It’s not uncommon to see older couples downsizing to a smaller home. Whether it’s rightsizing from a larger HDB to a smaller one, a condo to an HDB or a landed house to a condo, they might choose to downsize as their children have already moved out and they don’t need such a huge living space.

Rightsizing might also be a great option for those who want to retire early and enjoy the balance of their sales proceeds.

We’ve previously covered several reasons why homeowners would want to sell and rightsize their property. In this article, we’ll highlight the pros and cons of rightsizing from one property type to another and the eligibility requirements.

Rightsizing from a condo to an HDB

If you plan to right size from a condo to an HDB, you can consider buying a resale HDB or a BTO. For this article, we’ll assume the homeowners plan to right size from a 4-bedroom condo unit (and up) to a 2 or 3-room HDB flat.

Some right-sizers who are used to living in larger condo units like a penthouse might also opt for a 4-room flat as it will give them more space than a 2 or 3-room flat. They might also want spare rooms for their children and grandchildren visiting them.

Resale HDB

Here are the average prices for resale HDBs as of today:

Pros:

• Eligible for various housing grants and schemes like the Proximity Housing Grant (PHG) and the Silver Housing Bonus (SHB)
• Shorter waiting time (several months) compared to a BTO (three - four years or more)
• Most resale flats are located near town centres with easy access to amenities; convenient for seniors
• You can purchase a resale flat in any area in Singapore

Cons:

• Have to wait for 15 months after selling your condo before buying a resale HDB (you’ll be exempted from this if you’re over 55 and are looking for a 4-room flat or smaller).
• More expensive than BTO

Eligibility requirements:

• Only SC and PR households can buy a resale flat. If one of you is a foreigner, the other must be an SC.
• Buyers also need to be eligible in terms of income ceiling, ethnicity, family nucleus and more. Read more about resale flat eligibility in our article.

HDB BTO

Here are the average indicative prices for HDB BTOs based on the four BTO exercises in 2022.

Note: The prices above are for those with a 99-year lease and exclude housing grants.

Pros:

• Most affordable option for rightsizing
• There are two types of 2-room Flexi flats: one with a fresh 99-year lease, and the other with a short lease. Short lease 2-room Flexi flats have flexible lease options ranging from 15 to 45 years (in five year increments) as long as it covers you and your spouse up to 95 years old. You must be at least 55 to be eligible for this.
• Eligible for various grants and schemes such as the Silver Housing Bonus. Other schemes include:
  • Deferred Downpayment Scheme (DDS) – Flat buyers aged 55 years and above who have bought a 2-room Flexi or 3-room uncompleted flat will be able to defer their downpayment until they collect their keys.
  • Staggered Downpayment Scheme (SDS) – Right-sizers who bought a 2-room Flexi or 3-room uncompleted flat in a non-mature estate can pay their downpayment in two separate instalments.
  • Senior Priority Scheme (SPS) – A minimum of 40 per cent of 2-room Flexi flats will be set aside for seniors, half of which will be set aside for seniors eligible under SPS. The new flat must be within 4km of your current flat or owner-occupied private property.
• There’s priority balloting for those who are planning to live near their children
• Deferred Downpayment Scheme (DDS) – Flat buyers aged 55 years and above who have bought a 2-room Flexi or 3-room uncompleted flat will be able to defer their downpayment until they collect their keys.
• Staggered Downpayment Scheme (SDS) – Right-sizers who bought a 2-room Flexi or 3-room uncompleted flat in a non-mature estate can pay their downpayment in two separate instalments.
• Senior Priority Scheme (SPS) – A minimum of 40per cent of 2-room Flexi flats will be set aside for seniors, half of which will be set aside for seniors eligible under SPS. The new flat must be within 4km of your current flat or owner-occupied private property.

Cons:

• Private property owners will have to wait a minimum of 30 months after selling their private property before they can apply for a BTO
• Have to wait 4-5 years before the BTO is completed
• Buyers will have to go through the BTO balloting process and compete with other buyers
• HDB BTOs are smaller than resale HDBs and condos, so right-sizers will have to decide if the space is enough for them
• The locations for BTOs are limited and are based on those released in the BTO exercises

Eligibility requirements:

• The standard HDB rules apply – at least you or your spouse must be a Singapore citizen (SC) and the other person needs to be an SC or SPR.
• Buyers also need to be eligible in terms of income ceiling, ethnicity, family nucleus and more. Read more about eligibility for resale flat in our article.
• Buyers must not have enjoyed housing subsidies twice (eg. bought a new HDB, DBSS flat, EC or used the CPF Housing Grant)

Rightsizing from a larger to smaller HDB

A group of right-sizers might also be from larger HDB flats such as 5-room, executive apartments (EA) and executive maisonettes (EM).

The pros, cons and eligibility requirements of downgrading from a larger to a smaller HDB are similar to the ones we mentioned above. However, there are some things that right-sizers need to take note of.

Resale levy

If your current home was bought at a subsidised price and you plan to purchase another subsidised flat, you’re required to pay a resale levy.

The list of property types include BTO, sale of balance flats (SBF), an EC that you bought from a developer and a resale flat that was bought using any CPF housing grants (except the PHG).

However, you won’t need to pay a resale levy if you plan to purchase a resale flat without any CPF housing grants. For those rightsizing to a BTO, you’ll still need to pay a resale levy as BTOs are already subsidised by the government.

CPF refund

When you sell your flat, you’d have to refund the principal amount you took from your CPF account, including accrued interest, back to your CPF Ordinary Account (OA). If you had received any housing grant, you’d also have to return it to your CPF OA with accrued interest.

If your current home is a BTO or resale HDB, chances are you have used your CPF for monthly loan repayments, down payment, buyer’s stamp duty (BSD) and other miscellaneous fees like legal fees.

Rightsizing from a landed house or larger condo to a smaller condo

For condo owners currently living in a 4/5-bedroom unit or a penthouse, they might want to rightsize to a 1 or 2-bedroom condo. Those used to a larger space can also consider a 3-bedroom unit, especially if you need an additional bedroom for your children and grandchildren who come over frequently.

Here are the average prices of resale and new launch condos in 2022.

Pros:

• Those who rightsize to a condo can enjoy the benefits of having security and facilities like a swimming pool, tennis court, clubhouse and more.
• Buyers are not subject to HDB eligibility requirements

Cons:

• There are additional costs incurred for monthly maintenance fees and conservancy charges
• More expensive than HDB, so right-sizers will have to decide if they will have enough for a comfortable retirement
• Not eligible for any housing grants or schemes
• Those who buy their new home without selling their current property first will have to pay additional buyer’s stamp duty (ABSD)
• If you’re rightsizing to a new launch condo, you’d have to wait for three years (or more) before the completion of your house.

Factoring in the amount you need for retirement

Ultimately, which property you choose to right size to depends on how much you plan to spend in your retirement days and your current finances.

A study by the Lee Kuan Yew School of Public Policy in 2019 showed that couples above 65 need at least $2,351 monthly to meet basic needs. This includes basic needs like food, transportation, accommodation, mobile phone expenses, an annual holiday, etc.

Considering that the life expectancy for Singaporeans in 2023 is 84 years old for males and 88 years old for females, you’ll need to factor in at least 20-25 years of retirement. Let’s say you and/or your spouse live till 90, you’ll need about $705,300 for retirement ($2,351 x 12 months x 25 years).

However, remember that the monthly expenditure of $2,351 is just a benchmark. You will need to consider the type of lifestyle you want during retirement. Would you need more money for trips or your hobbies? Do you have to set aside some money for medical conditions?

Hence, the sale proceeds from your current home and the cost of your new home will need to cover your retirement expenses. You might also have other sources of income from schemes like CPF Life or any endowment plans.

This article was first published in 99.co.