It’s a natural progression in Singapore for HDB flat owners to buy a condominium once their flat reaches the 5-year Minimum Occupation Period (MOP). And who can blame them? The allure of private properties, such as a condo, seem relatable enough: They appear more luxurious and exclusive with lots of facilities that some heartland estates may not have. Think tennis courts and 50-metre lap pools at your doorstep. Convenient, right?
But private residential prices have been rising in the past few years, despite the pandemic, and could climb between 1-4% this year, according to CNBC. With this market outlook, are private properties still a worthy investment?
4 reasons why you may choose a condo over an HDB
1. You can live in a condo forever, and your kids can too
Most condominiums enjoy freehold leases, meaning you can own the property indefinitely. This is unlike HDB flats, which typically hold a 99-year lease (meaning, it has to be returned to the State after 99 years). If you have children and you intend to pass down your home to them, this can be a huge deciding factor for you.
Even if you don’t intend to pass on your home, a freehold lease means you won’t have to worry about your lease running out and finding a buyer to take the house off your hands at a good enough profit. With the value of your property climbing steadily year on year, you’ll be able to take your time finding the right buyer (more on this later).
- HDBs have 99-year leases: With each passing year of ownership, the value of the home drops. Once the 99 years are finally up, the home’s value officially hits zero, and the government can claim the land back from you – and you’ll need to make your own living arrangements.
- With condominiums, it’s a whole different story: Since they can be held indefinitely, their value never decreases substantially. In fact, if you live in a prime area and your home is well-connected to nearby MRT stations and schools, you can expect the value of your property to climb steadily – even as your home ages.
2. If you’re under 35 and you don’t plan on getting married anytime soon… it’s a no-brainer
Of course, we have to preface this with the obvious: Only commit to a condo purchase if your budget permits as you may feel the pinch of the rising property prices upon entering the market.
That said, there’s no way — right now — to own a HDB flat unless you’re either 35 years old or married. That narrows down your property purchase options to condos and private properties.
The eligibility conditions for a condo purchase is also fewer than when you buy an HDB flat. For example, you need to take into account your citizenship, age (obviously), family nucleus, Ethnic Integration Policy and SPR quoata, etc.
3. If you’re buying a condo for investment, you can charge higher rent
You’ll find that this is true even if you have a lower number of available rooms in your condo than an HDB flat. For example, a three-room HDB flat and a one-room condo are likely to fetch the same monthly rent, even though one is clearly larger than the other.
Why? Like we said earlier, condominiums are more prestigious, and they’re more likely to be within walking distance of MRT stations, schools, bus stops and malls. When you factor in the added facilities and the fact that they tend to be located in prime real estate regions in Singapore, the higher rental yields make sense.
This is in line with the current rental market as it has “been hot in the past two years”, according to a recent report. It said that demand mainly came from young adults or couples who wanted to live on their own.
If you buy a condo and rent it out, the higher rental income you will receive is enough to cover the maintenance fees, which are higher than HDB flats. But with an HDB flat, you can only rent out rooms (which must be three-room or larger), and only once it has reached its MOP.
4. Most condos are in good locations
Unlike resale HDB flats, most developers of new condos build on land near amenities that their residents are likely to frequent. This is especially important if you don’t have a car and rely on public transport to get around Singapore – your daily commutes can be much faster if you buy a condo that’s close to your work and other commitments.
Here’s a checklist before you commit to buying a condo:
- Do you have children? If so, do you want to pass your home to them?
- You might consider buying a bigger home if you have children as they will need more space as they grow up. You’ll also need to consider if your new home is close to schools and other amenities they’d need.
- How long do you plan on living in your new home? Are you buying your house to invest, rent out, or settle down for good?
- If you only plan on living in your home for a few years before selling it for a profit, the right home for you will be vastly different compared to someone who intends to settle down. For example, you may consider buying a smaller condo in a desirable location and retain the option to move later on (bearing in mind the Seller’s Stamp Duty that’s applicable within the first three years of your condo purchase).
- If you plan on renting out your home, a condominium might be the better bet since you’ll be able to charge tenants a premium. The same advice applies to investments – condominiums usually bring in a higher profit.
- Do you own a pet that may not be allowed in an HDB flat?
- If you own a dog of a certain breed, such as a pit bull, chow chow, golden retriever, German sheperd and Siberian husky (my favourite), you may be better suited in a condo. The Board only allows about 60 types of breeds to be kept in an HDB flat, and only one dog. If you breach this rule, you may be fined up to a maximum of $4,000.
- Cats are also technically not allowed in flats as they are “difficult to contain”. That’s HDB, not us. However, unless your neighbours complain, you may get away with it. (Shh!)
- What can you realistically afford?
- If you’re taking a bank loan to finance your condo purchase, you’ll need to pay the first 5% in cash. And in this market, with condos starting at a million dollars, that’s around $70,000 in cash outlay. This may be more than expected, especially for younger couples, or those expecting a child.
- Don’t forget the condo maintenance costs, which can be around $200-$300 every month. These are for the exclusive facilities you enjoy, such as the pool, sports courts and BBQ pits. And if you miss your monthly maintenance payments, you’ll be charged an additional fee.
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If you liked this article, check these out:
- 2022 Guide to Buying a Condo in Singapore: How to Buy?
- The Buying Process for a New Launch Condo in Singapore in 2022
- For Condo Owners: How to Buy HDB Flat After Selling Private Property?
- What it Takes to Buy a Condo in Singapore
- When is it better to Buy a New Launch Condo: at Launch Date or Closer to TOP?