How to Choose Between a Resale HDB and Condo

Singapore makes the list of most expensive nations when it comes to purchase of property but surprisingly, it also boasts a significant amount of ownership percentage stretching to beyond 90%. Particularly considering that public housings commonly referred to as resale HBDs can easily cost up to half a million Singapore Dollars. I know about it because we bought one a few years back.

There are several factors that can be cited as the key inspiring elements for high home-ownership such as generous government grants but the major one is a superb system of retirement savings known as CPF that assists many of them in acquiring homes. 

For numerous Singaporeans, home-ownership happens to be a general aspiration. Nevertheless, the one major dilemma for them is generally deciding between purchasing an HBD or a Condo. While the considerations span far and wide ranging from factors such as lifestyle, eligibility, and prospects for capital appreciation, for those with plans to one day sell their property, it is important to ask yourself, “What is the reason behind purchasing this property?”

PURPOSE OF PURCHASING PROPERTY

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While some may consider this answer to be quite a straightforward, many of the new buyers would surprisingly state the reason as ‘both for living and investment’. However, the fact remains that one can only do either. Why? Basically, for the reason that all strategies followed towards the management of this property will differ depending on objectives-therefore affecting the overall choice of the particular property also. 

When it comes to HBDs, they are precisely designed for owner-occupancy since they are more of a public type of housing, therefore, possessing particular characteristics that complicate their process of investment. Such may include attaining eligibility schemes as have been set by the authorities (government) especially for buyers not to mention the minimum period of occupation before the owner can either rent or even sell it. 

As in our case, our main purpose in purchasing a resale flat is to save money from renting one. Since we became Permanent Residents in 2008, we started saving to buy our own flat and fortunately made our dream come true after a few years. We have not ventured yet into renting even just a room as we value privacy and we are currently enjoying the perks of living in a place we can rightfully call our very own. 

For private condominium nonetheless, buyers can obviously purchase them for individual stay although both the location and type of house can be influenced by the purpose of purchase. For example, if you are purchasing the condo for the purpose of personal staying, there are typical considerations you will take into account such as your family’s lifestyle needs you will require adequate space that can accommodate everyone, you may also consider factors such as school locations for your children, close proximity to urban and town centres or even a quieter more peaceful settings. 

Compare such to purchasing property for the purpose of rental income. Your inclinations would perhaps take you to purchasing either a 1 bedroom or a relatively smaller studio unit close to an urban setting or city centre, a location just within trekking distance to stations such as MRT and select one with particular assortment of facilities which may be enticing to expats- a gym, BBQ pits and even swimming pools. 

FACTORS TO CONSIDER WHEN MAKING A DECISION BETWEEN A RESALE HBD AND A CONDO

Choosing between HBDs and a Condo is a huge and important decision. As such, below are some several factors that you need to take into account when choosing between retail HDB and a condo prior to taking that expensive step: 

Financial and Legal Eligibility: Immediately after determining a concise purpose for purchasing a property, it is important to verify your eligibility to owning the property. With respect to HBDs, the first requirement is that you fulfill two conditions: nationality not to mention eligibility of family nucleus so as to attain qualification allowing you to purchase. 

For Condos, there are no similar restrictions although foreigner will have to watch out for a supplementary stamp duty for buyers implemented in line with property cooling channels that were introduced back in 2013. A permanent Singapore Resident would be charged an additional 5 % when they purchase their first property while foreigners are required to top-up a supplementary 15 %. 

Restrictions on rent and resale: If you purchase HBDs, you are required to fulfill set regulations of a minimum period of occupancy of a complete 5 years prior to renting the property out or even selling it. And when you decide to ultimately sell it, you will require acquiring a buyer that meets the Singapore Ethnic Policy or Singapore PR quota.

As the owner, you require HBD approval. It is also important to take note the presence of a standard resale levy that minimizes the total grant amount eligible for you when undertaking your next purchase (HBD). When it comes to Condos, the only restriction as earlier mentioned is a characteristic Seller Stamp Duty (SSD) which you require to pay when you sell the property within the initial four years. 

As earlier mentioned and with respect to cooling measures, there is yet another vital consideration that you need to take into account and it is the Total Debt Servicing Ratio (TDSR). This one applies not only to Singaporeans but also to foreigners. 

Essentially, this restriction limits the total amount borrowers are allowed to spend with respect to repayments of total debts to only 60 % of their overall gross income monthly. 

Overall debt repayments is not just with respect to your typical mortgage loan, it also incorporates other debts that you may be having for instance study loans, auto loans, credit card debts and even personal loans among others. As such, prior to beginning a search for an ideal home, it is important that you calculate the total loan amount with respect to your monthly income to narrow down your choices when it comes to the properties that you can well afford.

Home loans: The only condo finance options are bank loans and or loans as gathered from financial institutes. HDB loans offered at interest loans that are concessionary are no option. 

Subsidies: When it comes to HDB buyers, they are eligible to getting CPF Housing Grant that can be used in paying preliminary down payments or even in reducing mortgage loans. With respect to private houses, they have no grants. Nonetheless, for anyone purchasing a typical Executive Condominium (EC), they still remain eligible to getting a Housing Grant. 

Facilities fees: There are great facilities which accompany condos and which contribute to better life quality. Nonetheless, these facilities also need constant upkeep and thus you will need to part with considerable amounts of cash for maintaining them. These fees begin at a monthly $250 and can go on to a whooping monthly fee of $1,000. 

Do a comparison with the characteristic Service and Conservancy HDB charges that start from a meager $19 to $95 which are associated with HDB units dependent on the type of house and the location/town. 

CONSIDERATIONS IF YOUR PURPOSE OF PURCHASING PROPERTY IS INVESTMENT: 

If you set to purchase property to fulfill your investment purposes, it is vital you take a number of calculated risks and also take into account the huge macroeconomic environment. In most cases, it is common perception and expectation that the rental incomes they amass will assist them in covering all mortgage repayments per months they require to pay. 

To fulfill this, it is important you take into account the overall general trend with respect to the interest rate setting. Although the interest rates over the past few years have been on the low, the rates are projected to take an upward curve as year’s progress. Taking this in mind, it is important you make steps in securing fixed-rate loans or including some buffer as you calculate your rental amounts. 

The supply and demand of rental flats is a major influence of overall rental prices. And even though your apartment may as well command handsome premiums because of factors such as furnishings, locations, and even facilities, you are still susceptible to the overall general trend. This is just to show you that you need to conduct a proper research of the macroeconomic environment prior to taking the dive into investing. 

If your focus is more on typical capital gains, condos are the better way to head because this type of housing caters for a vast array of buyers. Moreover, historical data has indicated massive gains particularly when it comes to the private housing when compared to typical public housing. 

Nonetheless, even with this, outliers are always present like for instance those that made purchases when this niche was at the peak back in the 2011 to 2013 era and who have since been victims of significant losses. 

In a nutshell: Like any other type of investment, a lot of research and carefully calculated risks prior to taking a pen and jotting down your signature on those dotted lines!