Ask Mr. Propwise #5 – Sell HDB to buy a private property for investment?

March 16, 2011

Ask Mr. Propwise #5 - Sell HDB to buy a private property for investment?

Have a question about Singapore property? Ask Mr. Propwise (AMP)!

Dear Mr. Propwise,

I would like to seek your views on one of my property investment decisions. Some experts think private properties are better investments than HDB flats. I currently own a HDB flat (for own stay) and a private property. I have the intention to purchase another private property in the near future (depending on where the market is heading) for own stay, but have not decided whether to sell the HDB flat or to rent it out for rental income.

Although the COVs of flats are coming down, the prices should still be increasing moderately in the short to medium term due to demand and in terms of rental yield, it is higher than private properties.

The 3rd round of the government measures also now make it impossible for investors with existing private properties to buy HDB flats without disposing their properties, hence HDB flats are “assets” that not everyone can buy.

Or do you think is it a better option to sell my flat to realise the profits and invest the money into better private properties (as Kelvin Fong advocates in Secrets of Singapore Property Gurus)?

Thanks,

C.H.

Hi C.H.,

The answer to your question really depends on each individual’s circumstances but let me share some thoughts with you:

– Are you more in the income generating stage of investing or the capital appreciation stage of investing? For example, those looking to retire soon may want to acquire a portfolio of high yield properties to generate income. For those just starting out I think it makes sense to cash out and try and compound the capital appreciation (similar to what Kelvin suggests).

– Another key thing to think about is financing. If you are thinking of buying another property, depending on your job and debt service ratio etc, banks may be reluctant to finance a third property. If that is the case, selling off your HDB flat might then make it possible to invest in another private property, which will make sense if you think it has more upside.

– As for the restrictions on private property owners to buy HDB flats, that means that demand is reduced as the pool of potential buyers is smaller. As you mentioned, that will impact the COV and future price appreciation. Also, this restriction is not likely to be lifted anytime soon by the government. If you sell it now, you will not be able to buy back an HDB flat. So if the potential yield is very high (say >6%), I might consider keeping it (but contingent on the two points above).

Hope this is useful!

To wisdom and beyond,

Mr. Propwise

by Propwise.sg on March 16, 2011 · 12 comments

Posted in Ask Mr. Propwise (AMP),HDB flats (public housing),Investing in Singapore Property

{ 12 comments… read them below or add one }

ahbe June 28, 2011 at 11:11 pm

Hi C.H,

If you decided to sell your HDB and then buy a private property, you will also need to consider a place to stay while waiting to move in to your private property.

If your next private property is brand new, you will need to wait till the TOP period usually around 3 years for condos. You will need to consider a place to stay or rent for these 3 years.

If your next private property is resale, you will need to plan the timeline so that you can shift in immediately to your resale private property after selling your HDB.

More “problems” if your private property is brand new. But worth the wait and sacrifice of privacy for the new private property.
Just my 2 cents worth 🙂

Regards
ahbe

Reply

Jeya January 27, 2012 at 2:42 pm

Mr.Propwise, I own a hdb flat for 6 yrs now bought in the resale mkt with housing grant and still servicing the loan half way. Now I want to purchase a second property (private) for investment and have very little cash and cpf balance for minimum downpayment. But my current hdb is going for 100k more. Is it possible for me to sell my current hdb, buy a second hdb (as second timer) and use the extra cash to finance for a second private property? thanks, Jeya

Reply

Propwise.sg February 6, 2012 at 2:31 pm

Once you buy a HDB you will have to fulfill the MOP before you can buy a private property.

Reply

Charles Yeo February 1, 2012 at 4:23 pm

Dear Sir,
Please advise how many private property can a HDB owner, with no existing loan and satisfying MOP, buy?

Is there any restriction to the number of private properties I can buy?

Reply

Propwise.sg February 6, 2012 at 2:32 pm

No there is no restriction to how many private properties you can buy (as long as you have the money) once you’ve satisfied the MOP.

Reply

Mdm Lim March 26, 2012 at 1:51 pm

Hi, C.H.
I am now staying in a HDB more than 10 years (purchased under resale market with housing grant) and would like to own a second private property. What I should be look out for in term of HDB and CPF regulations and hidden cost like property tax, etc.?

Reply

Propwise.sg March 30, 2012 at 10:40 am

You can buy a private property as long as you have fulfilled the Minimum Occupation Period. If you are Singaporean the stamp duty for this second property is as per normal.

Reply

C.T. May 16, 2012 at 3:07 pm

Hi. I’m currently staying in a HDB 5-rm flat and going to fulfil my MOP by end of 2012. My husband and I are intending to move out but considering whether to jump into private condo, EC or BTO. Our current flat is selling at almost 100% more than our buying price.
If EC or BTO, our aim is to fulfil the MOP and use the extra cash to buy another private property.
Our ultimate goal is to own 2 properties (HDB+private or private+private) for purpose of financing our retirement and children’s education in future.
Which option do you think is more viable considering the current property market trend? Please share your opinion. Thanks.

Reply

Urgent Buyer October 23, 2012 at 9:43 am

Hi
If we stayed 10 years in our HDB fully paid and want to buy a condo to rent out the condo (rent out condo to finance payment for condo), can we do so as of Oct 2012?
What are the new rules of renting ownig a condo and renting condo if we still own a HDB flat and will stay in our HDB?

Reply

Propwise.sg November 4, 2012 at 12:16 pm

Shouldn’t be a problem if you have fulfilled the MOP, but you should confirm with HDB.

Reply

william June 23, 2013 at 12:27 pm

Dear Sir,
I own a hdb for twenty years(1st timer) and now i think of getting a new HDB or Ec , Can i apply the HDB or EC if i myself is bankcrtcy.

Reply

Propwise.sg July 3, 2013 at 9:21 pm

Unlikely, but you should check with HDB.

Reply

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