I right-sized from a 4-bedroom condo to a 2-bedder: Why I prefer a condo to a HDB flat
PHOTO: Stackedhomes
PUBLISHED ONFebruary 11, 2023 12:00 PMByRyan J
When it comes to right-sizing, the assumption is that homeowners will sell their private property to move into a resale flat. However, that isn’t always the case.
Some right-sizing homeowners actually opt for a smaller or older (and hence cheaper) condo unit instead. Just this week, we happened to speak to S, who sold her four-bedder to move into a two-bedder condo. Here’s why it can be a more sensible option:
Why right-size to a smaller condo?
Speaking to S and a few other right-sizing homeowners, the main reasons appear to be:
- A sense of financial security
- Facilities help to maintain active social lives
- Legacy planning issues
- No wait-out period
1. A sense of financial security
S says that moving to a smaller condo, instead of a flat, gives her a greater sense of financial security. Her explanation is that:
“I feel if I have private property, I still have the means to downgrade further. In case I need money after my retirement, I can still sell and then move to a flat. If all I have is a flat, there is no more other option.”
S also says she prefers freehold property, unlike leasehold properties such as HDB flats. She feels this allows the property to hold its value, so she can always count on it for further gains* if she absolutely must sell.
*We’d say this is semi-true. Freehold properties can hold their value better over very long periods, but they are not guaranteed to hold their value or appreciate better than a leasehold condo.
2. Facilities help to maintain active social lives
More than a few seniors have pointed out that, with condo living, the family seems more inclined to visit (on account of the facilities at the condo); and S has had the same experience.
“On weekends my grandchildren have a swimming instructor, who teaches them at the pool here,” she says, “So there’s always a good reason to get together every weekend. My son-in-law also uses the gym here, because he doesn’t have one nearby at his flat; so I get to see my daughter more often also because they will usually visit together.”
Another right-sizer we spoke to said that, while HDB flats have more facilities these days, condos are still generally best for large gatherings. He cited the clubhouse as being more comfortable than multi-purpose spaces at the void deck and says that the few BBQ facilities at flats are more tightly packed, and don’t accommodate family gatherings as well.
That said, you will have to choose your developments more strictly too. Newer mass market condos may have a lot of attractive facilities, but if you only have one pool and a tennis court shared with more than 1,000 units, you might find it to be overcrowded on weekends.
S also says having the condo security guards around makes a difference:
“They will usually open the door for me if I take a taxi, and some of them will help me with my shopping bags if I call and ask. Since my husband is wheelchair-bound this is very helpful.”
(Mind you, we don’t know if security in every condo will be as nice and help you carry your bags to your block – perhaps check before you buy!)
3. Legacy planning issues
One of the reasons behind S buying a condo was something we’ve mentioned on Stacked before: most Singaporean children can’t inherit their parents’ HDB flat.
With a nearly 90 per cent home ownership rate, most Singaporean children have their own homes, by the time their parents are right-sizing or retiring; and it’s not possible to own two HDB flats (if they own a private property and inherit a flat, they may be forced to live in the flat if they want to keep both).
S intends to leave the property to her daughter (her daughter owns a condo unit), so a private property is ideal. S also feels her condo unit would appreciate more than a flat (see point 1) or at least, hold its value better, leaving a more sizeable legacy.
4. No wait-out period
Under the September 2022 cooling measures, those who sell a private property must wait 15 months before they can buy a resale flat (unless they are 55 or older, and right-sizing to a 4-room or smaller flat).
S isn’t affected by this as she’s past 55, but we did recently speak to a couple who were caught out by the unexpected policy change.
Matt and his spouse are both in their late 30s and were intending to sell their condo unit to buy a resale flat. They had only just contacted a property agent when the very next day the measure was announced.
“The condo was quite old, it was left to me by my late grandma. But I need the money for a business I’m starting with my wife, so we decided to sell it and downgrade.
In the end, we downgraded to a small but much newer two-bedder, that would be near our shop. Because the 15-month wait was not viable, we didn’t want to contend with a rental while trying to run a start-up.”
Matt says the capital for the business was much less, given they had opted for a condo and not a flat; but “I take some consolation from the fact that I still have a condo and a good appreciating asset.”
For owners of smaller condos, retirees may represent an underrated group of potential buyers
There’s a common worry that, with shoebox units or smaller two-bedders, resale will be tough as there is a smaller market of buyers to attract. It’s certainly true that family units will rarely consider buying these small units – but that doesn’t confine the market to other investors.
There is a small but growing trend of seniors right-sizing into shoebox units or two-bedders. Besides comfort, they rationalise that these would make practical gifts to their children. As one realtor explains:
“Even if your children can’t move into it themselves, they can use it as a rental asset. If it’s fully paid up, a one or two-bedder can generate sufficient income to cover most or all of their current home loan. This is also one way to make your children mortgage-free.”
This article was first published in Stackedhomes.