We make $28k per month and own a 4-room HDB unit: Should we buy a new launch or just rent to be near Henry Park Primary?

Hello!

First of all, thank you so much for all the neutral and highly informative articles on the Singapore property market. They have been of great help for us to understand the market, especially the amount of data analysis you do!

We have been staying in a four room HDB for close to 10 years now, and need a bigger space now for a growing family. Ideally a four bedroom and >1,400 sq ft of space.

For the next five-10 years, we are looking to stay near Henry Park Primary and are now evaluating the below options:

1. Buying a new launch four bedroom apartment near Henry Park, selling current HDB

2. Renting a four bedroom apartment near Henry Park and Buying one (or two) new launch elsewhere for investment, selling current HDB

3. Rent a four bedroom apartment near Henry Park and rent out current HDB

Hope to get your expert advice on the better path to take considering costs and maximum capital gains.

Here are some further details:

1. HDB estimated Sale Price $850,000 (reference X value from SRX)
2. Mortgage loan balance of $320,000
3. CPF Used $290,000 evenly split
4. Accrued Interest $40,000 evenly split

Thank you!

Editor’s Note: Some financial and personal information were removed for privacy reasons

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Hello,

Thanks for writing in and we're happy to hear our work has been of help to you!

As frequent readers of our Q&A articles may already know, understanding your desired holding period is a vital aspect when contemplating various housing options, so it's helpful that you have already determined your preferred timeframe. Before delving into the specific options you are considering, let's begin by evaluating your affordability.

Affordability

Selling the current HDB

Combined affordability after selling HDB

Description	Amount
Maximum loan based on ages of 38 and fixed monthly combined income of $28k, with a 4.6 per cent interest	$2,854,386 (27 years tenure)
CPF funds	$610,000
Cash	$500,000
Total loan + CPF + Cash	$3,964,386
BSD based on $3,964,386	$177,463
Estimated affordability	$3,786,923

Husband’s affordability

Description	Amount
Maximum loan based on age of 38 and fixed monthly income of $14k, with a 4.6 per cent interest	$1,427,193 (27 years tenure)
CPF funds	$355,000
Cash ($500,000 split evenly)	$250,000
Total loan + CPF + Cash	$2,032,193
BSD based on $2,032,193	$71,209
Estimated affordability	$1,960,984

Wife's affordability

Description	Amount
Maximum loan based on age of 38 and fixed monthly income of $14k, with a 4.6per cent interest	$1,427,193 (27 years tenure)
CPF funds	$255,000
Cash ($500,000 split evenly)	$250,000
Total loan + CPF + Cash	$1,932,193
BSD based on $1,932,193	$66,209
Estimated affordability	$1,865,984

Now that we have a better understanding of your affordability, let’s look into the options you’re considering.

Options

Option 1: Selling current HDB and buying a new launch 4 bedroom apartment near Henry Park

Here is what we do know.

The estimated breakeven for the development is at $2,248 psf ppr.

Assuming that developers' profit margins range from 15 per cent to 20 per cent, with an average of 17.5 per cent, you would typically be looking at a potential launch price for Pinetree Hill at an average of around $2,641 psf.

However, given Pinetree Hill is about to launch, we have heard word on the ground that the starting $PSF would be set at $2,350 psf. As such, let's just assume the four-bedroom would be priced at $2,350 psf.

All 4-bedders at Pinetree Hill come equipped with a private lift. The 4 Bedroom Deluxe units range in size from 1,292 to 1,485 sq ft, while the 4 Bedroom Premium units span from 1,464 to 1,668 sq ft. Based on your requirement of at least 1,400 sq ft, you would need to consider the four Bedroom Premium units, as the 1,485 sq ft Deluxe units include the strata void above the living and dining area, resulting in a liveable space of approximately 1,292 sq ft

Assuming a price psf of $2,350 and a size of 1,464 sq ft, this will amount to $3,440,400 which is well within your budget of $3,786,923. However, please note that this is an estimated price and the actual price could be higher or lower.

You could also consider looking at resale options but your choices may be limited as a majority of developments in the area are priced beyond your budget due to their larger floor plates, particularly those with a freehold/999-year leasehold tenure.

For instance, these are some of the latest transactions for newer freehold/999-year leasehold four-bedders in the vicinity of Henry Park:

Date	Project	Tenure	Completion year	Size (sqft)	PSF	Price
Jan 2023	The Trizon	Freehold	2012	2,099	$2,025	$4,250,000
Jul 2022	Glentrees	Freehold	2006	2,626	$1,523	$4,000,000

These are some units that are currently available on the market that fall within your affordability:

Project	Tenure	Completion year	Size (sqft)	PSF	Price
Pandan Valley	Freehold	1979	1,668	$1,948	$3,250,000
Pine Grove	99-years	1984	1,755	$1,133	$1,990,000
The Serenade @ Holland	99-years	2004	1,904	$1,733	Starting from $3,300,000
Quinterra	99-years	2009	1,787	$1,863	$3,330,000

Do note that these developments are picked out purely because they match your budget and requirements. You definitely need to do more research to see if they are suitable for your needs/timeline.

We can observe from the table that older freehold projects are priced comparably to newer 99-year leasehold developments and potentially Pinetree Hill. In this regard, these older properties hold an advantage for buyers with long-term plans.

For a similar price range, they may opt for a larger, older freehold/999-year leasehold property over a newer, but smaller, 99-year leasehold development. However, individual preferences can vary, so this is a general rational perspective.

Considering that Pinetree Hill is projected to obtain its Temporary Occupation Permit (TOP) in 2027, and assuming you don't have alternative accommodation, you will need to rent a place in the meantime.

Since we are unaware of your child's age and when you require the address for primary school registration, we will assume you need it as soon as possible. As such, you will need to find a rental property within a one kilometre radius of Henry Park Primary School.

A quick search on PropertyGuru reveals that currently, the most affordable four-bedroom rental option within one kilometre of Henry Park Primary School is available at The Serenade @ Holland, with an asking price of $7,000 per month. Based on URA records, the latest rental transaction for a 1,500 - 1,600 sq ft unit in the development was in January this year at $6,000. Let's say you were to rent this at $6,000/month while waiting for the new launch to be built.

Now, let's calculate the accumulated cost over 10 years if you were to purchase a 4-bedder at Pinetree Hill, assuming it falls exactly within your budget of $3.7 million.

Description	Amount
Purchase price	$3,700,000
BSD	$161,600
Total CPF funds and cash	$1,110,000
Loan required after deducting CPF funds and cash	$2,751,600

Booking fee (5per cent cash)	$185,000
Completion (15per cent cash/CPF)	$555,000
Foundation stage (5per cent cash/CPF)	$185,000
Total downpayment	$925,000

The following is the progressive payment plan. We are using an interest rate of 4.6per cent and the longest duration for each stage.

Stage	per cent of purchase price	Disbursement amount	Monthly estimated payment	Monthly estimated interest	Monthly estimated principal	Duration	Total interest cost
Completion of foundation	5per cent	$148,000	$798	$567	$231	6-9 months (from launch)	$5,103
Completion of reinforced concrete	10per cent	$370,000	$2,795	$1,986	$809	6-9 months	$17,874
Completion of brick wall	5per cent	$185,000	$3,793	$2,695	$1,098	3-6 months	$16,170
Completion of ceiling/roofing	5per cent	$185,000	$4,791	$3,404	$1,387	3-6 months	$20,424
Completion of electrical wiring/plumbing	5per cent	$185,000	$5,789	$4,113	$1,676	3-6 months	$24,678
Completion of roads/car parks/drainage	5per cent	$185,000	$6,787	$4,822	$1,965	3-6 months	$28,932
Issuance of TOP	25per cent	$925,000	$11,778	$8,368	$3,410	Usually a year before CSC	$100,416
Certificate of Statutory Completion (CSC)	15per cent	$555,000	$14,772	$10,496	$4,276	Monthly repayment until property is sold	$692,736

All amounts are rounded to the nearest dollar

Costs incurred after 10 years if you were to buy a new launch near Henry Park

Description	Amount
Rent for 4.5 years at $6,000/month	$324,000
BSD	$167,600
Interest expense	$906,333
Maintenance fee (assuming $500/month) and property tax – payable for 78 months after TOP	$146,991
Total cost	$1,544,924

Let’s also look at the costs incurred if you were to purchase a resale property near Henry Park instead. We will assume you purchase the unit at Pandan Valley for $3,250,000.

Description	Amount
Purchase price	$3,250,000
BSD	$134,600
Total CPF funds and cash	$1,110,000
Loan required after deducting CPF funds and cash	$2,274,600

Costs incurred after 10 years if you were to buy a resale property near Henry Park

Description	Amount
BSD	$134,600
Interest expense (with 4.6per cent interest and 27 year tenure)	$932,618
Maintenance fee (assuming $500/month) and property tax – payable for 78 months after TOP	$173,300
Total cost	$1,240,518

With the considerable expense of rental costs, opting to purchase a resale property would allow you to save a minimum of $378,000 that would have been spent on rent.

However, when considering the purchase of an older development such as Pandan Valley, it is important to factor in the potential renovation costs. The extent of renovation work required will vary depending on the specific unit. But for the sake of giving you some estimates, if you were to undertake a complete overhaul of the property (assuming an estimated renovation cost of $120 psf) for a unit spanning 1,668 sq ft, the total amount would reach $200,160.

Option 2: Selling your current HDB and renting a 4 bedroom apartment near Henry Park while buying one (or two) new launches elsewhere for investment

It's a common sales pitch that you might have come across, that buying a new launch property will always yield higher profits compared to a resale property. However, this is not always the case. While the progressive payment scheme can alleviate the financial burden in the initial years, it really is very dependent on the new launch that you pick (entry price, surrounding price support, etc etc).

On the other hand, if you opt for a resale property, you can immediately rent out the unit, and the rental income can help partially offset the loan repayments.

You have a healthy budget considering your individual affordability of $1.8 million and $1.9 million. Let's consider three scenarios: purchasing two new launches, purchasing two resale properties, and purchasing one new launch and one resale property.

We will focus our attention on two-bedroom units as they generally offer greater resale potential compared to 1-bedroom units.

These are some new launches that currently fall within your affordability:

Project	Tenure	Completion year	Type	Size (sq ft)	Level	Price
The Continuum	Freehold	2027	2b2b	646	#05	$1,748,000
The Botany @ Dairy Farm	99-years	2027	2b2b	829	#13	$1,620,000
Terra Hill	Freehold	2026	2b2b	678	#03	$1,861,000
Claydence	Freehold	2026	2b2b	786	#05	$1,847,100

There are also some three-bedroom compact new launch units that fall within your affordability which you can consider as an investment. Three-bedders tend to cater to families and less to investors which results in better price stickiness. Its practical but compact layout caters to families on a budget looking for a condo.

Project	Tenure	Completion year	Type	Size (sq ft)	Level	Price
The Botany at Dairy Farm	99-years	2027	3b2b	926	#03	$1,898,000
Sceneca Residence	99-years	2027	3b2b	904	#03	$1,864,000
Royal Hallmark	Freehold	2025	3b2b	797	#03	$1,830,000
Zyanya	Freehold	2025	3b2b	893	#06	$1,780,800

Last available on June 24, 2023

And these are some resale units on the market within your affordability with decent rental yields:

Project	Tenure	Completion year	Type	Size (sqft)	Asking price	Avg 2 bedder rent (Mar – May)	Rental yield
Whistler Grand	99-years	2022	2b1b	614	$1,220,000	$4,250	4.18per cent
Principal Garden	99-years	2019	2b2b	764	$1,605,000	$5,373	4.02per cent
Sol Acres	99-years	2019	2b2b	710	$1,050,000	$3,700	4.23per cent
Kingsford Waterbay	99-years	2018	2b2b	689	$1,020,000	$3,609	4.25per cent

As before, these developments are simply picked out purely because they match your budget and requirements. There could be better resale alternatives out there.

Scenario 1: Purchasing two new launches

Let's say your wife was to purchase a unit at The Continuum for $1,748,000 and you purchase a unit at Terra Hill for $1,861,000, renting them out after TOP. We will assume a rental yield of three per cent interest rate of 4.6 per cent and the longest duration for each stage of the progressive payment plan.

Similarly, we will calculate the cost accumulated in 10 years.

The Continuum

Description	Amount
Purchase price	$1,748,000
BSD	$57,000
Total CPF funds and cash	$505,000
Loan required after deducting CPF funds and cash	$1,300,000

Description	Amount
BSD	$57,000
Interest expense	$428,130
Maintenance fee (assuming $300/month) and property tax – payable for 78 months from TOP	$79,839.50
Rental income (assuming 3per cent yield and no vacancy periods)	$340,860
Agency fee payable once every 2 years	$14,160
Total cost incurred in 10 years	$238,270

Terra Hill

Description	Amount
Purchase price	$1,861,000
BSD	$62,650
Total CPF funds and cash	$605,000
Loan required after deducting CPF funds and cash	$1,318,650

Description	Amount
BSD	$62,650
Interest expense	$421,629
Maintenance fee (assuming $300/month) and property tax – payable for 78 months from TOP	$86,008
Rental income (assuming 3per cent yield and no vacancy periods)	$362,934
Agency fee payable once every 2 years	$15,075
Total cost incurred in 10 years	$222,428

Cost incurred after 10 years if you were to purchase two new launches while renting

Description	Amount
Rent for 10 years at $6,000/month	$720,000
Cost for The Continuum	$238,270
Cost for Terra Hill	$222,428
Total cost	$1,180,698

Scenario 2: Purchasing two resale properties

Now let's say your wife was to purchase a unit at Kingsford Waterbay for $1,020,000 and you purchase a unit at Sol Acres for $1,050,000, renting them out immediately. We will use the average rent of $3,609 and $3,700 respectively and an interest rate of 4.6 per cent.

Kingsford Waterbay

Description	Amount
Purchase price	$1,020,000
BSD	$25,400
Total CPF funds and cash	$505,000
Loan required after deducting CPF funds and cash	$540,400

Description	Amount
BSD	$25,400
Interest expense	$221,572
Maintenance fee ($290/month) and property tax – payable for 10 years	$97,420
Rental income (assuming no vacancy periods)	$433,080
Agency fee payable once every 2 years	$19,490
Total profits made in 10 years	$69,198

Sol Acres

Description	Amount
Purchase price	$1,050,000
BSD	$26,600
Total CPF funds and cash	$605,000
Loan required after deducting CPF funds and cash	$471,600

Description	Amount
BSD	$26,600
Interest expense	$193,363
Maintenance fee ($230/month) and property tax – payable for 10 years	$92,400
Rental income (assuming no vacancy periods)	$444,000
Agency fee payable once every 2 years	$19,980
Total profits made in 10 years	$111,657

Cost incurred after 10 years if you were to purchase two resale properties while renting

Description	Amount
Rent for 10 years at $6,000/month	$720,000
Profits for Kingsford Waterbay	$69,198
Profits for Sol Acres	$111,657
Total cost	$539,145

Scenario 3: Purchasing one new launch and one resale property

So let’s say your wife was to purchase Kingsford Waterbay and you purchase Terra Hill.

Cost incurred after 10 years if you were to purchase one new launch and one resale property while renting

Description	Amount
Rent for 10 years at $6,000/month	$720,000
Profits for Kingsford Waterbay	$69,198
Cost for Terra Hill	$222,428
Total cost	$873,230

Putting capital appreciation aside, when considering costs alone, purchasing two resale properties while renting would result in the lowest expenditure over a span of 10 years. The next option, in terms of cost, would be to purchase one new launch and one resale property. Finally, the most expensive option would be to buy two new launches. 

The difference in costs between acquiring two resale properties and two new launches is over half a million which is a considerable sum. By being able to promptly rent out the properties, it significantly offsets the expenses incurred.

Option 3: Rent a 4 bedroom apartment near Henry Park and rent out current HDB

Without the specific address of your HDB, we are unable to provide a detailed analysis. However, based on the estimated selling price of $850,000 for a four-room flat, we can infer that it is probably situated in the central region or could be a newer flat located in the city fringe.

HDB towns	Avg 4-room rent (Q1 2023)
Ang Mo Kio	$3,200
Bishan	$3,200
Bukit Merah	$3,630
Central	$3,650
Kallang/Whampoa	$3,300
Queenstown	$3,800
Toa Payoh	$3,350
Average rent	$3,447

Considering the general trend of 99-year leasehold properties, their prices typically decline as the remaining lease diminishes. If your HDB flat is relatively older, holding onto it for another 10 years may not be the most ideal option, despite the favourable rental yields associated with HDB flats due to their more affordable price range.

Additionally, if your HDB flat is located in an area where numerous new HDB clusters are being developed, this could potentially negatively impact its demand and consequently its price, even if it happens to be a relatively young block.

Cost incurred after 10 years if you were to rent a 4 bedroom apartment near Henry Park while renting out your HDB

Description	Amount
Rent for 10 years at $6,000/month	$720,000
Interest expense (assuming you took a HDB loan (2.6per cent interest) with the maximum tenure of 25 years 10 years ago)	$3,456
Rental income from HDB (assuming the average rent of $3,447 and no vacancy period)	$413,640
Town council service and conservancy fee ($68/month) and property tax – payable for 10 years	$66,890
Agency fee payable once every 2 years	$18,615
Total cost	$395,321

So what should you do?

When solely considering costs, the option of renting out your current HDB while renting a four-bedroom condominium near Henry Park Primary School would result in the least financial burden.

However, if we take into account the potential for appreciation, this option may not be the most suitable depending on the age and location of your HDB, as discussed earlier.

Even though holding two resale private properties and renting for a duration of 10 years would incur approximately $144,000 more in expenses compared to renting a four-bedroom condo near Henry Park while renting out your HDB, the former option could be more favourable. This is because investing in multiple properties diversifies your risk, and depending on the specific developments you purchase, their potential for appreciation could be greater than that of an HDB.

Year	Private non-landed (resale)	YoY	HDB (resale)	YoY
2014	$1,190	–	$441	–
2015	$1,191	0.08per cent	$423	-4.08per cent
2016	$1,248	4.79per cent	$424	0.24per cent
2017	$1,292	3.53per cent	$425	0.24per cent
2018	$1,324	2.48per cent	$419	-1.41per cent
2019	$1,344	1.51per cent	$416	-0.72per cent
2020	$1,294	-3.72per cent	$431	3.61per cent
2021	$1,345	3.94per cent	$488	13.23per cent
2022	$1,455	8.18per cent	$532	9.02per cent
Annualised	–	2.55per cent	–	2.37per cent

Source: Edgeprop

The graph and table above illustrate that prior to the pandemic, while there was a noticeable growth in prices for private non-landed properties, HDB prices remained relatively stagnant. Looking ahead, as HDB increases the supply of new flats with reduced waiting times in the upcoming years, this is expected to alleviate the demand for resale flats. Consequently, it is likely that HDB prices will not experience a significant upswing similar to what occurred during and after the pandemic.

When comparing the expenses associated with purchasing a four-bedroom property near Henry Park Primary School versus acquiring two investment properties while renting in the vicinity of the school, it becomes clear that the former option, especially if considering a new launch, would result in the highest costs over a span of 10 years.

As mentioned earlier, while holding two investment properties offers the benefit of risk diversification, it also entails trading off the opportunity to reside in a customised home that aligns with your unique lifestyle and preferences, as you won't have the freedom to renovate it according to your liking. For many individuals, the duration of 10 years is significant, and having a place that is tailored to their living preferences might hold great importance.

Year	Pandan Valley	YoY	Ridgewood Condominium	YoY	The Serenade @ Holland	YoY	Pine Grove	YoY	Quinterra	YoY	All SGP non-landed (resale)	YoY
2014	$1,011	–	$1,206	–	$1,278	–	$924	–	$1,238	–	$1,190	–
2015	$970	-4.06per cent	$1,195	-0.91per cent	$1,204	-5.79per cent	$902	-2.38per cent	$1,211	-2.18per cent	$1,191	0.08per cent
2016	$950	-2.06per cent	$1,220	2.09per cent	$1,161	-3.57per cent	$812	-9.98per cent	$1,203	-0.66per cent	$1,248	4.79per cent
2017	$943	-0.74per cent	$1,139	-6.64per cent	–	–	$917	12.93per cent	$1,175	-2.33per cent	$1,292	3.53per cent
2018	$1,162	23.22per cent	$1,267	11.24per cent	$1,210	–	$949	3.49per cent	$1,260	7.23per cent	$1,324	2.48per cent
2019	$1,284	10.50per cent	$1,218	-3.87per cent	$1,226	1.32per cent	$1,085	14.33per cent	$1,365	8.33per cent	$1,344	1.51per cent
2020	$1,113	-13.32per cent	$1,323	8.62per cent	$1,195	-2.53per cent	$973	-10.32per cent	$1,363	-0.15per cent	$1,294	-3.72per cent
2021	$1,223	9.88per cent	$1,416	7.03per cent	$1,287	7.70per cent	$1,103	13.36per cent	$1,463	7.34per cent	$1,345	3.94per cent
2022	$1,389	13.57per cent	$1,552	9.60per cent	$1,398	8.62per cent	$1,182	7.16per cent	$1,522	4.03per cent	$1,455	8.18per cent
Annualised	–	4.05per cent	–	3.20per cent	–	1.13per cent	–	3.13per cent	–	2.62per cent	–	2.55per cent

Looking at the performance of various developments situated within a one kilometre radius of Henry Park Primary School that offer four-bedroom units within your budget, it is apparent that the majority of these developments have shown a more robust annualised growth rate when compared to the overall private non-landed market with the exception of The Serenade @ Holland.

It is worth noting that Pine Grove, a 99-year leasehold project completed in 1984, continues to demonstrate strong growth despite its age. This indicates a healthy demand for properties in this particular area. While we cannot currently provide an extensive analysis of Pinetree Hill, considering the performance of similarly sized projects in the vicinity, and the future of more residential plots in the area, it is likely to be a reliable store of value.

So if you are comfortable with the prospect of residing in a rented home for the next 10 years, opting to buy two investment properties while renting in the vicinity of Henry Park would seem to be an optimal choice. The decision of whether to purchase two newly launched properties, two resale properties, or a combination of both would also hinge upon your risk tolerance.

As demonstrated in the calculations, the ability to promptly rent out the properties would substantially diminish the expenses involved. Furthermore, the potential appreciation of a resale property could possibly be on par with that of a new launch, depending on the specific project you acquire.

And obviously, buying two properties is a lot more stressful than just owning one from a financial and logistical standpoint.

We have previously written a piece discussing if new launches are a sure win, and our analysis revealed that on average, the variance in capital appreciation between new launches and resale properties is not significant.

However, it is worth noting that new launches offer the advantage of more readily identifying opportunities compared to sporadic resale listings, which are influenced by market conditions rather than direct developer pricing. Nevertheless, as always, the potential for appreciation ultimately depends on the specific project chosen.

ALSO READ: Touring University Walk landed estate: Freehold terraces and leasehold semi-d's near Botanic Gardens & MRT station

This article was first published in Stackedhomes.