading to a resale EC

One other fashionable choice for HDB upgraders is to maneuver to an government condominium (EC). It’s good if you need full condominium services and privateness at subsidised costs.

Moreover, if you are going to buy an EC which has simply MOP-ed, will probably be absolutely privatised inside the subsequent 5 years. This may imply the next worth as will probably be open to all consumers, together with foreigners. 

Resale EC consumers additionally received’t must fulfil the MOP requirement however it’s going to solely be eligible to Singaporeans/PRs. Nevertheless, in the event that they promote their resale EC inside 3 years, they’ll be subjected to a Vendor’s Stamp Responsibility (SSD). 

Because the Tans are shifting from a 4-room HDB flat, a 2 or 3-bedroom EC can be preferrred. If they’re on the lookout for a bigger area, they could additionally think about a 4-bedroom EC.  

Primarily based on knowledge from URA, Realis and 99.co researcher, listed here are the typical resale costs of two, 3 and 4-bedroom ECs in 2022:

• 2-bedroom – S$909,778
• 3-bedroom – S$1,219,384
• 4-bedroom – S$1,502,498

One factor to notice is that ECs aren’t eligible for HDB loans, so the Tans must take a financial institution mortgage. This additionally signifies that the LTV ratio is 75%, so that they must fork out a downpayment of 25%. 5% of the downpayment will have to be in money. 

Mortgage breakdown for 2-bedroom EC

We’ve used 99.co’s mortgage calculator to find out how a lot the Tans must pay to finance a resale EC. These are based mostly on these assumptions:

• The total 75% financing is taken to maximise the LTV ratio
• The mortgage comes with a 30-year tenure and a 3.5% rate of interest each year
• For illustration functions, there are not any different loans to service, together with property loans, automotive loans, private loans and pupil loans

• Prime-up required for 25% downpayment – $0 (Since this may be coated by the S$241,193.10 money proceeds and CPF funds from the earlier home) 
  • 5% downpayment – S$45,989 (money, which might be coated by the money proceeds and CPF funds)
• BSD – S$21,893 (money/CPF) 

Mortgage breakdown for 3-bedroom EC

• Prime-up required for 25% downpayment – S$63,653 (money or CPF) 
  • 5% downpayment – S$60,969 (money)
• BSD – S$33,375 (money/CPF) 

Mortgage breakdown for 4-bedroom EC

• Prime-up required for 25% downpayment – S$134,431 (money or CPF)
  • 5% downpayment – S$75,125 (money)
• BSD – S$44,700 (money/CPF)

Because the month-to-month instalment for the 4-bedroom EC is near the TDSR restrict, the Tans might also need to fork out the next downpayment and take a decrease financial institution mortgage.

The two and 3-bedroom resale EC costs appear to be extra comfy for the Tans in comparison with the 4-bedroom resale EC costs. Until the couple has numerous financial savings and CPF funds, it may not be preferrred for them to buy a 4-bedroom resale EC. 

Additionally they have to think about further prices like authorized charges which could possibly be round S$3,500 and month-to-month upkeep charges for ECs which might be round $200-$400. The latter will depend on the unit sort and dimension of the challenge. 

Worth appreciation of resale ECs

The graph under exhibits the worth appreciation of resale ECs in Singapore, based mostly on the variety of bedrooms. 

Within the final 5 years, all three forms of resale ECs have seen an appreciation of their common psf costs. 4-bedroom resale ECs have seen the best improve of 53.6%. 

There was a worth dip from 2013 to 2017 throughout all EC sorts. This might have been because of the implementation of TDSR and MSR. 

When put next in opposition to resale HDBs and personal condos, ECs have seen the best improve of their common psf worth at 128.68% in comparison with 86.31% for personal condos and 97.75% for HDBs. This could be because of the low provide of ECs. 

State of affairs 3: Upgrading to a non-public resale condominium 

Upgrading to a non-public resale condominium is similar to a resale EC. The one distinction is that non-public condos are open to all consumers, not simply Singaporeans/PRs. 

The cost scheme for personal resale condos and resale ECs is identical and resale condominium consumers can even must pay SSD in the event that they promote their property inside 3 years. 

Listed here are the typical resale costs of personal condos in Singapore based mostly on URA, Realis and 99.co researcher knowledge:

Primarily based on the Tans’ month-to-month family earnings, they may be capable of afford a 2 and 3-bedroom non-public condominium within the OCR and a 2-bedroom non-public condominium within the RCR. 

Mortgage breakdown for 2-bedroom OCR condominium 

We’ve used 99.co’s mortgage calculator to find out how a lot the Tans must pay to finance a non-public resale condominium. These are based mostly on these assumptions:

• The total 75% financing is taken to maximise the LTV ratio
• The mortgage comes with a 30-year tenure and a 3.5% rate of interest each year
• For illustration functions, there are not any different loans to service, together with property loans, automotive loans, private loans and pupil loans

• Prime-up required for 25% downpayment – S$28,917 (money or CPF)
  • 5% downpayment – S$54,022 (money)
• BSD – S$27,818 (money/CPF)

Mortgage breakdown for 3-bedroom OCR condominium 

• Prime-up required for 25% downpayment – S$127,806 (money or CPF)
  • 5% downpayment – S$73,800 (money)
• BSD – S$43,640 (money/CPF)

Mortgage breakdown for 2-bedroom RCR condominium 

• Prime-up required for 25% downpayment – S$119,887 (money or CPF)
  • 5% downpayment – S$72,216 (money)
• BSD – S$42,373 (money/CPF)

Like resale ECs, shopping for non-public resale condos would additionally require authorized charges and there can be month-to-month upkeep charges as effectively. 

Worth appreciation of personal resale condos in OCR and RCR

In accordance with the worth graph above, the three unit sorts reasonably priced for the Tans have seen virtually the identical fee of worth appreciation over the past 5 years. 

How a lot revenue they achieve in future will depend upon the placement of their subsequent dwelling, whether or not it’s close to an MRT station/facilities and the developments within the space. The restricted provide of latest launches within the RCR and OCR has pushed up costs and potential consumers may look to resale condos as a substitute. This might additionally trigger a worth appreciation of resale condos within the RCR and OCR. 

Should you’re in the identical state of affairs because the Tans, we hope now we have given you a clearer image of how a lot you may achieve from promoting your first dwelling and what property choices you may improve to. Whether or not you’re discovering an even bigger dwelling or have desires of residing in an EC/condominium, there are alternatives which may fit your finances. 

Are you planning to promote your BTO and improve to an EC or condominium? Tell us within the feedback part under.

Should you discovered this text useful, 99.co recommends Prime districts with probably the most worthwhile gross sales within the final 5 years and Upgrading from a HDB flat to a condominium? The information to finish all guides.