Blog Posts Archives - Holland Property

New Launch vs Resale Condos In 2024: Which To Buy?

hollandproperty — Fri, 16 Feb 2024 15:36:25 +0000

New Launch vs Resale Condos In 2024: Which To Buy?

The property market has seen some notable changes over the year; but one of the more obvious differences is the price gap between new launch and resale condos. With new launches now at around $2,000 psf, an increasing number of buyers – including HDB upgraders – are starting to feel priced out. But how wide is the gap between new and resale right now, and what are some of the other factors to consider when choosing?

New Launch Condo Prices In 2024

New Launch Condos in CCR

We’ll begin with new launch condos in the CCR:

New launch prices averaged $3,007 psf in January last year, rising to $3,168 psf as of January this year. Notice, however, there’s a sharp drop in the number of new launch transactions; largely due to the number of available launches, but also possibly due to new cooling measures (see below).

New Launch Condos in RCR

Next let’s look at the RCR:

Prices averaged $2,601 psf in January of last year, dipping slightly to $2,568 psf in January this year. The transaction spikes in the middle of last year were mainly due to three major launches all happening in District 15 (Grand Dunman, Tembusu Grand, and The Continuum).

New Launch Condos in OCR

Next, let’s look at the OCR.

The OCR saw a strong pick-up in price over last year, rising from an average of $1,775 psf, to $2,019 psf. This is not entirely unexpected, since the OCR is where the bulk of homeowner transactions (mostly HDB upgraders) see the most demand.

Do You Notice A Common Factor In All Three Regions?

At this point, the average price of a new launch is now over $2,000 psf in all three regions. It’s now an inescapable fact that for family-sized units (typically three-bedders of at least 900 sq. ft.), the typical quantum for a new launch condo is around $1.8 million.

If we consider a 25-year home loan at the maximum loan quantum (75% of the price), monthly loan repayments (at 4% per annum) come to $7,126 per month. This means that, to meet the TDSR, which restricts monthly loan repayments to 55% of your combined income, the borrowers may need to earn close to $14,000 per month (unless they can make a bigger down payment).

Also keep in mind that 900 sq. ft. is smaller than the average 4-room flat, so those with bigger families may face a quantum of $2 million or more. This is all, quite frankly, well past comfortable territory for many median-income Singaporeans.

Resale Condo Prices in 2024

Resale Condo Prices In CCR

We’ll start with the resale prices in the CCR:

Prices in the CCR have been mostly flat over the year – they were at $2,309 psf in January 2023, and are at $2,312 psf now. I actually expect more of this muted performance in the near term, for reasons I’ll cover below.

Resale Condo Prices in RCR

Resale prices in the RCR are trending upward, from $1,747 psf in January last year, to $1,868 psf this year. As a matter of opinion, this could trend further upward if we see issues in the wider economy (e.g., further impact from the war in Europe and in Gaza). This is because, when companies cut costs and shrink expatriate housing allowances, we sometimes see an exodus from the CCR into the more affordable RCR properties; this might prompt investors to buy within the city fringe instead.

That said, it will boil down to whether investors are still interested in rental assets in more prime areas, given the higher ABSD rates today.

Resale Condo Prices in OCR

Now let’s look in the most segment: resale condos in the OCR are the bread-and-butter of the homeowner market in Singapore; especially given that new launches are increasingly out of reach:

It’s relatively happy news for home buyers.

Prices have risen from $1,340 psf in January last year, to $1,410 psf this year; but an increase of just over 5% is at least tolerable to most. The really good news for buyers is that, as of November 2023, we can see the average price has been sliding.

With the exception of the CCR, average resale prices in the RCR and OCR have stayed below the $2,000 psf mark; and it’s still quite possible to find resale units in the $1.4 million to $1.6 million range. This is generally comfortable for HDB upgraders, if not first time buyers, so I would expect the bulk of transactions to be in these resale segments going forward.

What’s Happening In The CCR?

One of the key factors in the CCR is the impact of last year’s cooling measures.

As of April 2023, the ABSD on foreigners was doubled to 60%. This is not a huge issue for the OCR, as few foreigners buy there anyway – but the CCR will likely bear the brunt of this going forward, as this region has the biggest number of foreign buyers.

If there are buyers in the CCR this coming year, I expect it will mainly come to buyers seizing upon the narrowing price gap between the RCR and CCR.

Within the RCR, there is (speculative) hope that the cooling measures will push buyers from the CCR into the relatively cheaper city fringe. In any case, I also expect that the launches of Grand Dunman, Tembusu Grand, and The Continuum so close together will have a knock-on effect on surrounding resale homes; this could lead to District 15 bumping up the regional average.

Harmonisation of Gross Floor Area

Another factor to consider are the changes to the definition of Gross Floor Area (GFA), which would apply to the new launches we’re seeing now.

As of June 2023, the government is standardising the definitions of Gross Floor Area (GFA) across regulatory bodies. This also has an impact on new launches though.

Several of the methods used to maximise prices in the past, such as building extra large air-con ledges, or charging for “empty air” between the floor and ceiling (strata void space) are no longer allowed. Previously, developers were able to charge buyers for the square footage of these features, even though they themselves were not charged for it.

The impact on price is not yet known to us – it could go in two different ways. On the one hand, it may result in more space for the amount you pay. On the other hand, developers may simply raise prices, to make up for the inability to use these methods. As such, I would say it may not affect the prices; but there’s a clear win in that you’re buying actual square footage you can use.

This would be a significant advantage for new launch buyers, compared to less space-efficient resale units. No one really wants to pay several thousand dollars for planter boxes they don’t use, even if the overall price may be lower.

Conclusions On New Launch vs Resale Condos in 2024

For those upgrading from 3-room or 4-room flats, or on a budget, new launches may be an uncomfortable stretch at this point. Executive Condominiums (ECs), or a resale unit in the OCR, are probably more sensible (and you can upgrade further from those in future, if you like)
For buyers with a bigger budget, it may be worth keeping an eye on new launches in the CCR, if developers get nervous about the ABSD and are more modest with prices. Alternatively, you might look to the RCR, and try to take advantage of narrowing prices with the CCR.
For singles and couples (no children) who are buying smaller, low quantum units, it may be worth looking at new launches. This is because the lower overall quantum might still make the units affordable, and the more efficient layouts of newer condos are even more important, when you’re buying a compact unit.

For more personalised assistance or further questions, do reach out to me directly and I’ll be glad to help.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny has a genuine interest in people and firmly believes in personal integrity. While helping homeowners with their property needs, their interest always takes precedence over his personal gains. Hence, Danny has consistently earned his clients’ complete trust and loyalty. Many of them have become his personal friends.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post New Launch vs Resale Condos In 2024: Which To Buy? appeared first on Holland Property.

Is It Still Worth Buying A Freehold Property For Retirement?

hollandproperty — Fri, 05 Jan 2024 15:10:44 +0000

Is It Still Worth Buying A Freehold Property For Retirement?

A few years ago, I wrote an article, “FREEHOLD VS LEASEHOLD: Is It Always Worth Paying More For A Freehold Condo?”. Here, I am asking a related question, does it make a difference whether we are buying a freehold or leasehold condo for retirement?

Many Singaporeans would immediately answer yes, and some may even insist on only buying freehold properties if it’s for the long term. However, the property market has constantly shown that we cannot make assumptions, and in fact, one of the least provable statements is that “freehold condos perform better.”

As a matter of fact, historically, we have seen both leasehold and freehold condos enjoy capital appreciation.

Let’s take a more nuanced look before you decide to invest in one for retirement:

Why is it so hard to give a definite answer on whether freehold is better?

A common question is why we don’t just look at all the freehold prices, then look at all the leasehold prices, and see which one performed better overall. Well, this will never be accurate.

First, there are far more leasehold than freehold condos, which will distort the results (generally to the benefit of leasehold condos, as there’s so many more transactions.) In addition, all the freehold condos tend to cluster around prime neighbourhoods like Orchard, Tanglin, etc. On the other hand, leasehold condos tend to be found in newer or fringe neighbourhoods. This, again gives leasehold condos an unfair advantage, as they almost always have more room to appreciate.

On the other hand, you will find more leasehold condos that are conveniently located near MRT stations and amenities. So, if you want the added convenience, you will have more choices for leasehold condos than freehold condos. This added convenience does have a positive impact on capital appreciation.

Also, if you buy a condo in a very new area like Tengah, prices will be rock bottom, and there’s a lot of room for appreciation as the government will build schools, MRT stations, markets, etc. But if you buy in an already heavily-developed area, such as Anson Road or Orchard Road, how much more can the price increase? It’s already among the most expensive properties in Singapore. So this is why leasehold properties, as a whole, can show much more significant percentage gains than their freehold counterparts.

Even if prime region condos show good appreciation, we’re forced to ask if the appreciation is really due to their freehold status or just because they’re such a desirable place to live. Property prices move for many reasons; not all are related to lease status.

Case Study: Leedon 2 vs The Merasaga

These two condos are located in the prime Holland Road neighbourhood.

Leedon 2 is a 72-unit freehold condo built in 1996.

The Merasaga is a 114-unit 99-year leasehold condo built in 1995.

Even though The Merasaga is slightly older than Leedon 2, it has appreciated by 220% over the last ten years. In comparison, Leedon 2 has gained by 171%.

Why is that so? There are a few possible reasons:

The Merasaga has a better layout
The Merasaga has better landscape and facilities
The Mersaga is quieter
The Merasaga enjoys a better view
The Merasaga commands better rents

So, as we can see, the lease status of the condos alone does not determine its value.

So how can we determine if a freehold property is really good for retirement?

We can start by understanding some general factors and eventually moving on to scrutinise the actual property.

The first factor is the likely lifespan of the property. An interesting point to note is that, regardless of whether a property is freehold or leasehold, it tends to last the same amount of time. This article has some research on how long most properties last before they go en-bloc; regardless of lease status, the general answer is between 19 and 24 years. It is rare for any condo to last more than 33 years.

This is significant to your retirement for two reasons:

First, you may want to buy a freehold unit because it’s “there forever,” and you have something to will to the children, or perhaps you feel you can charge rent for the rest of your life, and so can your family.

But the average lifespan of a condo shows this is improbable: even if you pay 15 to 20% more for a freehold condo, you may find that the condo goes en-bloc in 24 years; exactly the same as a leasehold counterpart nearby. And if that’s going to be the case, do you still want to pay the freehold premium?

you may want to buy a freehold unit because it’s “there forever,” and you have something to will to the children, or perhaps you feel you can charge rent for the rest of your life, and so can your family. But the average lifespan of a condo shows this is improbable: even if you pay 15 to 20% more for a freehold condo, you may find that the condo goes en-bloc in 24 years; exactly the same as a leasehold counterpart nearby. And if that’s going to be the case, do you still want to pay the freehold premium?

Second, we need to consider that freehold status becomes more valuable with age. For example, when a leasehold property has only 60 years left, the value suffers as borrowers may not be able to get a full loan; this means they need more cash upfront. Buyers may even need to pay full cash for properties with 30 years or less on the lease.

In theory, freehold properties avoid this issue, as there is never any lease decay. This is part of the justification for the freehold premium. But again, consider how long the typical condo lasts: it would have to survive 39 years (dropping the lease to 60 years) before there’s an effect on the financing. As I have mentioned above, this is quite a rare age for condos.

If your condo goes en-bloc, or you sell it early on, you may find the lease decay has no effect, and that would mean paying for freehold status was a waste of money. You may as well have bought a cheaper leasehold unit and held it for the same amount of time.

If your condo goes en-bloc, or you sell it early on, you may find the lease decay has no effect, and that would mean paying for freehold status was a waste of money. You may as well have bought a cheaper leasehold unit and held it for the same amount of time.

But let’s put the property lifespan aside, and look at rental income

It may surprise you to learn that some very savvy property investors when picking a unit to rent out, will refuse to consider freehold. The reason is the higher price of freehold and the impact on rental yield.

Consider two condo units of the same age, quality, and location. The only difference is that one is a freehold, and the other is a leasehold.

The leasehold unit is $1.8 million and rents for around $54,000 per year.

The freehold unit is $2.1 million and rents for around $54,000 per year.

(Why are they the same? It’s because a tenant will never pay more for freehold status. Lease status has no benefit to them. All they care about is whether it’s a pleasant place to live, close to work, has an MRT nearby, etc.)

Gross rental yield is the annual income divided by the property price. So for the leasehold unit, the gross yield is 3% ($54,000 / $1.8 million x 100). But for the freehold unit, the gross yield is 2.57%.

Simply put, you’re probably making more money from renting the leasehold unit than the freehold one. So do consider if the extra $300,000 in price is better off in your retirement fund or some other investment.

But I am not buying to rent out, you may say. Granted, your purpose is for your own stay so you are not so much concerned about rental yield. But do consider two things:

There is a correlation between property value and rental yield. If it comes to a point in time that you do decide or need to sell your property, the one with a higher rental yield is likely to fetch a higher price than one with a lower yield.
As the property ages, the maintenance costs will go up. Owners will have to face the constant hassles of repairing leaking pipes, water seepage, spalling concretes, etc. More sinking funds will be needed for lift maintenance, facilities upgrades and structural repairs. Oftentimes, these repair costs can be very significant. After a while, frustrated owners might start to wonder if it is really worth hanging on to their ageing freehold condos.

Finally, we should consider that long-term changes to the area could trump your freehold value

There are certain factors that being freehold cannot overcome. Some examples of this are:

Several new condos are built nearby, increasing competition for tenants or buyers, and some of the new condos even block the view of your property.
Condo maintenance worsens toward later years; even if your condo is the only freehold one in the area, it still looks worse than its leasehold counterparts.
Cooling measures or market conditions change at the time you sell. If you sell during a downturn or (touch wood!) at a loss, at least a leasehold option would mean losing less money.

Ultimately, a leasehold property commits less capital and has a lower risk profile.

A private property is a great retirement asset, but it may not be necessary to make it a freehold

It is true that some of the most prime regions, such as Tanglin, Cluny, Orchard, etc. have properties that are good retirement assets. However, it’s unlikely that the savvier investors are buying there just because the properties are freehold. They are buying there for long-term value due to the location.

From a personal finance perspective, it’s also worth considering that a cheaper (leasehold) property can be paid off sooner or with less interest over the years. It’s seldom worth pushing your loan tenure too close to retirement, just for the sake of having a freehold condo.

Simply put, find a well-located and well-priced condo for your retirement asset; whether or not its freehold is a secondary concern

The key parameters are:

Affordability – Your monthly repayments should not be more than 30% of your monthly household income.
Rental income and retirement targets – If your targeted retirement income is $4,000 a month, and the property can produce $4,000 a month, then does it really matter whether it’s leasehold or freehold?
Targeted appreciation rates – Based on your retirement planning, you might target a certain rate of return (e.g., effective gains of 3% per annum when you sell). This must be the first priority. If you find that a freehold property that can do it, then go for that property. But if you find a leasehold property that can do it, don’t hesitate to go for that instead. Don’t be too hung up over lease status.

If you’re currently pondering a freehold (or leasehold!) condo for retirement, I can help you make specific comparisons. Do reach out to me for direct help, and I can advise you on whether the property meets your retirement objectives.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post Is It Still Worth Buying A Freehold Property For Retirement? appeared first on Holland Property.

Is It Still Worth Upgrading To A Condo In 2024?

hollandproperty — Mon, 18 Dec 2023 12:47:19 +0000

Is It Still Worth Upgrading To A Condo In 2024?

As 2023 comes to an end, home loan interest rates are up, and private home prices are higher than they were in previous years (although frankly, home prices rising is something that can be said of most years). This has led some HDB upgraders to reconsider their motives: in light of higher costs, is it still worth making the jump to a private, non-landed property?

There’s no single answer that’s right for everyone; but here are some of the main considerations, in making your decision:

Can I Afford To Upgrade from an HDB To A Condo In 2024?

Before we decide if it’s worth doing, we need to consider if it’s even practical, or the numbers involved.

Let’s look at average new launch prices, as we head into 2024. As I write this, we are nearing the end of December 2023:

As we can see, prices of new launches have slowed over the past quarter, with new launch prices averaging $2,136 psf.

Resale condos have seen a sharper spike in end-December 2023, but this is somewhat expected; with new launch prices being so high, I would expect more upgraders to be looking for resale options. As an aside, there were a lot of new launches in 2023; and there is a knock-on effect where new launches will also pull up the prices of nearby resale condos.

Even with the uptick, resale condos average just $1,645 psf.

We’ll use a three-bedder condo as an example for HDB upgraders

A three-bedder condo is roughly around 1,000 sq. ft. We use this size because, practically speaking, most HDB upgraders are families; so one and two-bedders are considered too small. Also, most families do not like to “upgrade” into anything smaller than a 4-room flat (around 900+ sq. ft.), especially if their former flat was bigger.

So for a new launch condo, an upgrader would be looking at a quantum of about $2.1 million, while a resale condo might have a quantum of around $1.6 million.

How viable is it to upgrade? Let’s take a look:

Cost for upgrading from an HDB to a resale condo:

The average cost of a three-bedder, resale unit is about $1.6 million. We will assume the upgrader has sale proceeds of around $600,000*, after selling their flat. This means they need to bridge an amount of about $1 million.

The initial down payment, assuming a maximum loan quantum, is 25% of the property price. This means they need $80,000 in cash, plus $320,000 in cash or CPF. After paying this amount ($400,000), they’re still left with $200,000 in cash from the sale of their flat.

The remaining loan they need is $800,000. Assuming a floor rate of 4%, and a 25-year loan tenure, this comes to about $4,223 per month. Assuming a TDSR limit of 55%, this requires the borrowers to have a combined income of at least around $7,600.

Cost for upgrading from an HDB to a new launch condo:

This is much tougher, as the average quantum is now around $2.1 million. Again, we’ll assume the previous flat was sold at $600,000*.

The required down payment is (first 5%) $105,000, followed by (next 20%) $420,000 in cash and / or CPF. After paying this amount, they will have only $75,000 left.

Assuming they pay the $75,000 into the property as well, they still need a loan quantum of $1.5 million.

At a 4% interest rate, assuming a 25-year loan tenure, the monthly loan repayment is around $7,920 per month. This would require a minimum combined income of about $14,400 per month.

You can see that, barring big developer discounts, the majority of HDB upgraders in 2024 will be much more comfortable with resale condo prices; but for those who have higher-value flats to sell (e.g., DBSS flats, flats at Pinnacle @ Duxton), the sale proceeds may be sufficient to bridge the gap to even a new launch condo.

*For simplicity’s sake, we will assume they have no outstanding home loan, and a sufficient amount in cash for the down payment. There are also other costs, such as stamp duty, agent’s fee and legal fee, which are not factored in here. For a more complex breakdown, do reach out to me and I can help you work out the numbers specific to your situation.

Is upgrading from HDB to condo worth the cost?

This will depend on the following factors:

Your ability to cope with the higher interest rates going forward
The role that the condo will play in your retirement
For younger buyers, potential delays in right-sizing
Whether you see value in cash-out refinancing as an option
The condo as a “safety margin”

1. Your ability to cope with the higher interest rates going forward

Singapore home loans are based on SORA rates. It’s a combination of your bank’s spread, plus the underlying three or one-month SORA rate (these are the most common home loan packages).

The higher the SORA rate, the higher your home loan interest. You can check historical rates here. SORA rates as of end-December 2022 were at 2.9%, but they reached over 3.7% as of end-2023.

The rate hikes are expected to slow in 2024, but they’re still likely to head upward in the near-term. Rates are also nothing like what we saw in the pre-Covid period, where 2% was the norm.

That being said, note that the floor rate for the TDSR (see above) assumes a 4% interest rate, which is already higher than the average rate – so if you can pass the TDSR, odds are you can handle the higher interest.

2. The role that the condo will play in your retirement

When it comes to resale gains, private homes still have a clear edge.

Over a 10-year period, private home prices (resale only) rose between $1,259 psf to $1,645 psf. This is an increase of about 30.6%.

In the same time frame, HDB flat prices rose from $461 psf to $571 psf. This is an increase of about 23.8%:

We also need to consider that Singapore has an ageing population and that non-Singaporeans cannot buy HDB flats. By the year 2030, about ¼ of all Singaporeans will be aged 65 and older.

Consider that when the next generation passes on, there will be a lot of vacant HDB flats. Children probably cannot inherit these from their parents, as you cannot own more than one HDB flat. At the same time, non-Singaporeans cannot absorb this supply of leftover flats.

In such a high-supply-lower-demand scenario, there’s a serious risk that HDB flats will no longer see the appreciation they have in past decades.

So for those thinking long-term and into retirement, this is a factor worth considering.

3. For younger buyers, potential delays in right-sizing

If you are below the age of 55, and you sell off a private home, you’ll need to wait 15 months before you can buy a resale flat (for a BTO flat, you need to wait 30 months). This does not apply to those aged 55 and above, including their spouses, who are moving to a 4-room or smaller resale flat.

This is a serious consideration for younger upgraders. If you make the jump to private, and later find you cannot sustain the costs, you will have a problem downgrading to a flat again. Even after liquidating the condo, you may incur additional costs in the form of rental needs, while waiting to be able to secure a flat.

As such, those who are not in a financially stable situation may not find the risk to be acceptable.

In general, it’s best to upgrade only if the monthly loan amount is kept to around 30% of your monthly income (even if the TDSR allows for more).

Also, if possible, leave enough money in your CPF funds to tide you over at least a year (longer the better) in case you are out of job for a while.

4. Whether you see value in cash-out refinancing as an option

One lesser-known advantage of owning a private property is cash-out refinancing*. This allows you to take out a loan against your property, at a much lower interest rate than personal loans, credit cards, etc.

You might, for instance, be able to borrow up to 75% of your property value, minus your CPF usage. As of 2024, most banks would have an interest rate that’s broadly similar to mortgage rates.

Taking out even a 50% loan against a $1.6 million resale condo is quite sizeable: it can fund a child’s overseas education, or start a business venture, without the high interest of many private education loans, business loans, etc.

It can also be seen as a way to monetise your property, without having to sell or rent it.

*Read my article on Wealth Accumulation Through Equity Loan

5. The condo as a “safety margin”

If you have a private home, and your financial situation turns bad, you can at least right-size back to an HDB flat. In this sense, the condo acts as a safety margin of last resort.

If you have an HDB flat, your only choice is to right-size to a smaller flat; and it’s likely that the proceeds are slim, and may not get you out of your financial complications.

As such, some buyers find emotional peace-of-mind, in knowing that their home can provide for them in alternative ways. This can be a strong motivation to upgrade, more so than factors like having a nice pool or view.

In essence, those who view their property as being an investment, retirement asset, or fallback are still likely to derive value from upgrading. However, as of 2024, the combination of higher interest and prices unfortunately restricts this possibility.

It’s likely homeowners who have higher-value flats, or paid-up properties, who are in a stronger position to upgrade. For those who have just started with their first home, a longer period of disciplined savings may be necessary, before they make the leap.

In addition, given the higher quantum of new launches, a better question may be: is it worth upgrading to a new launch condo? This is likely to be an issue that upgraders will grapple with, in the coming year.

For a personalised look at whether you should upgrade, do contact me for a consultation.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post Is It Still Worth Upgrading To A Condo In 2024? appeared first on Holland Property.

How Your Property Can Still Provide For Retirement In 2023 And Beyond

hollandproperty — Fri, 10 Nov 2023 20:53:00 +0000

How Your Property Can Still Provide For Retirement In 2023 And Beyond

Retirement planning is paramount to many Singaporeans. Beyond the traditional portfolio of stocks and bonds, real estate has always been a compelling and tangible asset class that can redefine your golden years. In this age of uncertainty, where economic landscapes can shift unpredictably, the stability and resilience of real estate make it a beacon of hope for those seeking a robust retirement strategy.

The past few years have seen significant changes in the Singapore property market – from a sudden upsurge in prices to a new Prime and Plus model of flats to increased stamp duties. To top it off, we’re headed into a more volatile economy, due to external factors like wars in Europe and the Middle East. This has led to questions over whether residential property remains “the way to go” as a retirement asset, and how expectations have changed.

HDB flats as a retirement asset?

HDB resale flats

In considering HDB flats as a retirement asset, let’s first look at the situation with resale flats today.

At the time I’m writing this, it’s November 2023. Here’s a snapshot of prices today, and how far they’ve moved in the aftermath of Covid:

Note: All data is from Square Foot Research

HDB flat prices saw their sharpest uptick in prices throughout the post-Covid period. Resale flat prices now average $572 psf across Singapore, up from $452 psf in 2020.

Prior to this, resale flat prices had actually declined since the last peak in 2013. To grasp how big a change this is, the past two to three years have managed to reverse almost eight years of decline since 2013. Here’s what it looks like over a decade:

Back in 2013, the government imposed the Mortgage Servicing Ratio (MSR). This capped monthly loan repayments to no more than 30% of monthly income, when buying an HDB property.

On top of that, HDB no longer allowed sellers to do a valuation report before selling their flats because they were using the valuation as a benchmark to set their prices, resulting in Cash Over Valuation (COV).

The issue of lease decay, especially for older flats, came into the spotlight in 2017 when our minister, Mr. Lawrence Wong, cautioned that not all flats will be eligible for the Selective En Bloc Redevelopment Scheme (Sers). This caused many homebuyers to shun older flats.

The result was a gradual decline in resale flat prices, making them much more affordable right up to Covid. But once Covid struck, construction of BTO flats came to a screeching halt. Even after the lockdown period, the resumption of construction was very slow. Completion of BTO flats was delayed. Naturally, many people turned to resale flats. This caused a surge in demand for resale flats, thus pushing resale flat prices very quickly over a very short time, as you can see above.

(I wrote in May 2021 what is driving the red-hot HDB resale market)

The introduction of the new Prime and Plus housing models may compound this effect, at least over the near-term.

BTO flats new classifications: implications for HDB flats as a retirement asset

In August 2023, it was announced that the old system of mature versus non-mature neighbourhoods would be scrapped. Flats will come in three categories: Prime, Plus, and Standard by 2H2024.

Prime flats are located in central areas, such as Queenstown or Tanjong Pagar. Some currently existing Prime projects include Verandah @ Kallang, Farrer Park Fields, and Alexandra Vale.

Plus flats do not yet exist at the time of writing. However, these are flats that will be closer to malls, MRT stations, or their individual neighbourhood hubs (although the neighbourhood may be a fringe area.) The first of these will be Bayshore, to be launched in 2024.

The main differences between Plus, Prime, and Standard (normal) flats include:

Plus and Prime flats will enjoy more subsidies than Standard flats but will be subject to a Subsidy Recovery (SR), which must be paid back when the flat is sold. This applies only to the first batch of buyers, and the amount varies for each project. This is to make up for the bigger subsidies involved.
There is a 10-year MOP on Plus and Prime flats, including for resale buyers.
During the 10-year MOP period, owners can’t rent out the entire flat or invest in a private property.
Other eligibility requirements, such as the income ceiling, continue to apply to Plus and Prime flats, even at the point of resale (normal resale flats have no income ceiling.) The exact list of requirements for Plus flats will be disclosed in greater detail when the information becomes available.

However, existing resale flats, which are close to Plus and Prime flats, have seen no rule revisions. These flats now have an equally good location, but also don’t suffer from restrictions like the 10-year MOP, or some eligibility factors like the income ceiling. As you might expect, this has caused many sellers close to Prime projects to ramp up their asking price. They have all of the advantages and none of the drawbacks.

However, existing resale flats, which are close to Plus and Prime flats, have seen no rule revisions. These flats now have an equally good location, but also don’t suffer from restrictions like the 10-year MOP, or some eligibility factors like the income ceiling. As you might expect, this has caused many sellers close to Prime projects to ramp up their asking price. They have all of the advantages and none of the drawbacks.

This being said, the momentum in the resale flat market is likely unsustainable

Those who sold their flats in the aftermath of Covid may well have seen windfall returns, compared to the eight years preceding the pandemic (ref: the chart above.) However, this surge in resale flat prices is unlikely to last.

HDB aggressively ramped up flat construction after Covid, with the deliberate aim of keeping resale prices low. In 2022, for instance, HDB completed 23,782 new flats, which is the highest amount since 2017. The government built so aggressively, that HDB incurred a $5.38 billion deficit to ramp up supply.

The number of BTO flats, along with interest in Plus and Prime flats, is likely to siphon some demand for resale units. In fact, given the high prices of resale flats, some first-time buyers have no choice other than to wait for BTO units. And in the long term, these new flats will end up joining the resale market, thus satisfying demand.

As such, I wouldn’t be over-optimistic regarding flats as long-term assets, despite the surge in prices over the past couple of years. Covid was an outlier event and not part of a natural market cycle.

Implications regarding resale flats as retirement assets

There are two notable implications going forward:

1. Plus and Prime flats show a repositioning toward ageing-in-place

One of the consequences of Plus and Prime flats is the phenomenon of self-sorting. By this, I mean that buyers of these flats are unlikely to want to upgrade, and hence take themselves out of the competition for standard flats.

Both Plus and Prime flats are not ideal, for those who want to make the jump to private property. The main reason is time: the MOP starts from the point of key collection, and stretches for 10 years. As such, if you factor in construction time of four to five years, buyers of Plus and Prime flats need to wait 14 to 15 years. During this time, private home prices would have appreciated even more (see below), thus making it harder to move up into condos.

The further restrictions on Plus and Prime flats – such as having an income ceiling and subsidy recovery – also limit the flats’ future gains; the wealthiest buyers would be earning too much to purchase these homes (the income ceiling on an HDB flat is $14,000.)

For these reasons, those who seek to upgrade will choose standard resale flats instead.

That the government placed so many restrictions on Plus and Prime flats also clarifies its position: these homes, which are in high-demand areas, are angled at those who want to live in them indefinitely; possibly for their entire lives. This shows a growing regard for HDB flats’ roles as pure homes, rather than investment vehicles.

Simply put, you may be rewarded with a better location, if you’re willing to stick with the same flat for the rest of your life.

Both Plus and Prime flats are not ideal, for those who want to make the jump to private property. The main reason is time: the MOP starts from the point of key collection, and stretches for 10 years. As such, if you factor in construction time of four to five years, buyers of Plus and Prime flats need to wait 14 to 15 years. During this time, private home prices would have appreciated even more (see below), thus making it harder to move up into condos.

2. Increased supply could moderate long-term appreciation

The larger number of flats, which will eventually enter the resale market, will place downward pressure on resale flat prices. Based on lessons learned during Covid (and the subsequent shortage), one possible outcome is HDB moving away from the slow BTO model.

That is, HDB may decide to build-as-appropriate, rather than wait to see sufficient interest before commencing sales and construction (the current BTO model.) If this happens, we will see even more supply in the market going forward.

Simply put, I think HDB has learned its lesson from the last supply crunch and will keep numbers high to avoid a repeat spike in flat prices.

Private condo as retirement asset

New launch condos

New launch condos are still priced at dizzying heights, averaging $2,339 psf, up from $1,815 psf back in 2020. Do note that the price has actually dipped slightly from February 2023 though, which saw a peak of $2,627 psf.

It’s quite a struggle for new launch prices to fall, even as more condos are completed. This is because developers are facing high land costs, increased material and labour costs, as well as higher ABSD and Land Betterment Charges, which limit the amount of discounts they can give. Profit margins have also been very slim.

Despite the high prices of new launch condos, many investors still prefer them to resale condos.

See my article on 6 reasons why new launch is better than resale as investment property.

Resale condos

In the resale condo market, prices also soared to an average of $1,585 psf, rising from $1,261 psf back in 2020. This is also, to some extent, related to the uptick in new launch prices (new launches in a neighbourhood have a knock-on effect, and will also cause local condo prices to rise slightly.)

As with HDB flats, however, the supply crunch is being resolved. This year, a number of particularly large meta-developments, such as Normanton Park (1,862 units!) and Treasure at Tampines (2,203 units!) will be completed. This is likely to soak up demand from the existing market, and we’re already seeing the impact in rental markets. In August 2023, rental rates were already slowing from a six-year high, as more units finally became available.

However, it remains to be seen if recent ABSD hikes won’t curb resale supply. Owners of multiple properties may be resistant to selling, even in collective sales.

Consider that, if you bought a second condo without ABSD before, selling now means that your replacement unit will cost 20 percent ABSD. As such, en-bloc sales have yet to see a resurgence, despite the 2017 tranche of properties already being completed and sold.

Hence, it’s unlikely that private property prices will fall per se though volume has dropped; at best, we may see a slower pace of price hikes.

As the last round of cooling measures was so recent though (June 2023), we will have to wait a while to gauge the extent of its impact. For now, it’s possible the full consequences of the ABSD rate hike may not yet have fully sunk in. A chief concern here is the ability of individual buyers to take on a full mortgage.

Because the ABSD rate is so high, investment properties make the most sense if you can decouple to buy separately (i.e. a husband and wife both buy units under their individual names, to avoid incurring ABSD). The problem is that, with home prices and interest rates currently high, it is tougher to qualify for separate home loans. For now, it’s a toss-up on whether many can afford to decouple and dodge ABSD.

Implications of condo units for retirement planning

Due to higher costs, it becomes ideal to upgrade before the age of 40, when financing restrictions start to bite
There may be more impetus to upgrade if possible, as flats become less investment-oriented
En-bloc sales have become less reliable as an exit strategy

1. Due to higher costs, it becomes ideal to upgrade before the age of 40, when financing restrictions start to bite

Consider decoupling to avoid ABSD. This requires each spouse to take on an entire mortgage individually. Given that a 1,000 sq. ft., new launch unit now averages $2,339 psf, this means at least one spouse is taking on a family-unit with a quantum of over $2.3 million.

On top of this, the Total Debt Servicing Ratio (TDSR) caps monthly loan repayments to 55 percent of monthly income, using a floor rate of four percent per annum.

Now assuming a maximum loan quantum of 75 percent of the property value, at 25 years, this is a loan of around $1.67 million. This is a monthly repayment of $8,815 per month, which would require an income of over $16,000.

This is already quite a high bar, and most buyers would end up having to make a bigger down payment to meet the TDSR. But if you wait past the age of 40, your maximum loan tenure will decrease (as your age plus the loan tenure cannot exceed 65, or else maximum financing falls to 55 per cent.). Shorter loan tenure will translate into higher monthly mortgage payments.

In short, those who want dual properties without paying ABSD, and rental income after retirement, need to act sooner. The older they get, the harder it is to get financing; and again, property prices may not fall, so much as just slow the pace of increase.

In short, those who want dual properties without paying ABSD, and rental income after retirement, need to act sooner. The older they get, the harder it is to get financing; and again, property prices may not fall, so much as just slow the pace of increase.

2. There may be more impetus to upgrade if possible, as flats become less investment-oriented

HDB has given clear signals that flats are intended for home ownership first. Investment benefits are secondary; it’s nice if it happens, but it’s not the primary benefit. This is not entirely a bad move, by the way, and it’s much fairer to those who seek pure owner-occupancy.

However, this could fuel motivation to own a private property, with regard to having a retirement asset. Because if all else fails and retirement funds run out, a condo can still be sold off while you right-size to a flat. But if all you have is a flat, there’s not much left to downgrade from (except perhaps to a smaller flat, or to sell off the excess lease, which may only be a marginal help.)

They are not, however, as lucky as the previous batch (from the 2008 to 2013 era) who were able to buy without ABSD concerns.

3. En-bloc sales have become less reliable as an exit strategy

Unless sale proceeds for en-bloc become so high that sellers can replace the property, even despite 20 percent or higher ABSD, I would expect tooth-and-nail resistance to collective sale. Doubly so from investors who are foreigners or corporate entities, as their replacement units would cost 60 percent ABSD (!)

Developers are already facing higher ABSD rates and financing rates, and the surge of Chinese developers with deep pockets – as we saw in 2017 – is unlikely (China’s real estate market is in a severe crisis, so we shouldn’t expect their big developers to come and throw money around like before.)

For these reasons, I would be cautious of counting on en-bloc sales as an exit strategy going forward. Private property can still be a retirement asset in terms of providing rental income, or resale gains to individual buyers; but not in the sense of developer buyouts.

For insights into a specific property for retirement, or a review of your property progression in 2024 and beyond, do contact me for personalised help.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post How Your Property Can Still Provide For Retirement In 2023 And Beyond appeared first on Holland Property.

4 Options After HDB Flat Reaches Minimum Occupation Period (MOP)

hollandproperty — Sun, 17 Sep 2023 11:53:13 +0000

4 Options After HDB Flat Reaches Minimum Occupation Period (MOP)

HDB Minimum Occupation Period (MOP), So What?

What’s the fuss about HDB Minimum Occupation Period (MOP)?

Some people look forward to their BTO (Build-To-Order) HDB flats reaching the MOP like their ORD (Operationally Ready Date). Those who had served their two-year national service would know the feeling.

To the majority, however, MOP may mean nothing.

Don’t get me wrong. It’s perfectly normal. After all, you had waited in great anticipation for your BTO flat (likely your first matrimonial home) five years ago. You had put your heart and soul (and of course, money) to renovate the flat. It is your pride and joy. So, it makes sense to continue to enjoy it for as long as you can.

To others, it signals the beginning of their roadmap to realise their property wealth planning or fulfil their aspirations of upgrading to private property.

More Are Selling Their BTO HDB Flats Upon Reaching MOP

Based on a Straits Times report dated Jan 30, 2020, in 2019 the sale of HDB flats less than 10 years old numbered 4,578, which was an increase of 33.4 per cent over the preceding year.

Over the years, more and more HDB owners sold their flats within a year upon reaching MOP:

2016 6.5% (811 units)
2017 9.5% (1,091 units)
2018 11.8% (1,392 units)
2019 12.2% (2,736 units)
2020 13.4% (2,919 units)

It shows that to a growing number of Singaporeans, their HDB flat is not meant to be a home for life but a stepping stone to a bigger plan.

I have helped several HDB owners fulfil their upgrading dreams by selling their flats upon reaching MOP.

A 3-room flat owner in Yishun contacted me months before his flat reached MOP to discuss the plan to sell it and upgrade to private property. Immediately upon reaching MOP, I put the flat on the market. Within a few weeks, it was sold for a record price of $450,000 with a gain of almost 100%.! The record still stands today.

Very recently, I sold a 4-room flat in Toa Payoh, a few months after MOP, at $950,000 within a week. The high-flying young couple intends to buy a landed property.

These are just a sample of many HDB owners who cashed out on their MOP flats to realise their upgrading aspirations.

It shows that to a growing number of Singaporeans, their HDB flat is not meant to be a home for life but a stepping stone to a bigger plan.

In the last few years, we have seen an increasing number of HDB resale flats sold for over a million dollars. They are not just flats in central locations but include estates such as Woodlands, Bukit Batok, Yishun and Jurong East.

These HDB owners recognised their acres of diamond and sold their highly-valued flats to upgrade to private property.

What is HDB Minimum Occupation Period (MOP)?

MOP is what sets public housing (HDB and EC) apart from private property.

Anyone who buys a BTO HDB flat, resale HDB flat and new Executive Condominium (EC) are all subject to the five-year minimum occupation period. During these five years, owners are not allowed to sublet the whole flat or sell it on the open market. If the flat owner has the approval to sublet the entire flat (eg. work or study overseas), the period of subletting will not be part of the five years.

Why Is There An HDB Minimum Occupation Period (MOP)?

The underlying reason why the government imposes the minimum occupation period for public housing is to curb speculations.

HDB flats are meant primarily to provide affordable housing for the public and not for profiteering.

I frequently came across ‘investors’ who entertained the idea of buying an HDB to rent out since the entry price is relatively low, and the rental yield is attractive. But the moment they heard that they can’t rent out for the first five years, that shattered their dream.

HDB MOP is an Important Milestone

HDB MOP is an important milestone because this is the point at which you can rent out your entire flat, or sell it on the open market.

But before you think about what to do, you must ask yourself if you have a game plan. Most people have no such plan, so they are happy to maintain the status quo by staying put. It is perfectly all right to be in this group of people. Upgrading and property wealth planning may not be for everybody. Different strokes for different folks.

If, however, you are keen to embark on the journey to grow your wealth through property investment, then you need to start planning. It is ideal for those who are in the 20’s to early 40’s. The younger you start, the better.

If you plan to sell to upgrade or to invest at the same time, it doesn’t mean you need to do it immediately upon hitting five years. Sit down with an experienced property agent and discuss your goals and aspirations, then devise a game plan.

Failing to plan is planning to fail.

Once you begin with the end in mind, then you can strategise how to execute the plans.

Don’t Sit On It Once Your HDB Flat Reaches Its MOP

It is not wise to wait too long to start planning.

I have clients who already started planning six months before the MOP.

If you intend to sell, the best time generally is within the first five years after MOP when the price is at its peak. In my opinion, it is better to sell earlier when your flat is still in tip-top condition. It is easier to sell and at a good price while the conditions of your flat are still very new.

It is not unusual for MOP flats to sell at more than 100% of their original prices. 50% to 70% is the norm.

Once you know your needs and plans, then you can consider the different options when your flat has fulfilled the HDB MOP:

Treating your flat as a pure rental asset and buy a private property
Purchasing another HDB flat
Upgrading to a private property
Taking a “sell one, buy two” strategy

Four Options To Consider Once Your HDB Flat Reaches MOP

1. Rent Out Your HDB Flat and Buy a Private Property

You may consider keeping your flat instead of selling it.

It might be an interim measure, such as by couples who need more time to accumulate cash before they upgrade. It can also be a contingency plan for those facing financial difficulties.

The idea is to move in somewhere else (such as with your in-laws) for a certain period. During this time, you rent out your entire HDB flat for income. This can help accelerate your savings rate to upgrade to a private property.

But do be cautioned that if you have an irresponsible tenant who messes up your nice flat, it may affect the value when you decide to sell.

If your flat is only five year old, likely it would still be in a pristine condition. That not only means easier to sell but also can fetch a higher value.

If you are PR, do take note this option is not for you because you are not allowed to sublet the whole flat. If you intend to purchase a private property, you would be required to sell off your flat.

If you intend to buy a private condo while keeping the flat for rental income, do consider the cost.

You will have to pay 20% ABSD.

If you were to buy a $1 million condo and are slapped with a $200,000 ABSD, that’s equivalent to 4.16 years of rental income (assuming you rent out your flat for $4,000 a month). Hence, from an economic point of view, it doesn’t make very good sense.

Furthermore, the rent is not much different between a five years old flat and an old renovated flat, even though the disparity in their resale values is great. From that standpoint, it is a waste to keep your five years flat for its rental income. Besides, at some critical points, the value of the flat will start to depreciate.

For those who have planned ahead even at the point when they purchase their BTO flats or resale flats with the intention to keep their flat upon meeting the MOP, the couple would have considered buying as owner-essential occupier instead of joint-owners. This would have saved them the ABSD.

If you intend to buy a private condo while keeping the flat for rental income, do consider the cost. You will have to pay 20% ABSD.

2. Sell Your HDB and Purchase Another HDB Flat

The idea of selling an HDB flat to buy another has fallen out of favour in recent years. Due to the declining prices of resale flats, there’s a chance these older flats won’t suffice as retirement assets.

HDB resale flats will likely see depreciation as they get older despite the current red-hot HDB market which was partly caused by the Covid-19 pandemic. The current supply shortage of resale flats and delay of BTO flat completion which result in the spike in HDB prices may not last indefinitely.

Since 2013, the overall HDB flat prices have trended downward after enjoying a strong run in the preceding years. This is due to a realignment of government policies to treat HDB flats more as a roof over your head than an investment. Also, diminishing lease of HDB flat has become a sensitive issue in recent years.

(This is good news for those who haven’t bought a home yet, as it keeps prices affordable; it’s not so good for those who seek to use their property as a retirement asset, or for wealth accumulation).

Selling your BTO flat and buying a resale flat is not always bad.

It might be suitable for those who are already in a ‘retirement mode’. Downgrading to a smaller flat can free them up with cash for their retirement funds.

There are also others who need a bigger home as their families get bigger and they can only afford to upgrade to a bigger flat instead of private condo. So there is no right or wrong option but a matter of needs, affordability and prudence.

So there is no right or wrong option but a matter of needs, affordability and prudence.

3. Upgrade to a Private Property or Executive Condominium (EC)

This is the time-worn, traditional method used by Singaporeans over the past few decades when their HDB flats reached MOP. You can sell the flat, and then use the cash proceeds to make the down payment to a private property.

Do take note if you were to buy a private property first then sell your HDB flat, you will need to pay 20% of ABSD (Additional Buyer Stamp Duty). Subsequently, when you sell your flat within six months, you can get a refund of the ABSD, provided the new purchase is under joint-ownership of the couple. But having to pay the ABSD first may affect your financial planning. So do plan your timeline properly.

On the other hand, if you were to upgrade to a new Executive Condo (EC) from your HDB flat, ABSD is not applicable.

For those who choose to upgrade from an HDB to private condo, it is to enjoy the improved facilities and privacy of condo living. However, there’s another advantage to doing this: it allows you to ensure your home is a better appreciating asset.

As such, many flat owners choose to use the proceeds of their flat to upgrade to a private condo or an Executive Condominium (EC)*. Assuming securing a full bank loan at 75% Loan-To-Value (LTV), you need just five per cent of the condo price in cash, while another 20 per cent can come from cash/CPF.

So you’d need $250,000 for a $1 million condo; it’s usually possible to meet this amount through the sale of your flat.

*EC is a viable alternative to a private condo, provided your household income does not exceed $16,000. Even though it has a similar five-year MOP, the prices are about 20 to 30 per cent cheaper than private condos.

Upgrading to a private condo is not as challenging or far-fetch as many may think. Supposed a couple (both aged 35) with a combined income of $6,000, they can possibly borrow up to $800,000. If their flat is worth $600,000, they can buy a condo worth up to about $1.3 to 1.4 million.

If you need help with the numbers, please feel free to contact me for a non-obligatory discussion.

Upgrading to a private condo is not as challenging or far-fetch as many may think.

4. Take a “Sell One Buy Two” Strategy

This is a popular strategy for dual-income families. Using this approach, the sales proceeds from the flat are used to purchase two properties; one by each spouse. For example:

Case Study:

Mr and Mrs Wee sold their five-room flat for $700,000 with an outstanding $100,000 loan. They have $40,000 each in their CPF account.

They want to buy a $1.5 million condo for own stay (under husband’s name), and a smaller $800,000 condo (under wife’s name) for investment. With the sales proceeds ($600,000) and CPF, they can pay the down payments of $375,000 and $200,000 for each of the respective purchases (assuming they have no problem taking the maximum 75% loan).

Later in life, they have the option of switching. For example, they could move to the smaller condo and rent out the bigger one, once the children have moved out.

This approach allows the family to hold two properties, without paying the Additional Buyers Stamp Duty (ABSD). This is because, after selling the flat, each spouse is effectively treated as a first-time home buyer (they have no other property to their name).

This strategy does require a certain level of income however, as both the husband and wife will each be taking on individual mortgages. Proper financial planning is crucial.

I can help you through the main concerns of both transactions; do contact me for a non-obligatory discussion.

Read in more details: Sell One Buy Two Why & How?

Start Planning When Your HDB Flat Is Reaching Its MOP

Meeting your MOP for your HDB flat presents a huge financial and lifestyle opportunity. Don’t let inertia get in the way of taking full advantage of it.

I have come across so many people who never take action because they suffer paralysis by analysis. They have so many ‘what if’ that hold them back. In the end they fall back into their comfort zones.

Take action today! Make the first step to explore your various options.

Consider how your property assets fit your overall portfolio and think long term (15 or 20 years) rather than just in the present.

You can make an appointment with me for a free consultation via Zoom using the calendar below.

“If you opt for a safe life, you will never know what it's like to win.”

Richard Branson (Screw It, Let's Do It: Lessons in Life)

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post 4 Options After HDB Flat Reaches Minimum Occupation Period (MOP) appeared first on Holland Property.

What Should You Buy For Your First Home?

hollandproperty — Mon, 11 Sep 2023 17:22:00 +0000

What Should You Buy For Your First Home?

Singapore has one of the highest home ownership rates globally, standing at more than 90 per cent of its population.

Every Singaporean aspires to own their own home, be it newlywed couples buying their marital home or singles their bachelor pad. Others purchase for retirement and investment.

Since buying a property is possibly the most significant investment of our lives, it requires much thought and proper financial planning.

Take, for instance, Jonathan and Judy. Both of them just returned from overseas after spending several years pursuing their education and acquiring some work experience. They decided to come back to Singapore, get married and start a new home.

Inevitably, one of the most immediate needs is to sort out their housing needs. They could have stayed with their parents but felt that it would be ideal to have their own private space as a newlywed couple.

So what are their choices based on their needs and budget?

Option 1: Build-to-Order (BTO) HDB Flat

BTO flat is, by default, the number one choice of many Singaporeans.

Buying a BTO flat has many advantages.

Since heavily subsidised by the government, they are cheaper than resale flats. This means it will likely enjoy capital appreciation potential. Those who are lucky enough to secure a BTO flat is akin to striking a lottery. At the end of the five-year minimum occupation period (MOP), many would sell their flats for a tidy profit. It is not uncommon to enjoy 30 per cent gain or more.

My clients, Ali and Fatimah (not their real names), paid $240,000 for their 3-room BTO flat in Marsiling. After staying for five years, they sold it for $320,000. That translated to a 33.3 per cent gain!

Most home buyers prefer BTO flats to resale flats also because they come with a fresh 99-year lease, attractive design, aesthetic appeal and modern amenities.

The inclusion of flooring and wall tiles in some parts of the flat helps to save some renovation costs. Furthermore, if you opt for the Optional Component Scheme (OCS), you can enjoy more savings since the additional cost is part of the total flat price.

During the recent National Day Rally, PM Lee Hsien Loong unveiled a future change in public housing policies to reduce the ‘lottery effect,’ especially in prime locations.

With the next change which will be implemented from the second half of 2024, BTO flats will be categorised into Standard, Plus and Prime flat types.

The Plus type BTO flats are those in choice locations, and the Prime type in the choicest and most central locations.

These two types of flats are the most sought-after because of their resale values upon meeting the Minimum Occupation Period (M.O.P.).

However, the MOP period for these flats will be increased from 5 years to 10 years.

Furthermore, when selling on the open market, the government will claw back the subsidies given for the flats.

For the Prime type, other conditions include an income ceiling and 10-year MOP for the buyers of such resale flats.

With these changes, it might no longer be attractive to those who intend to buy BTO flats with the intention of reaping a huge profit when selling on the open market.

10 years is a long time to wait.

Having the subsidies clawed back by the government will eat into any potential profit.

And it will be harder to find buyers who need to meet the income ceiling because their buying power will be capped.

If you are buying a BTO flat with the pure intention of long-term staying, then it will be a good option.

Lowest price among all options.
Heavily Subsidised.
Brand New flats with the modern amenities and common spaces.
Fresh 99 years lease.
Capital appreciation potential is the highest among HDB flats, at least for the time being.
Minimal renovation required.

4 – 5+ years waiting period.
Coupled with the 5 to 10 years MOP period upon taking over the home, the opportunity cost is very high.
Smaller sizes than older resale flats.
Limited supply.
Luck of draw.

Option 2: Sale of Balanced Flats (SBF)

If you die die must own a brand new flat but miss out during BTO flat launches, you can try your luck at Sale of Balanced Flats.

HDB SBF launches occur twice a year, usually in May and November. These are unsold flats or flats given up by successful applicants from previous BTO launches, which may have already completed or still under construction.

These flats pooled together by HDB, can be found both in mature and non-mature estates.

In May 2021, HDB launched 2,494 SBF in mature and non-mature estates such as Jurong East, Yishun, Marine Parade, Queenstown and Clementi. About 28 per cent of them are ready to move in, while the rest are still under construction.

A friend of mine was fortunate enough to secure a 4-room flat at Clementi NorthArc. The mid-floor 93 sqm flat costs $536,000, though more expensive than the original BTO price but cheaper than a resale flat. Recent transactions of MOP resale flats in the same estate are more than $800,000. Even 15-year-old 4-room resale flats in Clementi are above $700,000.

One main advantage of SBF is the shorter waiting time compared to BTO flats since they are ready for moving in or are under construction.

Whilst there may be choices of estates to choose from, the number of units is limited. And usually, the level and facing are less than ideal.

Do take note ethnic integration policy applies to SBF.

Brand New flats with short or no waiting period.
Cheaper than resale flats though higher than BTO flats
More options for locations

Limited choices of units
The level and facing of the balanced units generally not very good
Limited supply

Option 3: Resale HDB Flat

Since not everyone has the luxury of waiting for a BTO flat, there is a spike in demand for resale flats.

If you need to move into your new home FAST (about 3-4 months vs 3-5 years for BTO flats), you should consider a resale flat.

While resale flats may not be as ‘profitable’ as a BTO flat, the government gives generous housing grants to eligible buyers, making it an attractive proposition.

As of Feb 2023, the grants have increased from $50,000 to $80,000 for 2 to 4-room flats for first-timers (families), and from $40,000 to $50,000 for 5-room or larger flats.

Furthermore, those who are eligible can enjoy up to another $80,000 Enhanced CPF Housing Grant (EHG) and $30,000 Proximity Housing Grant (PHG).

With BTO flat prices hitting above $600,000, the housing grants for resale flats help narrow the price gaps.

The key difference is resale flats do not come with a fresh 99-year lease.

Read: What Is Driving The Red-Hot HDB Resale Market

On the other hand, resale flats appeal to those who want to live near their parents or preferred primary school for their children. They can afford to pick and choose the unit in terms of location, level, facing and condition. If you want massive space, you can even look for jumbo flats or executive flats that HDB has stopped building.

On the flip side, resale flats have an issue with lease decay, especially with older flats. If they are more than 40 years old, there may be a cap on the usage of CPF.

As opposed to a BTO flat, you only have to wait for the five-year MOP before you can sell and upgrade.

Ready to move in within 3-4 months.
You can choose the location, size, level, facing, etc.
Unit sizes may be much larger.

Slimmer chance of capital appreciation.
Will be subjected to CPF usage and loan restrictions if the remaining tenure of the flat and the age of the buyer is less than 95 years.
Concern about lease decay.
Dated design, amenities and common areas.
Usually requires more renovation.

A couple can opt to buy an HDB flat using one name as owner and another as ‘essential occupier’. Upon fulfilling the five-year MOP, the couple can choose to keep the HDB flat, and the ‘essential occupier’ can buy a private property for own stay or investment. However, the catch is that both husband and wife must be able to bear each of their respective housing loans.

Option 4: Brand New Executive Condo (EC)

Like BTO flats, Executive Condos (EC) are subsidised by the government. While they look exactly like any private condo built by private developers with a full suite of condo facilities, the eligibility criteria are set by HDB.

Because they are subsidised, the capital appreciation potential is high.

Minimal renovations are required for a brand new EC, just like a private condo, unless you want to turn it into a palace.

If you meet the eligibility criteria and the prices match your budget, you should seriously consider a brand new EC.

So, is new EC for everyone?

When I was doing financial planning for some clients, I found out it is not feasible for many of them.

Part of the reason is that the prices of EC have risen considerably over the last few years. Current price level averages slightly above $1,300 psf.

As a result, new ECs are now smaller than older ones to bring down the quantum prices.

The main setback for potential buyers is the loan issue. Buyers of new EC are subject to Mortgage Servicing Ratio (MSR) instead of Total Debt Servicing Ratio (TDSR) as in private condo. With the same income, you can borrow twice as much for a private condo than an EC.

The double whammy is while you can take up to 90% for an HDB loan, the maximum Loan-To-Value (LTV) for EC is 75%. The 25% downpayment is very challenging for young couples since they have yet to accumulate sufficient savings and CPF.

Another disadvantage of buying an EC is that you are also bound by the five-year MOP before you can sell or lease out.

Condominium lifestyle facilities and security without the full price tag of a private condo
Enjoy first-mover advantage since you are buying at the lowest possible price.
Enjoy high capital appreciation potential upon MOP & privatisation.
Wide choice of units.
Longer lease tenure than resale since buying new.
Minimal renovation required since it comes with finishings
Latest designs and facilities.

3-4 years waiting period followed by five years of MOP before you can rent out or sell
Smaller in size compared to HDB flats and older ECs.
Subject to MSR so less affordable than resale ECs.
Maximum Loan-To-Value (LTV) is 75%.
Can only take bank loans with no 90% loans available from HDB, thus a higher initial downpayment.

Option 5: Resale Executive Condo (EC)

Like buying a resale HDB flat, a resale EC gives you the benefit of choices on the secondary market. And there is no need to wait for years for the construction period.

A resale EC is actually more affordable than a brand new one despite the higher price. This is because your loan now comes under TDSR instead of MSR. You can borrow twice as much with the same income.

Let’s zoom into the cluster of EC and private condos at Pasir Ris Drive 3 to make a bit of comparison:

Watercolours (EC TOP 2014)
Sea Horizon (EC TOP 2016)
Seastrand (Condo TOP 2014)
Ripple Bay (Condo TOP 2015)
Sea Esta (Condo TOP 2015)

Resale EC Watercolours and Sea Horizon are between $1,134 to $1,252psf. The other three resale condos average between $1,206 to 1,325psf. So the price difference between resale EC and condos is quite minimal though slightly lower.

By looking purely at the price level, if all other factors are equal, it may make sense to have a small saving to buy a resale EC. It still boils down to the preferred project and unit. The only factor is you can’t sell the resale EC to foreigners till it reaches the 10-year mark.

Ready to move in within 3-4 months.
No MOP, so can rent out immediately.
May have upside potential upon privatisation at the 10th year mark.
Good length of remaining tenure.
More choices in terms of location, level, size, facing and conditions.
Subject to TDSR instead of MSR, hence higher affordability than brand new ECs

Units usually require some renovations.
Bank loans only. No 90% loans available from HDB, thus a higher initial downpayment.
Usually less profitable long run compared to brand new EC.
Lesser tenure than brand new.
Maximum Loan-To-Value (LTV) is 75%.

Did you know you can borrow twice as much to buy a condo/resale EC than buying an HDB/new EC?

Mortgage Servicing Ratio (MSR) applies to loans for HDB (new and resale) and new EC, whereas Total Debt Servicing Ratio (TDSR) applies to resale EC and private condos.

Under MSR, you can only use up to only 30 per cent of your gross monthly income to service your mortgage loan. On the other hand, under TSDR, the cap is 60 per cent of your total debt commitments, including mortgage loan, car loan, and credit card instalments.

So if you and your spouse are both 30 years old with a total household monthly income of $8,000 (assuming no other debt commitments), based on a 30-year loan tenure, you can borrow up to:

$534,466 to buy an HDB or new EC
$1,068,935 to buy a condo or resale EC

Option 6: New Condos

There are a lot more choices when it comes to buying a private condo than EC. Locations are usually better in terms of proximity to amenities and MRT.

One main advantage of private condos over HDB and new EC is that it is not subjected to the five-year MOP. That means you can rent it out immediately when completed or sell it (subject to Seller Stamp Duty if you sell within three years). So this works best for investors.

Private condo prices are higher than HDB flats and EC. However, you can take a bigger loan, thus making it more affordable.

If you are buying your first home, new launches mean you will have to wait for TOP. Typically, the construction can be anything between three to five years.

For those upgrading from an HDB to a private condo under construction generally means you will have to sell first.

You will have a rent a place for either case or find a temporary home during the interim period.

Read: 6 Reasons Why New Launch Is A Better Investment Property Than Resale

Higher capital appreciation potential because of first-mover advantage
Not subjected to MOP.
Widest choice of locations.
Plenty of unit choices for new launches. Can choose the layout, level and facing you like.
Usually higher quality finishings and nicer facilities.
Save on renovation costs.
Enjoy one-year defect warranty.
Eligible for a higher amount of loans since Total Debt Servicing Ratio (TDSR) applies, as opposed to Mortgage Servicing Ratio (MSR).
Lower price quantum because new condos are smaller, thus more affordable.
Progressive payment scheme helps to migitate the current high interest rates.

Highest price tag compared to HDB and EC.
New condos are usually smaller than older condos.
Need to wait 3 to 5 years of construction period.
HDB upgraders need to sell their flats first to avoid paying ABSD.

Option 7: Resale Private Condo

Buying a new condo under construction is not always feasible when you need to move in immediately.

If space is a priority for you, older condos are more spacious. The average size of a three-bedder used to be about 1,200 sf. These days, it’s less than 1,000 sf, and with more unusable space.

For HDB upgraders, buying a resale condo can be a seamless process with proper timeline planning.

The downside of resale condos, especially for older ones in their original conditions, is the cost of renovations.

Maintenance costs can also be higher with more going towards repairs and sinking funds. Over time, you will have to deal more with pipe leakages, fixtures deteriorating, ceiling concrete spalling, ageing air-conditioners in need of replacements, etc.

If the resale condo tenure is leasehold and is more than 15 years old, the chance of capital appreciation is slimmer. But on the other hand, some very old condos in excellent locations may have high enbloc potential.

Not subject to MOP.
Widest choice of locations.
Eligible for a higher amount of loans since Total Debt Servicing Ratio (TDSR) applies, as opposed to Mortgage Servicing Ratio (MSR).
Usually larger in sizes than new condos

Less choice of units in the condo you are interested in. May not have the level and facing you want.
Usually requires some renovations.
Possible issue of lease decay for older 99-year leasehold condos.
Might be subjected to CPF usage and loan restrictions.
Dated design, facilities and common areas.
Higher cost of maintenance and repairs.
Higher price quantum because of bigger sizes.

Factors in Determining Your Choice

There is no right or wrong in any of these choices because everyone’s needs and budgets are different.

What are some of the factors that will affect your final decision?

Affordability

It is prudent to buy within your means.

Start where you are, with what you have.

Have enough reserves that can last you at least six months, or better still, 12 months, in case the unforeseen happens.

Needs

Your needs based on your priorities could be space, number of rooms, workspace for work from home, convenience, facilities, etc.

With your budget, find the type of housing that matches your needs best.

Urgency of Moving In

How soon you need to move into your first home will largely determine your housing choice.

Obviously, if time is not on your side, you will have to take BTO flats, new EC and new condos that are under construction off your list.

If you are in no hurry to move in and would like to see a higher capital appreciation potential, then brand new HDB, EC or condos would be the better choice.

Location

A few factors can affect your preferred location:

Distance and convenience of travel to your workplace
Proximity to your parents or in-laws
Proximity to your children’s schools
Personal preference: lifestyle, amenities, near sea, near nature, etc

Investment Returns Potential

Different housing choices have different investment returns potential. Since most of us are unlikely to stay in the same house forever, we would like to see our property value appreciates when we are ready to sell.

If you would like to know how the various types of housings perform in the last ten years, drop me a note.

Feel free to contact me for a non-obligatory discussion should you need help in your purchase of your first property.

Danny Han is a licensed property agent since 2005.

As a kampong (village) boy growing up in Holland Village, he has so many fond memories. He grew up with pigsty (yuk!), cemetery, swamp and communal-living (with 10 families under one roof). His childhood games were gasing (spinning top), marbles, kites, spider-fighting and tree-climbing. An open-air cinema was his source of entertainment. 7^th-month Hungry Ghost wayang (Chinese opera) and getai (concert) was a once-a-year event that brought the entire village together.

What Danny is passionate about is not just about showing clients properties around Holland Village, but also enjoys sharing anecdotes and nuggets of information that are part of his growing up years.

Danny is an avid hiker and passionate foodie. He has covered most of the nature trails in Singapore, including some that are off the beaten track. Living up to his motto, “walk to eat,” he enjoys going out with his wife, a retired academician, on a food hunt across the island. He also has some foodie kakis who mix work with food. They then share their gastronomic experiences through food blogs. So do watch out, because every time he shows you a property, he will tell you what is the best food nearby!

September 6, 2025 No Comments

February 16, 2024 No Comments

January 5, 2024 No Comments

December 18, 2023 No Comments

November 10, 2023 No Comments

October 16, 2023 No Comments

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post What Should You Buy For Your First Home? appeared first on Holland Property.

Timeline Planning for Upgrading from HDB to Private Condo

hollandproperty — Mon, 11 Sep 2023 16:06:14 +0000

Timeline Planning for Upgrading from HDB to Private Condo

To upgrade from an HDB to a private condo is one step away from fulfilling the Singaporean dream. This upward mobility is a natural progression for an affluent nation like ours, where many aspire to enjoy not just homeownership but a lifestyle.

Have you taken the first step by assessing your financial status?

So with the financial planning done for upgrading from HDB to private condo, what’s next?

The next step is to do a timeline planning for upgrading from HDB to private condo.

(Please read: “Financial Guide to Upgrading from HDB to Private Condo”).

Before you start shopping around for your dreamed condo, you have to consider these options:

Keep your HDB flat and buy condo
Buy condo first then sell your HDB flat
Sell your HDB flat first then buy condo
Sell your HDB flat and buy condo concurrently

The other question is, should you buy resale or new launch? (Read my article on “Investment Property: 6 Reasons Why New Launch is Better Than Resale”)

Option 1: Keep HDB Flat and Buy Condo

Own two properties with one for rental income (can be HDB or condo)
No need to worry about timeline since there is no need to move out of your current HDB flat

Have to pay 20% ABSD
Can’t do decoupling for HDB flat
HDB flat likely to depreciate over time
Need high capital outlay for condo purchase
If you have an outstanding HDB loan, you can only take 45% loan for condo purchase

If you have fulfilled your five years Minimum Occupation Period (MOP), you are allowed to keep your HDB flat and buy a condo. You can choose to continue staying in your HDB flat or move into your new condo.

Maybe you are thinking, why not keep your HDB and rent it out since the rental yield is very attractive? Then with the rental income, you can use it to finance your new purchase. Sounds very logical?

But do take a step back and consider the disadvantages.

Firstly, since the new purchase will be your second property (HDB doesn’t allow part-sale or commonly known as ‘decoupling’), you would need to pay an Additional Buyer Stamp Duty (ABSD) of 20%. Yes, no kidding! 20% is a lot of money.

Many people loathe the thought of throwing away this considerable sum of money.

If you were to buy a $1.2 million condo, a 20% ABSD amounts to $240,000. Suppose you rent out your flat at $3,500 a month or $42,000 a year, the $240,000 ABSD will set you back by 5.71 years in rent.

Oh no! It’s like going through another round of M.O.P.!

Your HDB flat will likely depreciate over time, especially for older flats with the concern over tenure decay.

Not only that, but you would also need to fully clear your HDB loan to enjoy the maximum 75% loan for your condo purchase. Otherwise, you can only borrow 45%.

HDB prices might have gone up since Covid-19, the trend may not last indefinitely. The spike in prices is the mainly due to a shortage of supplies on the market caused by the pandemic. BTO flats were delayed. Cost of labour and materials went up. More buyers turned to resale flats instead of waiting for BTO flats. Furthermore, with more CPF grants, it makes resale flats more attractive than before.

To meet this shortage, HDB is ramping up more BTO flats to meet the demand. Construction time is also now shortened. Hence, we may see the current shortage situation stabilised over time.

On the other hand, private property prices have appreciated more than HDB prices in the last 10 years (see chart above).

Hence, to buy a $1.2 million condo without selling your HDB flat, you would need at least 25% (5% down + 20% ABSD) in cash, which is $300,000.

And if you don’t have enough CPF to cover the other 20% plus $38,600 Buyer Stamp Duty (BSD), you would need another $278,600 of cash.

This upfront capital outlay makes it out of reach for many people.

Option 2: Buy Condo First Then Sell HDB

Can carefully choose the right property
Have the time to renovate and move into the new house

Has to pay ABSD first but can claim back if new purchase is a matrimonial home (i.e. buy under husband and wife’s names) and sell the HDB flat within six months. This upfront financial commitment may present some cashflow problem.
If you still have outstanding HDB loan, the maximum amount you can borrow is 45%, so you would need more capital outlay to buy a condo.

If you choose to buy condo first then sell your HDB, the disadvantages are quite similar to the first option, namely there will be issues with ABSD and loan. The initial capital outlay is very high.

However, though you have to pay the ABSD first, if you can sell your HDB flat within six months, you can apply for remission and get back the money. This remission only applies to the matrimonial home; that is, the property must be in both husband and wife’s names. For singles, widows/widowers and divorcees, there is no remission.

On a positive note, with this option, you can shop around for your dream home without any pressure. In this way, you are more likely to make a good decision.

Option 3: Sell HDB First Then Buy Condo

No ABSD
Can take time to find the ideal home
No cash flow problem
Sell HDB at a higher price NOW than a lower price LATER

May need to find temporary accommodation after selling your flat eg. renting
Cost of renting a place during the interim period

The biggest advantage of selling your HDB first is not having to pay ABSD, thus easing your cash commitment. Plus, with the sales proceeds from the HDB, it will reduce your cash flow when paying for the new purchase.

If you are selling your HDB flat to buy a new condo launch, you will need to find a temporary place to stay before T.O.P.

If you have to rent during the interim period, you will need to factor in the cost of rental. With current rental at an all time high, this could be a deterrent. It would be ideal if you can stay short-term with your parents or relatives.

It’s also wise to book a new condo during launch to enjoy early bird discounts and first mover advantage. So, selling your flat first will free you from the time constraint to buy a new condo.

Some do not like the idea of having to move twice and having to rent for say, two to three years before the new place is ready.

However, it is wise to book a new condo during launch to enjoy early bird discounts and first mover advantage. So, selling your flat first will free you from the time constraint to buy a new condo.

Option 4: Sell Your HDB Flat And Buy A Condo Concurrently

Time to find the ideal house
Have time to renovate
No need to arrange for temporary accommodation
No ABSD if planned well

Need to have sufficient cash to pay 5% cash and Buyer Stamp Duty
Need proper timeline planning
The buyer for your flat may not be willing to grant you an extension of stay

The idea for this course of action is to time the selling and buying such that:

After the buyer for your HDB flat exercises his option to purchase, you can commit to your condo purchase. Theoretically, your buyer can’t back up after exercising OTP, so you are quite safe. But to be even safer, you wait till HDB acceptance after submitting the resale application. This is because there are cases when the buyer can’t go ahead with the purchase for various reasons.
You exercise your OTP after your buyer to avoid having to pay ABSD
Completion of your HDB sale comes before the completion of your purchase so that the sales proceeds can help to pay for the purchase. If this is not possible, you would need to apply for a bridging loan. If you need to use the CPF from the sales proceeds for the purchase, do note it takes about two weeks before the money is credited into your CPF account.

Since the HDB completion occurs before the completion of your private condo, you need your buyer to grant you an extension of stay. Again, you need to express this intention up front before you accept his offer.

To facilitate a seamless move from your HDB flat to your condo takes careful planning to execute, so be sure you seek the help of an experienced agent.

Are you still confused? Are you lost in the jungle? Still not sure which option to take? Fret not because I am here to help you.

Everyone’s situation is different. Contact me for a non-obligatory discussion and I can help you devise a bespoke plan to realise your upgrading goal from HDB to private condo.

Go to my facebook page and like my page so that you can be notified of my upcoming article on how to choose the right condo.

Need an opinion on your property investment plans? Want to know the value of your property? Or need help to sell or rent out your property?

Get a 1-time free 30 min Property Wealth Planning consultation. Schedule one right now by using the calendar below .

A PWP consultation includes:

An in-depth financial affordability assessment
Highly relevant investment insights
A clear and customised investment road map for your real estate investment journey ahead.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post Timeline Planning for Upgrading from HDB to Private Condo appeared first on Holland Property.

Investment Property: 6 Reasons Why New Launch Is Better Than Resale

hollandproperty — Tue, 31 Jan 2023 10:24:00 +0000

Investment Property: 6 Reasons Why New Launch Is Better Than Resale

Today, property investment is the aspiration of many Singaporeans.

In an increasingly affluent and progressive nation, we look beyond having just a roof over our heads. Property investment is a popular strategy to plan for our retirement.

The question is, when you are looking for an investment property should you be looking at a new launch or resale condo? Which one has more potential to help you make some gains in the future?

When you start comparing the new launch versus resale condo, the most noticeable differences are the differences in sizes and per square foot prices. New launches are generally smaller and higher $psf.

But does that mean resale condos are better buys?

If new launches are smaller and more expensive in terms of $psf, why are more people buying them?

Reason #1: New Launches Are More Profitable Than Resale

One usual response I get is, “New launches are so much more expensive, how to make money?”

What is most baffling is that though new launches are more expensive than the resale in terms of per square foot prices, they are actually more profitable. Isn’t profitability what you are after when buying an investment property?

Let’s look at some examples of new launch versus resale.

Commonwealth Towers versus The Queens

Commonwealth Towers and Queens are next to the Queenstown MRT but on different side.

They were both T.O.P. in 2017 and 2002 respectively.

Commonwealth Towers was launched in May 2014 at an average price of $1,622psf as compared to Queens at only $1,218psf.

To date, Commonwealth Towers have gained 26.33%, whereas Queens 19.99%.

Alex Residences versus Ascentia Sky

Both are near to the Redhill MRT. Their respective TOP years are Ascentia Sky (2008) and Alex Residences (2017).

Alex Residences was launched in Nov 2013 at an average price of $1,719psf. At that point, Ascentia Sky was transacted at a lower $1,375psf.

Fast forward, Alex Residences has since gained 26.75% while Ascentia Sky 14.74%.

While it seems like resale condos are better buys when the nearby new projects are launched at a higher $psf, empirical research shows that the new launches are more profitable investment properties.

Reason #2: New Launch Buyers Enjoy First Mover Advantage

Based on research by OrangeTee & Tie, about 9 out of 10 who bought new homes from the developers in the last 10 years made profits.

Developers sold 115,610 new homes in the last ten years. About 15% (16,017 units) were resold with an average gross profit of $220,000. These profitable resales were across different market segments.

Take a look at some projects that were TOP in the last 2-3 years where most units were resold at profit.

Project	Segment	T.O.P.	Gains (No.)	Average/High Gains	Losses (No.)	Average/High Loss
Coco Palms	OCR	2018	73	$117,180 / $431,500	0	0
The Glades	OCR	2017	9	$49,138 / $115,500	4	$25,178 / $70,100
Sim Urban Oasis	RCR	2017	26	$125,047 / $264,751	0	0
Commonwealth Towers	RCR	2017	26	$199,123 / $345,300	0	0
City Gate	CCR	2018	8	$143,906 / 213,000	0	0
Duo Residences	CCR	2018	26	$192,679 / $409,900	4	$337,890/ $937,000

Source: Edgeprop

Why did most of the buyers of these new launches make money for their investment property? The reason was they enjoyed the first-mover advantage.

As the saying goes, “early birds catch the worms.”

The best time to buy is during launch. Developers typically offer their lowest prices to entice buyers and to spur sales. This approach helps to create hype.

Over time, as the project sales move, it is not unusual for developers to start increasing their prices at various stages.

There is a TOP effect where buyers are willing to pay a premium to see the finished products and enjoy immediate occupation. So those who buy at launch generally will make a profit.

Price Preservation

Owners who bought first hand will rarely sell at a loss because of price preservation.

What if you buy a unit from the first owner who paid the developer’s launch price?

Let’s suppose the launched price of the unit you bought was $1,400psf, but you paid $1,700psf. Five years later you want to sell at a 10% profit. So you need to sell at $1,870psf. But you would be competing against many first owners who bought at an average of $1,400psf. These owners will limit your upside potential.

If you buy a new condominium, you are on an equal playing field as all others when putting their property on the market. Since every owner wants to make a profit, you will likely make a profit too on your investment property.

If you buy a new condominium, you are on an equal playing field as all others when putting their property on the market. Since every owner wants to make a profit, you will likely make a profit too on your investment property.

Reason #3: New Launches Are More Affordable

You may be asking, how can new launches be more affordable when their prices are so high in $psf?

Do you notice new launches are so much smaller than the older condos?

Those apartments that built in the ’80s and ‘90s come with 3-bedder anything from 1,600sf to over 2,000sf.

In the following decade, 3-bedders are typically between 1,300 to 1,700sf.

Then, up to 2009, we see an era of apartments with huge balconies, disproportional air-con ledges, double-volume space and bay windows.

Today, the 3-bedders have shrunk to a mere 900sf to 1,200sf.

With land prices so astronomically high these days, developers are building the apartments smaller to make the quantum more affordable for buyers.

The Impact of TDSR

There is a reason why apartments are now built much smaller.

At one time, the gap between new launches and resale condos is very close, and at times even converges.

But everything changed on ‘D Day’ 29 June 2013.

After several rounds of cooling measures that could not tame the market, the government introduced the mother-of-all cooling measure: Total Debt Servicing Ratio (TDSR). TDSR limits the maximum loan of the borrower to 60% of one’s gross monthly income.

Monthly debt includes all outstanding debt obligations:

Property-related loans, including the loan being applied for.
Car loans.
Student loans.
Renovation loans.
Credit card loans.
Any other secured or unsecured loans, including revolving loans.

It instantly changed the whole landscape of property investment.

Affordability becomes a major issue.

The only way developers can get around this issue is to make the new condos smaller.

The Key Is Affordability

When you are buying an investment property, it will likely be your second property.

If you have an outstanding loan, you are only eligible for 45% Loan-To-Valuation (LTV) for your second loan. That means if you are looking at a $1m investment property, you would need 55% of capital outlay.

Let’s suppose you already have one property in your spouse’ name, and you want to buy an investment property in your name as your first property (adopting the Sell-One-Buy-Two strategy).

Since it’s your second property, which is an investment property, you want to be prudent and not over-stretching your resources.

Comparing Commonwealth Towers and Queens

Let’s go back to the example of Commonwealth Towers and Queens.

Queens’ smallest unit is a 915sf 2-bedder. In August 2014, a #17 unit was sold for $1.25m ($1,366psf)

The smallest 2-bedroom unit at Commonwealth Towers is 689sf. The transacted price for #17 unit was $1.018m ($1,479psf).

To buy the said Commonwealth Towers at $1.018m, the buyer’s minimum gross income is $5,800 a month. Your 25% downpayment is $254,500.

On the other hand, a buyer needs to earn $7,100 a month to buy the 2-bedder at Queens with a downpayment of $312,500.

A 689sf 2-bedroom unit at Commonwealth Towers was recently rented out at $5,200 and a 915sf 2-bedroom at Queens at $4,000 . That works out to 6.1% versus 3.8%.

Of the two, which is more ‘affordable’ and enjoy better rental yield as an investment property? The obvious answer is Commonwealth Towers though in $psf term it is higher than Queens.

When comparing new launch versus resale condo, new launch while higher in $psf, is more affordable and gives better rental yield

Reason #4: New Launches Have Better Designs and Facilities

New projects usually come with better and more updated amenities such as infinity pools, aqua gym, onsen spa, sky gardens, themed pavilions, private kitchens, game rooms, karaoke rooms, gyms with state-of-the-art equipment, badminton hall, branded appliances and high-end finishing.

The list can go on and on. Every developer is trying to out-do one another.

It is quite common for developers to engage world-renowned architects to differentiate themselves.

Newer condos with better design and facilities will usually attract tenants who are willing to pay a higher rent while sacrificing on the size.

The biggest advantage of new launch over older resale is the feel-good factor because everything is newer and nicer

Reason #5: New Launches are Easier To Rent Out

If you are buying an investment property and deciding between a new launch versus a resale condo, new launch will definitely has an edge when looking for tenants simply because it is new and better, even if it is smaller.

Today, tenants are spoiled with choices.

Potential tenants will almost always go for condos that are newer and nicer. New condos not only are easier to rent out than the older ones but also they enjoy better rental yields.

The older developments lose out to the brand new condos on the facilities. For the interior of the units, owners will need to renovate the apartment, sometimes extensively, to make it more tenantable.

It is not uncommon for tenants to be concerned about the state of the air-conditioners if they are old. They are worried about things breaking down, such as washing machine or refrigerator.

If the apartment is brand new, everything that comes with it is brand new and under warranty. The developer covers even the first year servicing of the air conditioners. So it’s hassle-free both for the landlord and tenant.

Newer condos are not only easier to rent out than the older ones but also they enjoy higher rental yields

Reason #6: New Launches Have Lower Cost of Maintenance

One of the major considerations when choosing between a new launch and resale for your investment property is the cost of renovations for the latter. This cost involves your cash reserves. For an investment property, it is not ideal to eat too much into your cash reserves.

You might burn a big hole in your pocket if you need to overhaul the whole apartment with new air-conditioners, wardrobes, flooring, bathrooms and kitchen cabinets. Furthermore, you may need to buy a new washing machine, dryer, refrigerator and oven. It is not uncommon to end up spending more than $100,000.

New condos come with everything new, including branded appliances. And if there is any defect, they are covered under the one-year defect liability period by the developer. The saving can be quite substantial.

As the apartments aged, especially those that are 15 years old and above, they are prone to structural issues like leaking and choked pipes. You need to fork out higher sinking funds as the costs of maintenance and repair for the common areas and facilities go up.

New condos are spared from such problems with all things new.

Concluding Thoughts

While we are saying new launches are better investments, not all new launches will make money. It is important for you to consult an experienced agent to identify the right choice of new launch.

After all that been said, it also does not mean it’s wrong to buy a resale condo. There are many investors who believe in resale condo for various reasons. Here we are expressing our opinions, supported by research, why we think new launches are better investment property.

If you are planning to buy an investment property but not sure as to what is the best option, do feel free to contact me for a non-obligatory discussion.

Do go to my Facebook page and click like because there is another upcoming related topic.

Need an opinion on your property investment plans? Want to know the value of your property? Or need help to sell or rent out your property?

Get a 1-time free 30 min Property Wealth Planning consultation. Schedule one right now by using the calendar below .

A PWP consultation includes:

An in-depth financial affordability assessment
Highly relevant investment insights
A clear and customised investment road map for your real estate investment journey ahead.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post Investment Property: 6 Reasons Why New Launch Is Better Than Resale appeared first on Holland Property.

Are Condos in Integrated Developments Good Investments?

hollandproperty — Thu, 11 Aug 2022 20:00:00 +0000

Are Condos in Integrated Developments Good Investments?

There’s a growing trend toward integrated developments. From the early successes of The Centris to the iconic Orchard Residences, we continue to see more rolling out, such as Sengkang Grand Residences, Midtown Bay, South Beach Residences, Marina One Residences and Woodleigh Residences.

The 372 -unit Amo Residences sold over 98% on the first day of launch on 23rd July 2022 at an average price of $2,100psf. The largest penthouse was sold for over $6m at $2,406psf!

The upcoming Lentor Modern by Guocoland will be the next block-buster.

British billionaire, James Dyson, made the news when he paid a record price of $73.8m for a penthouse on Wallich Residences, atop the Tanjong Pagar MRT.

Why are the integrated developments gaining popularity?

What are the pros and cons?

First, What is an “Integrated Development”?

Sometimes, we think mixed-use development, integrated development and integrated transport hub are referring to the same thing, but they are not.

A mixed-use development often means a small number of commercial units in the condo – for example, the inclusion of a café and minimart, or a childcare centre.

Integrated development is usually larger in scale than a mixed-use development because it has direct access to a bus interchange and/or MRT station. Besides, it may be next to other communal amenities such as hawker centres, and community clubs.

Park Place Residences, Marina One Residences, and Woodleigh Residences, for instance, have large malls that are a part of the overall project. Woodleigh Residences even incorporates the local police station.

The retail or office component of integrated developments is truly massive. For example, North Park Residences has a mall that’s over 1.3 million square feet (the largest of any integrated development to date).

Integrated Transport Hubs (ITHs), on the other hand, as defined by Land Transport Authority (LTA) as fully air-conditioned bus interchanges that are seamlessly linked to MRT stations and adjoining commercial developments such as shopping malls. To note, an ITH may or may not have residences.

As of 2018, there are nine ITHs: Ang Mo Kio, Bedok, Boon Lay, Clementi, Joo Koon, Sengkang, Serangoon, Toa Payoh, and Bukit Panjang (Source: LTA).

Another upcoming ITH will be at Beauty World. The announcement of this new ITH has already helped boost the sales of nearby Daintree Residence, Forrett and Verdale. Another potential hot seller is the Linq.

We can see why integrated developments are so alluring. Convenience is the key. For typical busy Singaporeans, a one-stop hub where living, transportation, entertainment, and daily necessities all converged, it means a significant saving on time. In a fast-paced society, time is the essence.

How Have Integrated Developments Performed?

Let us take a look at four examples.

Compass Heights

TOP in 2002, Compass Heights is the first integrated development with a condo connected to a shopping mall (Compass One), MRT (Sengkang NEL), LRT and bus interchange. It comes with 269,098sf of shopping space and 536 condo units.

How does it fare since its launch?

To date, Compass Heights has made a gain of 77.28%. It peaked in 2013 before it begins to decline.

On the hand, the newer Luxurie (2015) and La Fiesta (2016) nearby, have appreciated 10.26% and 18.67% respectively.

Why has caused Compass Heights to decline as compared to the newer condos? The answer could be age. It is almost 20 years old now and has past its prime. Based on my observation, 15 years is about the critical point for a leasehold condo despite all its other positive attributes.

On the rental front, Compass Heights currently averages about $2.28psf, compared to Luxurie ($2.92psf) and la Fiesta ($3.08psf). It does go to prove that tenants ultimately still prefer newer condos.

Based on Edgeprop, the respective implied rental yields are:

Compass Heights: 3.1%
Luxurie: 3%
La Fiesta: 3%

The Centris Integrated Development

The Centris

The 610-unit Centris, right by Boon Lay MRT, was TOP in 2009. It sits on top of the Jurong Point Mall, which is the biggest and busiest mall in the west. It has a 750,000sf of shopping spaces.

How has The Centis performed over the years?

From the time of launch in 2006, The Centris has made a gain of 119.25%. It outperforms the nearby Lakeholmz (93.04%), Lakeshore (89.85%) and Caspian (82.37%).

In terms of rental, The Centris fares the best at $3.03psf, compares to Lakeholmz ($2.38psf) and Lakeshore ($2.78psf). Even the newer Caspian (TOP 2012) falls behind at $2.84psf.

The respective implied rental yields work out to (source: Edgeprop):

The Centris: 3.3%
Lakeholmz: 3.3%
Lakeshore: 3.3%
Caspian: 3.1%

The main reason why The Centris still has not lost its shines is that there are no other condos which are within a short walking distance to Jurong Point Mall and Boon Lay MRT.

Bedok Residences

Bedok Residences, connected to the Bedok MRT, comes with 583 residential units and 222,463sf of shopping size. It was one of the hottest launches in 2011 when many queued overnight to secure a unit. It still enjoys a lack of competition with no nearby condos.

How has it fared since then?

The overall gain of Bedok Residences is 10.93%, which is not as spectacular as The Centris. It still outperforms the rest of the condos in the same district because there is no competition in the vicinity.

The rental rate of Bedok Residences at $3.93psf (3.2% rental yield) is far above the $2.90psf average of district 16.

Hillion Residences enjoys connectivity to Bukit Panjang MRT (Downtown Line), bus interchange and Hillion Mall

Hillion Residences

Hillion Residences, connected to Bukit Panjang MRT, has 546 residential units and 174,730sf of shopping spaces. It is one of the newer integrated developments that was opened in 2017.

When the project was launched in March 2013, the take-up rate was slow because it was almost right after the government announced the cooling measures.

Hillion Residences so far has made a gain of just over 5%, whereas the nearby The Tennery and Maysprings depreciated.

The current rental of Hillion Residences is $3.85psf, compared to The Tennery $2.96psf and Maysprings $2.18psf.

The implied rental yields are (source: Edgeprop):

Hillion Residences: 3.3%
The Tennery: 3.3%
Maysprings: 3%

It is interesting to see how the Hillion Residences integrated development, particularly the Bukit Panjang MRT has helped to boost the prices of the much older Maysprings.

Maysprings was launched in April 1996. Between 1996 to 2006, it depreciated by 46.07%. It recovered briefly after the 1997 Asian Financial Crisis, only to become a victim again in the year 2000 when the dot.com bubble burst.

Its fortune, however, made a drastic turn-a-round in 2007 when the property market picked up. Likely, the main push factor that catapulted Maysprings was the announcement of the Bukit Panjang MRT in July 2008, as part of the Downtown Line.

Between 2006 to 2020, Maysprings makes a spectacular gain of almost 172%!

The prices dipped from 2013, in line with the national trend, after the government announced rounds of cooling measures. However, the prices went back up again in 2018 when the integrated development was open.

Good Track Records of Integrated Developments

Looking at the history of some of these integrated developments, we can see that they do present an investment potential that differs significantly from conventional condos.

It is no surprise the integrated development at Woodleigh Residences is fully sold-out and the recent launch Amo Residences is left with only 6 unsold units.

Do watch out for Lentor Modern which will be opened for preview on 22 August 2022. This 605-unit project on top of Lentor MRT will come with a massive 96,000sf of commercial space, including a 12,000sf supermarket and a 10,000sf childcare centre.

When Woodleigh Residences was launched in November 2018 at more than $2,000psf, it didn’t take off very well on the back of the new cooling measure introduced in July 2018. Also, Park Colonial just across the road was selling at a lower price. The developers then took the project off the shelf for about six months before it was relaunched at a more attractive price level of $1,800+psf.

It is interesting to note that Park Colonial has now caught up with the prices of Woodleigh Residences. This makes Woodleigh Residences a very attractive proposition.

A Disclaimer on Integrated Developments

Recently British billionaire, James Dyson, was once again in the news when he sold his 3-level penthouse at Wallich Residence at $62m. He bought it for $72.8m about a year ago. (Wallich Residence is an integrated development on top of the Tanjong Pagar MRT). That translates to a staggering 14.8% loss, excluding all the stamp duties he had to pay.

While this may be an exceptional case, given his financial status, I must also reiterate that not all integrated developments are equal. Although I have pointed out some of the worthy integrated developments that have performed well in terms of capital appreciation and rental yields, not all of them are as good as these.

You will still need to do your due diligence when picking the right project. Like all other projects, you will have to consider the entry prices, nearby competing condos (as in the case of Woodleigh Residences versus Park Colonial), location, right choice of units and so forth.

Differences Between Integrated Developments and Regular Condos

Some of the differences to note are:

The distribution of maintenance costs
Congestion and noise issues
Overall cost of the property
Convenience and savings on transport
Rentability concerns

1. The Distribution of Maintenance Costs

In integrated developments, generally the retail and office components bear more of the maintenance costs, compared to residential.

One example of this is Guoco Midtown. The residential component (Midtown Bay) has only 219 units, which is considered small. This would usually result in higher maintenance fees, sometimes in the range of $600 per month ($400 per month is typical for most condos).

And yet, monthly maintenance fees range from about $360 per month (single bedder) to just $505 per month for even the largest three-bedders.

2. Congestion and noise issues

There are some trade-offs you can expect for the convenience of staying in an integrated development.

When you live on top of a huge shopping mall, you’ll have to accept that noise levels are higher, roads around your home see more traffic, and some of your expected amenities will be crowded out by the public (the “convenient” restaurant downstairs might still entail a 90-minute wait).

3. Overall Cost Of The Property

Generally, we can expect integrated developments to cost more than regular condos because people are willing to pay for the extra convenience, seamless connectivity with public transportation and the location.

More importantly, as we have seen historically, integrated developments have performed well both in terms of capital appreciation and rental yields.

Integrated developments also don’t come by every day. They are usually part of the URA Master Plan for major developments in the area. The government earmarked these integrated developments based on their strategic locations to serve as sort of a business hub.

4. Convenience and Savings on Transport

Convenience is the biggest plus point of integrated developments, as you can just ride the lift down and shop for groceries, get a haircut, put your child in a childcare centre, etc.

There will also be considerable savings on transport, as you don’t need to use food delivery or travel for your shopping and dining. Likewise, if your office is in the same development, you can save quite a sum on going to and from work over the years.

It’s also nice to know your bedroom is just three minutes’ walk from the office if you’ve had a long day.

5. Rentability Concerns

The general consensus is that integrated units have higher rentability. It’s especially attractive to tenants who work in the same office as the development.

However, rentability is not an easy concept to gauge. I would venture that a regular condo, which is close to the MRT station and major amenities, is as rentable as most integrated developments.

For example, a condo right across the road from an integrated development may be just as rentable (the tenant just needs to cross the street to access the same amenities) but may come at a much lower price. This is why Park Colonial was selling very well as compared to Woodleigh Residences which was launched at a higher price. Due to competition, Woodleigh Residences has to reposition its pricing.

On the other hand, integrated developments like The Centris and Bedok Residences can enjoy not only higher rentability but also rental yields, namely because they have no competitions from other condos.

In light of these differences, are regular condos or integrated developments better for you?

If you’re the sort who likes a high degree of privacy or exclusivity, then integrated developments are probably out of the picture. If you loathe the concept of thousands of shoppers crowding into your development after work / on weekends, then start looking for a peaceful, regular condo instead.

On the other hand, if you like convenience and city living, integrated developments might appeal to you. The same is true if you happen to work within the integrated development – then it’s both convenient, and a huge cost savings, to note have to travel to and from work.

If you are considering from an investment perspective, do bear in mind not all integrated developments have the same investment value and potential. There are various factors that should be taken into consideration.

Feel free to contact me and we can look at some of these factors.

Make a virtual appointment with via the calendar below for a further non-obligatory discussion.

Danny Han has always been in the people’s business, having spent 23 years as a church pastor, five years as an insurance agent, and the last 16 years as a property consultant.

Danny received his Diploma in Mechanical Engineering from Singapore Polytechnics and Bachelor of Science from Oklahoma Christian University of Science and Arts in Bible & Psychology.

Besides keeping abreast of the property market trend and constantly equipping himself to better serve his clients, Danny is a passionate foodie, a weekend cyclist, and an avid hiker.

Subscribe to receive updated practical property investment insights, property reports and good investment deals

SKYE AT HOLLAND

New Launch vs Resale Condos In 2024: Which To Buy?

Is It Still Worth Buying A Freehold Property For Retirement?

Is It Still Worth Upgrading To A Condo In 2024?

How Your Property Can Still Provide For Retirement In 2023 And Beyond

PINETREE HILL

The post Are Condos in Integrated Developments Good Investments? appeared first on Holland Property.

How To Price Your Property To Sell

hollandproperty — Sat, 14 May 2022 15:46:09 +0000

HOW TO PRICE YOUR PROPERTY TO SELL

One of the most important factors, if not the most, when you decide to sell your property is to price it correctly.

Every seller wants to sell at the highest possible price, and every buyer wants to buy at the lowest.

You can set any sales price you want, but the market determines the value.

Setting Your Price Too High

Many sellers want to start with a high price, sometimes unrealistically, because they don’t want to lose out if potential buyers are willing to pay. In a seller’s market, expectations are understandably high.

The danger, however, is that over-pricing your property can lead to over-exposure. The freshness of the listing generally wanes after the first two to three weeks. Buyers may be wondering if there is something wrong with the property if it is still on the market after several months.

You may choose to drop the price as time goes by, but it can send a wrong signal to buyers who have been following your listing. They may wait and see how low you will go down eventually or take the opportunity to give low-ball offers to test the sellers.

Setting the price high with a view to lowering it over time is not a good sales strategy.

One key factor in setting the property price is how motivated are the sellers. If there is no urgency in selling, sellers may want to test the market with an unrealistic high price tag, and it may end up with no viewers or some curious viewers.

If they plan to upgrade or downsize, they usually sell-high-buy-high, and the converse is true unless the market quickly turns around. In this kind of situation, it is imperative to set the correct pricing so that the sellers can move on with their plans.

The danger, however, is that over-pricing your property can lead to over-exposure. The freshness of the listing generally wanes after the first two to three weeks. Buyers may be wondering if there is something wrong with the property if it is still on the market after several months.

Setting Your Price Too Low

Conversely, setting the price too low will attract many buyers, but sellers might be worried that they are shortchanged. Or buyers might be wondering why it is so cheap. Could something be wrong with the house, or could it be a loan-shark case?

On the positive side, low pricing will likely attract many viewers and result in multiple offers. An experienced property agent will use this strong interest to create a lot of hype.

I had a few cases where buyers tried to outbid each other, thus driving up the sales price. Eventually, the seller got higher than what he wanted!

On the positive side, low pricing will likely attract many viewers and result in multiple offers.

Determining The Market Value

You should engage an experienced property agent who knows how to use comparative market analysis (CMA) to help you determine the market value. Once that is established, he can also help plan a pricing strategy to sell your property at the fastest time at the highest price.

So how do we determine the market value?

Bank Valuations

The first step is to check with the bankers for an indicative valuation. Every bank has its panels of valuers, so the valuations can vary across banks. Hence, it is good to check with a few local and foreign banks. The banks may stretch their valuation up to a limit to match the asking price.

If bank valuation cannot match the sales price, it may put a cap on the buyers’ offer price because they have limited cash reserves. Even if they can afford it, they may not be willing to pay too much above the ‘fair’ market price.

For HDB flats, valuation is done by HDB valuers after the sellers have issued the Option to Purchase (OTP). By looking at the transaction history, agents can assess if the sales price will likely incur any cash-over-valuation (COV).

While sellers are delighted with the high sales price, they run the risk of buyers not exercising their options if the COV amount is too high. The maximum $1,000 option fee (unlike 1% for private property) is not enough to deter them from giving up the property. That will result in three weeks of opportunity cost for the sellers till the option lapses before looking for another buyer.

Looking Into More Details

Banks’ indicative valuations are desktop valuations (not based on on-site property inspections) that have some shortcomings because they don’t consider every factor.

Essential factors such as facing, level, and layout are overlooked.

Some projects come with so many types of configurations and facings. To put them all on an equal footing does not do justice to each house.

Villa units at Reflections at Keppel Bay with balconies and stunning views of the sea are the premium units.

Take, for instance, Reflections at Keppel Bay. It has high-rise tower blocks, some with balconies while most don’t. Some have big columns in the living rooms. The low-rise villa blocks have balconies with units facing the golf course, canal or the sea, and the latter is the most premium.

When I was marketing a premium villa unit with rare sea and golf course facings, buyers often used generic transacted prices as a gauge. The gaps in these prices were huge, and invariably, buyers would use the lowest prices to negotiate. I then decided to sort out the past year’s transactions based on different blocks and facings. I highlighted those with sea-facing, and it became clear they are higher in value than those facing the golf course and canal. The developer’s launched prices for these units were also higher. Eventually, the apartment was sold to a discerning buyer at a fair market value.

There are always exceptional cases. Such as very high-floor units with spectacular panoramic views, highly sought-after enclaves or award-winning projects (e.g. The Pinnacle and Skyville@Dawson).

Recently, I sold a five-year-old 3-room HDB flat in Yishun at a record price (the last check shows the record still stands) with a massive $70k cash-over-valuation. The flat was in pristine turnkey condition with the best facing in the block.

Not all condos in the same development and HDB flats in the same blocks are made equal.

Not all condos in the same development and HDB flats in the same blocks are made equal.

Penthouses, Ground Floor and Double Volume Ceiling Units

If you own any of these condo types, assessing their values is not so straightforward. On paper, they appear very spacious in terms of square footage, but you can’t value them like any typical unit.

Penthouses generally have massive open roof terraces; ground floor units with private enclosed space (PES). Others come with double volume ceilings where the air space is part of the ‘floor area’. The liveable space of these condo types often falls short of expectations.

Lack of Transaction Data

Another shortcoming of solely dependent on the bank’s indicative valuation is where there is a lack of transactions which usually happens in smaller developments.

When I was marketing a condo in the 104-unit Jervois Lodge, I found out that there had been no transactions in almost two years. The banks’ valuation fell short because they relied on two-year-old transactions when the property market had appreciated by about 10 percent.

In this case, I have to use nearby developments to assess the unit’s value and consider the overall growth percentage of the neighbourhood over the two years.

As a side note, if you are buying an investment property, it is not advisable to go for small developments with minimal movement in sales.

Transaction History

Buyers these days are very savvy. With data so readily available online, they will do their homework to assess the value of the property.

Transaction history is a good guide. But if one relies solely on the data on URA website, the information is very bare because they do not show the unit numbers. Without knowing the level and facing of the unit, you can’t compare apple with apple as I have highlighted earlier on, using the example of Reflections on Keppel Bay.

Agents usually subscribe to portals such as Edgeprop and SRX, which gives detailed and real-time information. At Huttons, our proprietary app, Analyzer, provides a host of information which offer valuable insights into every property. With all these tools, we can assist our clients in finding out the true worth of their property.

Transaction data is only one part of the story. An experienced agent will use his market knowledge to advise the seller on the optimal pricing, helping him get the best sales price.

Look at Your Competitors' Pricing

Another essential step besides checking on recent transactions is to look at comparable listings.

If you price your property much higher than your competitors, you might not receive any calls. The typical consumer behaviour is to start with the cheapest, and you are inadvertently helping your competitors sell theirs faster.

Some may still view it out of curiosity, with a parting question, “Do you know there is another unit with a much lower asking price? Why is your price so high?”

Pricing your property at fair market value will enable you to sell your property quickly. You can markup your price a little when it’s a seller’s market.

If your property is the only one on the market for the development and is in a highly sought-after location, then you have a further advantage.

A buyer came to view my listing in Merasaga a few years ago, and he made the offer on the spot based on the asking price. He told me he had been waiting to buy a unit there for two years, but no one was selling. Rarity is your best weapon.

If you price your property much higher than your competitors, you might not receive any calls. The typical consumer behaviour is to start with the cheapest, and you are inadvertently helping your competitors sell theirs faster.

Enhance the Value of Your Property

Creating a positive first impression will help sell faster and secure a better price.

There are a few things that the agent can advise the seller to do:

Give a fresh coat of paint, ideally with neutral colours.
Minor repairs: broken lights, leaking tap, cracks, etc.
Decluttering. Keep the house as clean and tidy as possible.
Home staging. Not every buyer can visualise the potential of an empty house.

These enhancements will involve some costs but are worthwhile. If your buyer falls in love at first sight of your house, you get the deal at the price you want!

Finding out the worth of a property and devising a pricing strategy is not always straightforward. It is best to leave them in the hands of an experienced and knowledgeable agent to help you work through the process.

If you have any questions or need to discuss this topic further, drop me a note.

Danny Han is a licensed property agent since 2005.

What Danny is passionate about is not just about showing clients properties around Holland Village, but also enjoys sharing anecdotes and nuggets of information that are part of his growing up years.

September 6, 2025 No Comments

February 16, 2024 No Comments

January 5, 2024 No Comments

December 18, 2023 No Comments

November 10, 2023 No Comments

October 16, 2023 No Comments

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post How To Price Your Property To Sell appeared first on Holland Property.

What Are The Pros and Cons of Van Holland

hollandproperty — Tue, 19 Apr 2022 13:33:58 +0000

What are the Pros and Cons of Van Holland?

Van Holland is a freehold development that sits on the site of the former Toho Mansion, which was purchased at a price of S$1,805 per square foot per plot ratio. Units at Van Holland are currently selling at an average price of around $2,900 per square foot. Do you think that is a fair price for the units?

In my personal opinion, I do feel at $2900psf is on the higher side if you were to compare it with some other new projects in the Holland/Farrer area. Its profit margin of about 24% is also higher than its competitors.

On the other hand, for a freehold development that is just across from Holland Village, it does come at a premium.

The closest comparison would be Mooi Residences, a freehold boutique development with only 24 units and only 4 mins walk to Holland Village. It has an average price of $2415psf, which is considerably lower than Van Holland. However, Van Holland does come with better facilities.

Van Holland is a comparatively small development. There are just 70 units, from one to four-bedroom layouts. But there is also a full suite of condo facilities. Tell us more about the facilities available. Does this also mean maintenance will be steeper, given that fewer units are around to share the cost?

To be more exact, Van Holland has 69 units.

For a small development, it does provide an impressive suite of facilities:

It has two lap pools, one on the ground floor and another on the sky terrace
Then you have the usual children’s pool, jacuzzi spa, gym, a nice clubhouse and gourmet pavilion. Other interesting facilities include a bike garage and a junior rock climbing wall.

The fewer units at Van Holland have a bearing on its maintenance fee.

For a 2-bedder you would be looking at $588; 3 and 4 bedder $686. Compared with Leedon Green, a larger project with 638 units, the maintenance is only from $240-390.

There are several other new launch developments in the Holland Village area. How does Van Holland compare against them? (e.g. One Holland Village Residences, Leedon Green, Hyll on Holland) (Note: can do a fair comparison of price, size, facilities, interior fittings, etc)

Interestingly, there are quite a number of new developments in the vicinity that were launched around the same time, which resulted from the enbloc fever in 2017 and 2018. So that does give buyers choices in this area.

Let’s first look at the prices

Van Holland has 69 units average price is $2900psf
One Holland Village Residences 296 units $2687psf
Hyll on Holland 319 units average price is $2430psf
Leedon Green 638 units is $2,683psf
Mooi Residences 24 units $2415psf

So as we can see, the price of Van Holland is higher than the rest, with one exception, which is 15 Holland Hill. This project has only 57 units with an average price of $3045psf. It is targeted at buyers looking for spacious units because there are not many new condo units above 2000sf.

Facilities wise, only Leedon Green and One Holland Village Residences out of the list have tennis courts.

As for interior fittings, all these are high-end developments, so they all come with top of the line finishing, appliances and fittings.

One unique feature of Van Holland I would like to highlight is the book-matched marble flooring. What that means is when the pieces are placed side by side, they mirror each other like an open book. This is possible because of the way the marble slabs are cut to give the same patterns.

Another interesting feature of Van Holland is the faucets come with Swarovski crystals! Talk about class!

The site layout for Van Holland is such that there are two main rows of residential blocks. There is also very little space between the rows, resulting in many inward-facing units to be facing each other in close proximity. Do you think this is a dealbreaker, especially for residents who value privacy?

I would say the closeness of the units is the main disadvantage of Van Holland. Some of them can be as close as 5.4m which is definitely too close for comfort.

So far, the units that are facing each other are faring very badly. Only 3 of the 3-bedders looking right into their neighbours were sold. The corner units are selling quite well, 2 of which are the penthouse units.

From these data, we can conclude the close proximity of these units does have a negative impact.

If you are interested to know more about the new developments in the Holland area, you can drop me a message or book a consultation time slot with me through the Calendy below and I will be more than happy to share with you.

Danny Han is a licensed property agent since 2005.

What Danny is passionate about is not just about showing clients properties around Holland Village, but also enjoys sharing anecdotes and nuggets of information that are part of his growing up years.

September 6, 2025 No Comments

February 16, 2024 No Comments

January 5, 2024 No Comments

December 18, 2023 No Comments

November 10, 2023 No Comments

October 16, 2023 No Comments

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post What Are The Pros and Cons of Van Holland appeared first on Holland Property.

Relooking At Buying A Leasehold Landed Property

hollandproperty — Mon, 28 Mar 2022 07:19:42 +0000

Relooking At Buying A Leasehold Landed Property

Conventionally, most Singaporeans would not give leasehold landed property any serious consideration. To even suggest it is preposterous.

However, increasingly I am finding more and more home buyers are giving leasehold landed houses a second thought. This change of heart is partly due to the escalating cost of landed properties where aspiration cannot catch up with affordability.

The need for more space for some families is real

I recently helped the Leongs recently to sell their 3-bedroom apartment for $3m. The 1755sf home has outgrown their needs, with five children added to the family over the years. On top of that, their aged parents stayed with them, and the need for more space was acute.

After selling their apartment, the Leongs wanted to buy a 5-bedroom or a very spacious 4-bedroom condo. To their dismay, they could not find anything suitable within their budget.

An older leasehold landed property is one viable option.

For sure if one can afford it, buying a freehold landed property is a no-brainer. With the growing affluence of Singaporeans, that’s the dream home of many.

Landed Property Prices Hitting All-Time High

In 2021, we saw a total of 936 houses changing hand, of which 60 are Good Class Bungalows (GCB), a rare breed of landed property. The total transacted value was a record high of $8.9b. Overall prices climbed 13.1 per cent in 2021, the fastest growth since 2010.

In 2020, a Nassim Road GCB was sold for a whopping $128.8m or $4,005psf. Not long after, another GCB in Cluny Hill was sold at a new record price of $4,291psf.

So it is clear that Singaporeans have a love for landed property.

The number one concern for leasehold landed property is the lease decay concern which ties with the lack of prospects for capital appreciation.

The number one concern for leasehold landed property is the lease decay concern which ties with the lack of prospects for capital appreciation.

FH vs LH Price Trend

The number one concern for leasehold landed property is lease decay and the lack of prospects for capital appreciation.

Is it always true that leasehold landed property prices will depreciate over time?

Let’s look at some statistics.

Looking at the historical trends, they quickly dispel the misconceptions that leasehold landed properties will always depreciate in value over time. As a matter of fact, leasehold houses do appreciate in value albeit not no as much as freehold houses.

That is not to say that leasehold properties will not depreciate as the lease decays. If we use the Bala’s Table as a guide, we recognise that they will reach a critical point when a steep downward trend occurs.

Generally, a 99-year leasehold house can hold up its value well for the first 15 to 20 years when it is still relatively new and well maintained.

The most critical year is when it has only 30 years left because that is when the bank would not loan money to buyers.

If you think of selling your leasehold house, it will become increasingly challenging with each passing year beyond the 20-30 year mark.

In the light of lease decay concern, is a leasehold landed house worth considering at all?

There are no absolute yes or no, and a few factors to consider may affect your decision.

As a matter of fact, leasehold houses do appreciate in value albeit not no as much as freehold houses.

AFFORDABILITY VS ASPIRATION

The number one consideration is budget.

If you can afford to buy your dream house with no budget constraints, then I would say go for freehold.

On the other hand, a financial constraint may make you relook at leasehold. Our affordability may fall short of our aspirations.

The escalating prices of landed property have made it increasingly out of reach for those who aspire to own one.

Today, many home buyers buy freehold landed properties because they want to rebuild or do major A&A works to configure the house to meet their needs. To rebuild, you would be looking at a ballpark figure of around $300 to $400psf. If the new house has a built-up area of 5,000sf, that would add up to $1.5 to $2m.

Freehold land cost on average can be between $1,500psf to $2,500psf, depending on the location. A 2,500sf piece of land would translate from $3.75m to $6.25m. Leasehold land will bring your cost down by about 15% to 20% cheaper.

If you are lucky, you may still find a freehold house for around $3m, if you don’t mind the size, condition or location. $5m and above will give you a bit more options. Conversely, for less than $4m you can find some leasehold houses of decent sizes and conditions.

LIFESTYLE VS INVESTMENT

Not everyone is fixated on capital appreciation or the investment value of their property.

Why are people paying tens of millions to buy houses on Sentosa Cove though they come with 99-year leasehold status? While many of them are foreigners since it is the only place where they can buy landed houses with no restrictions, there are also wealthy Singaporeans who own them. These homes give them a lifestyle that is unique to Sentosa.

Have you heard of 99-year leasehold Good Class Bungalows (GCB)? The minimum land size for GCB is 15,000sf. It may sound unthinkable, but the former 752,000sf Caldecott Broadcast Centre site might soon become the first 99-year leasehold GCB site with 15 GCBs.

The chairman of the developer, Kuok Khoon Hong, will be taking the largest plot for his own extended family. He is ranked as Singapore’s 12^th richest person in 2021.

Why would someone as wealthy as Mr Kuok be willing to pump in so much money for a massive leasehold GCB, where there is likely a cap on its future value? Here is a lifestyle choice that takes precedence over investment value since there is nowhere else in Singapore where you can find a big plot of land, freehold or leasehold.

Is your primary goal to live in a landed property with a garage, garden, pool, roof terrace, and plenty of rooms for a multi-generational family? In that case, it does not really matter whether it is 99-year or freehold, and the lease tenure makes no difference to the lifestyle you desire.

Is your primary goal to live in a landed property with a garage, garden, pool, roof terrace, and plenty of rooms for a multi-generational family? In that case, it does not really matter whether it is 99-year or freehold, and the lease tenure makes no difference to the lifestyle you desire.

HERE-AND-NOW VS LEGACY PLANNING

Most Singaporeans only want freehold landed properties because they want to leave them for future generations. Estate in Perpetuity or freehold estate means the owner can own it forever, which means the house can pass down to many generations.

This begs the question: is it always prudent to pay a premium for a house so that you can pass it on to your loved ones?

Sometimes we can be so focused on the future that we forget to enjoy life here-and-now

As a parent myself, I know we always think about giving the best to our children. Parents are often known for parsimony so that children can enjoy a better life. As a result, we ourselves miss out on the good things in life.

If you have missed out on living in a landed house you wanted so much because you can’t afford a freehold one, you might want to consider a leasehold house for both you and your children to enjoy the here-and-now. After all, a 99-year leasehold house will outlast most of us.

The parental responsibility is to provide the children with the education they need to live an independent life. To leave behind for them great wealth and properties are not necessarily in their best interest. We have seen too many family conflicts over inheritance. Or children squander the inherited wealth because they don’t value what they don’t work for.

Paying more for a freehold house may also mean we have to be contented with a smaller, older, or less-than-ideal location house.

That leads us to the next factor.

If you have missed out on living in a landed house you wanted so much because you can’t afford a freehold one, you might want to consider a leasehold house for both you and your children to enjoy the here-and-now.

SPACE VS VALUE

If you have a large family with four children and elderly parents, you would need a home with five to six bedrooms to meet your space needs (of course, in the past, it was not unusual for a family of 10 to squeeze into a 3-room HDB flat).

Is it easy to find condos with so many rooms? Your choices would be minimal. If you do find one, you may have to break the bank to buy one.

A leasehold landed home may be a viable option if you have a budget constraint. They are easier to find, and the price can be lower than condos in terms of $psf.

We know that we usually look at the $psf based on the land size for landed homes. But if you were to base the cost on the built-up area, the $psf can be $800psf to $1,200psf for leasehold landed properties, depending on the age and location. It can even go lower than that.

I did a quick survey on Propertyguru, and I found a leasehold renovated 6-bedroom semi-detached house in the East with a built-up area of 4,300sf, asking for $3.5m. It works out to $1,173psf. It still has a balance lease of about 70 years. A condo of the same age in the vicinity has an asking price of $1,246psf.

We need a paradigm shift when buying a landed property. Today, more and more Singaporeans are receptive to the idea of leasehold landed properties.

Ultimately, if a leasehold landed home can offer a lifestyle you yearn for and the space you need, don’t write off the idea. The money you save from paying for a higher price freehold landed home can be used for your enjoyment, retirement, investments or legacy planning.

If you need to discuss this topic further, do drop me a note or book a consultation time slot with me through the Calendy below.

Danny Han is a licensed property agent since 2005.

What Danny is passionate about is not just about showing clients properties around Holland Village, but also enjoys sharing anecdotes and nuggets of information that are part of his growing up years.

September 6, 2025 No Comments

February 16, 2024 No Comments

January 5, 2024 No Comments

December 18, 2023 No Comments

November 10, 2023 No Comments

October 16, 2023 No Comments

Subscribe to receive updated practical property investment insights, property reports and good investment deals

The post Relooking At Buying A Leasehold Landed Property appeared first on Holland Property.

Blog Posts Archives - Holland Property

New Launch vs Resale Condos In 2024: Which To Buy?

New Launch vs Resale Condos In 2024: Which To Buy?

New Launch Condo Prices In 2024

New Launch Condos in CCR

New Launch Condos in RCR

New Launch Condos in OCR

Do You Notice A Common Factor In All Three Regions?

Resale Condo Prices in 2024

Resale Condo Prices In CCR

Resale Condo Prices in RCR

Resale Condo Prices in OCR

What’s Happening In The CCR?

Harmonisation of Gross Floor Area

Conclusions On New Launch vs Resale Condos in 2024

SUBSCRIPTION FORM

Is It Still Worth Buying A Freehold Property For Retirement?

Is It Still Worth Buying A Freehold Property For Retirement?

Why is it so hard to give a definite answer on whether freehold is better?

Case Study: Leedon 2 vs The Merasaga

So how can we determine if a freehold property is really good for retirement?

But let’s put the property lifespan aside, and look at rental income

Finally, we should consider that long-term changes to the area could trump your freehold value

A private property is a great retirement asset, but it may not be necessary to make it a freehold

Simply put, find a well-located and well-priced condo for your retirement asset; whether or not its freehold is a secondary concern

SUBSCRIPTION FORM

Is It Still Worth Upgrading To A Condo In 2024?

Is It Still Worth Upgrading To A Condo In 2024?

Can I Afford To Upgrade from an HDB To A Condo In 2024?

Cost for upgrading from an HDB to a resale condo:

Cost for upgrading from an HDB to a new launch condo:

Is upgrading from HDB to condo worth the cost?

1. Your ability to cope with the higher interest rates going forward

2. The role that the condo will play in your retirement

3. For younger buyers, potential delays in right-sizing

4. Whether you see value in cash-out refinancing as an option

5. The condo as a “safety margin”

SUBSCRIPTION FORM

How Your Property Can Still Provide For Retirement In 2023 And Beyond

How Your Property Can Still Provide For Retirement In 2023 And Beyond

HDB flats as a retirement asset?

HDB resale flats

BTO flats new classifications: implications for HDB flats as a retirement asset

This being said, the momentum in the resale flat market is likely unsustainable

Implications regarding resale flats as retirement assets

1. Plus and Prime flats show a repositioning toward ageing-in-place

2. Increased supply could moderate long-term appreciation

Private condo as retirement asset

New launch condos

Resale condos

Implications of condo units for retirement planning

1. Due to higher costs, it becomes ideal to upgrade before the age of 40, when financing restrictions start to bite

2. There may be more impetus to upgrade if possible, as flats become less investment-oriented

3. En-bloc sales have become less reliable as an exit strategy

SUBSCRIPTION FORM

4 Options After HDB Flat Reaches Minimum Occupation Period (MOP)

4 Options After HDB Flat Reaches Minimum Occupation Period (MOP)

HDB Minimum Occupation Period (MOP), So What?

More Are Selling Their BTO HDB Flats Upon Reaching MOP

What is HDB Minimum Occupation Period (MOP)?

Why Is There An HDB Minimum Occupation Period (MOP)?

HDB MOP is an Important Milestone

Don’t Sit On It Once Your HDB Flat Reaches Its MOP

Four Options To Consider Once Your HDB Flat Reaches MOP

1. Rent Out Your HDB Flat and Buy a Private Property

2. Sell Your HDB and Purchase Another HDB Flat

3. Upgrade to a Private Property or Executive Condominium (EC)

4. Take a “Sell One Buy Two” Strategy

Start Planning When Your HDB Flat Is Reaching Its MOP

SUBSCRIPTION FORM

What Should You Buy For Your First Home?

What Should You Buy For Your First Home?

Option 1: Build-to-Order (BTO) HDB Flat

Option 2: Sale of Balanced Flats (SBF)

Option 3: Resale HDB Flat

Option 4: Brand New Executive Condo (EC)

Option 5: Resale Executive Condo (EC)

Option 6: New Condos

Option 7: Resale Private Condo

Factors in Determining Your Choice