We make $300k per year and are nearly in our 50s. Should we sell our 22-year-old HDB flat or investment property to upgrade?

Hi Stacked Homes,

I always enjoy reading your detailed analysis and professional advice in response to readers’ questions to support their decision making. This time, I hope you could also help answer my questions.

We are approaching our 50s with combined yearly income of $300,000 with two teenage (15-19) kids. We own a four-room HDB in one of the cheapest estate and a freehold one-bedder in D11 (in equal shares) with no outstanding loan. As our HDB is now over 22 years old, I have been wondering if we should still keep it. I am also considering moving into a three-bedroom condo in a more central/convenient location but have been put off by the ever rising ABSD (One of us is SPR.)  

With our combined cash saving of $300,000 and CPF OA of $400,000-$500,000, should we sell one of our current properties and/or decouple, and get a three-bedder condo for own stay? Would it still be possible to also buy another investment property to generate rental income?

Looking forward to hearing your advice. Thank you in advance.

Property	1-bedder in D11	4-room flat in Choa Chu Kang
CPF used + Accrued Interest (S$K)	256	238

Editor's Note: The condo and flat address has been redacted for privacy reasons.

---

Hi there,

We are happy to hear that you’ve enjoyed our content so far!

Given that both of you will turn 55 in five-six years and a portion of your CPF funds may be locked up in your Retirement Account (RA), now is an opportune time to begin planning if you intend to restructure your property portfolio. And as you might already know, delaying the purchase of a property will lead to a shorter loan tenure and subsequently a reduced loan quantum, impacting your affordability.

To begin, we will first assess your affordability before delving into the performance of your existing properties and exploring the available options.

Affordability

Let’s first look at the potential cash proceeds you’ll receive if you were to sell your existing properties.

The addresses of the properties have been omitted for privacy reasons.

There haven’t been any one-bedroom transactions in your one bedroom condo this year, the last one was in February 2022:

Date	Size (sqft)	PSF	Price	Level
Feb 2022	700	$1,658	$1,160,000	#02

For calculation purposes, we will assume the same selling price. However, do note that it would likely be higher given how the market has moved.

Description	Amount
Selling price	$1,160,000
CPF to be refunded into OA	$256,000
Cash proceeds	$904,000

These are some of the recent transactions for four-room flats along Choa Chu Kang Drive:

Date	Block	Size (sqm)	Price	Level
Jun 2023	687C	90	$465,000	04 to 06
Jun 2023	688B	91	$485,000	19 to 21
Apr 2023	688A	90	$450,000	10 to 12
Apr 2023	688B	90	$450,000	10 to 12
Mar 2023	687B	90	$460,000	04 to 06

For our calculation, we will use the average transacted price of $462,000.

Description	Amount
Selling price	$462,000
CPF to be refunded into OA	$238,000
Cash proceeds	$224,000

From what you have described to us, it seems that your intention is to ultimately still hold two properties if possible. So we will calculate your individual affordability assuming it’s the first property count.

Singapore citizen, 50 years old (Spouse A)

Description	Amount
Maximum loan based on the age of 50, a monthly fixed income of $13K and 4.6per cent interest	$928,434 (15 year tenure)
CPF funds (not including CPF to be refunded from sale of existing properties and assuming an even split of the combined CPF funds of $500K)	$250,000
Cash (not including cash proceeds from sale of existing properties and an even split of the $300K cash savings)	$150,000
Total loan + CPF + cash	$1,328,434
BSD based on $1,328,434	$37,737
Estimated affordability	$1,290,697

SPR, 49 years old (Spouse B)

Description	Amount
Maximum loan based on age of 49, monthly fixed income of $13K and 4.6per cent interest	$970,471 (16 year tenure)
CPF funds (not including CPF to be refunded from sale of existing properties and assuming an even split of the combined CPF funds of $500K)	$250,000
Cash (not including cash proceeds from sale of existing properties and an even split of the $300K cash savings)	$150,000
Total loan + CPF + cash	$1,370,471

Even though your loan, CPF and cash add up to $1,370,471 (but due to the BSD and ABSD payable) your downpayment amount will be reduced, which lowers your overall affordability. If we were to work backwards, your maximum affordability is $1,181,428, with a BSD of $31,857 and an ABSD of $59,071.

Depending on which property you sell or decouple, your affordability will naturally adjust accordingly.

Now, let's take a look at how your existing properties are performing.

Performance of existing properties

1-Bedder in D11

Year	1BR In D11	YoY	Property Price Index (PPI) of residential properties	YoY
2012	$1,396	–	151.5	–
2013	$1,504	7.74per cent	153.2	1.1per cent
2014	$1,548	2.93per cent	147.0	-4per cent
2015	$1,387	-10.40per cent	141.6	-3.7per cent
2016	$1,368	-1.37per cent	137.2	-3.1per cent
2017	$1,352	-1.17per cent	138.7	1.1per cent
2018	$1,537	13.68per cent	149.6	7.9per cent
2019	$1,510	-1.76per cent	153.6	2.7per cent
2020	$1,603	6.16per cent	157.0	2.2per cent
2021	$1,532	-4.43per cent	173.6	10.6per cent
2022	$1,711	11.68per cent	188.6	8.6per cent
Annualised	–	2.06per cent	–	2.21per cent

Looking at the annualised and year-on-year growth rates over the past decade, we can observe that your one-bedder's prices are closely aligned with the overall private property market.

The fact that it has a freehold tenure does help to alleviate concerns about lease decay, so you can look to hold it for a longer term. Additionally, the development's proximity to two reputable primary schools may contribute to its sustained demand. However, being a one-bedroom unit may limit its appeal to families with children.

Nonetheless, the project enjoys a central location and is within walking distance of the MRT station, making it attractive to investors or individuals/couples looking for a convenient living situation.

In Q2 2023, the average rent for one-bedroom units in there was $3,188. With a price of $1,160,000, the rental yield is approximately 3.3 per cent, which is fairly decent but not fantastic given the current rental market conditions.

4-room flat in Choa Chu Kang

Year	4-Room Flat In CCK	YoY	HDB Resale Price Index (RPI) – Q1 of each year	YoY
2012	$413	–	138.5	–
2013	$422	2.18per cent	148.6	7.29per cent
2014	$379	-10.19per cent	143.5	-3.43per cent
2015	$350	-7.65per cent	135.6	-5.51per cent
2016	$335	-4.29per cent	134.7	-0.66per cent
2017	$320	-4.48per cent	133.9	-0.59per cent
2018	$323	0.94per cent	131.6	-1.72per cent
2019	$307	-4.95per cent	131	-0.46per cent
2020	$330	7.49per cent	131.5	0.38per cent
2021	$368	11.52per cent	142.2	8.14per cent
2022	$421	14.40per cent	159.5	12.17per cent
Annualised	–	0.19per cent	–	1.42per cent

We can see from the table that the annualised growth rate for your four-room flat over the last ten years is much lower compared to the overall HDB resale market.

Following the introduction of three rounds of cooling measures in 2013 and the change in HDB's valuation procedure, which shifted property valuation to occur after the issuance of the Option to Purchase (OTP), there has been a gradual decrease in HDB prices. Having said that, during the years preceding the pandemic, prices at your specific block witnessed a more significant decline in comparison to the rest of the market.

Considering that prices for the block have now reached nearly the same level as they were in 2013 before the decline began, it could be an opportune moment to contemplate selling while the market conditions are favourable.

Now that we have a better understanding of how your existing properties are performing, let's consider the possible pathways you can take.

Potential pathways

1. Sell HDB, decouple your 1BR and purchase a 3-bedroom unit under one name

Let’s say Spouse B were to buy over the shares for the 1BR condo and assume a selling price of $1,160,000.

Decoupling calculation

	Seller (Spouse A, Citizen)	Buyer (Spouse B, PR)
Shares	50per cent	50per cent
Valuation	$580,000	$580,000
CPF to be refunded (for seller)	$128,000 (Assuming even split of $256,000)	–
Current CPF OA balance (for purchase)	–	$250,000 (Assuming even split of $500,000)
Option + Exercise fee (5per cent)	$29,000 (Received)	$29,000 (Paid)
Completion fee (20per cent)	–	$116,000
Legal fees	$3,000	$3,000
BSD	–	$12,000
ABSD	–	$29,000
New loan (for buyer)	–	$345,000
Cash proceeds (for seller)	$449,000	–
Cash needed (for buyer)	–	$29,000 (Option fee)

Since Spouse B will not need to fully utilise all the $150,000 of cash, we will put $100,000 towards Spouse A’s property purchase.

Spouse A's new affordability

Description	Amount
Maximum loan based on age of 50, monthly fixed income of $13K and 4.6per cent interest	$928,434 (15 year tenure)
CPF funds ($250,000 + $128,000)	$378,000
Cash ($150,000 + $100,000 + $449,000)	$699,000
Total loan + CPF + cash	$2,005,434
BSD based on $2,005,434	$69,871
Estimated affordability	$1,935,563

With a budget of $1.9 million, your options for a three-bedder in the central region are rather limited, even if you were to look at older developments. These are some younger projects that fall within your affordability:

Project	Tenure	Completion year	District	Size (sq ft)	Asking price
Centro Residences	99 years	2014	20	926	$1,679,000
Queens Peak	99 years	2020	03	840	$1,850,000

Bear in mind that the sizes here mean that these are a compact size for a three-bedroom, which typically would do without a yard or utility area.

Seeing as your youngest child is presently 15 years old, we presume that you will reside in the next property for at least the duration until he/she moves out, let's say approximately 10 years from now. We will analyse the expenses involved as well as the potential gains or losses that may arise during this 10-year holding period.

The outcome from holding onto your one-bedroom condo:

Description	Amount
BSD + ABSD (incurred when decoupling)	$41,000
Interest expense (Assuming loan of $345K with a 16 year tenure at 4.6per cent interest)	$119,677
Maintenance fees (Assuming $250/month)	$30,000
Property tax	$52,510
Rental income (Assuming rent of $3,188/month with no vacancy period)	$382,560
Agency fees (Payable once every 2 years)	$17,215
Total profits	$122,158

Let's assume you were to purchase a unit at Queens Peak. To date, there have been three 3-bedder transactions made in the project this year with an average price of $1.8 million. We will use this for the calculation.

Cost of holding Queens Peak:

Description	Amount
Purchase price	$1,800,000
CPF funds + cash	$1,077,000
BSD	$59,600
Loan required	$782,600

Description	Amount
BSD	$59,600
Interest expense (Assuming loan of $782,600 with a 15 year tenure at 4.6per cent interest)	$263,122
Maintenance fees (Assuming $350/month)	$42,000
Property tax	$28,800
Total costs	$393,522

Total costs incurred from holding both properties for 10 years: $393,522 – $122,158 = $271,364

We will use the annualised growth rate for private residential properties over the last 10 years of 2.21 per cent to do a simple projection for the potential capital gains.

Project	Property price in 10 years	Capital gains
1BR In D11	$1,443,417	$283,417
Queens Peak	$2,239,785	$439,785
Total profits	–	$723,202

After taking the costs incurred into consideration, the potential profits made over 10 years is $451,838.

Do note that these projections are rudimentary and intended solely as a general reference. They are dependent on market movements and will consequently vary. Additionally, depreciation has not been factored into these calculations.

2. Sell both properties and purchase another two separately

Given that a substantial amount of funds will be unlocked if you were to sell both properties, your options for the own stay unit may open up more. By selling both units, in addition to your current combined CPF funds of $500,000 and cash of $300,000, you'll have an additional $494,000 of CPF funds and $1,128,000 of cash.

Let's run through the numbers again.

Spouse A's affordability (Assuming he/she buys the own stay property, we will allocate more cash)

Description	Amount
Maximum loan based on age of 50, monthly fixed income of $13K and 4.6per cent interest	$928,434 (15 year tenure)
CPF funds ($250,000 + $247,000)	$497,000
Cash ($150,000 + $1,000,000)	$1,150,000
Total loan + CPF + cash	$2,575,434
BSD based on $2,575,434	$98,371
Estimated affordability	$2,477,063

Spouse B's affordability

Description	Amount
Maximum loan based on age of 49, monthly fixed income of $13K and 4.6per cent interest	$970,471 (16 year tenure)
CPF funds ($250,000 + $247,000)	$497,000
Cash ($150,000 + $128,000)	$278,000
Total loan + CPF + cash	$1,745,471

Although the sum of your loan, CPF, and cash reaches $1,745,471, the payable BSD and ABSD reduce your overall affordability by decreasing your downpayment amount. Working backwards, we find that your maximum affordability stands at $1,614,428. This includes a BSD of $50,321 and an ABSD of $80,721.

So with a budget of $2.4 million, finding a freehold three-bedder in the central region isn't feasible, unless you are content with looking at boutique developments. As such, looking at younger leasehold three-bedder units could be a more reasonable option. Here are some younger three-bedroom units that fall within your affordability in the central region:

Project	Tenure	Completion year	District	Size (sqft)	Price
Highline Residences	99 years	2018	03	904	$2,150,000
Stirling Residences	99 years	2022	03	1,055	$2,380,000
Avenue South Residence	99 years	2023	03	947	$2,370,000

As for the investment property, here are some two bed two bath units under $1.6 million with a decent rental yield at the moment:

Project	Tenure	Completion year	District	Size (sqft)	Price	Avg 2 bedder rent (Apr-Jun)	Rental yield
The Clement Canopy	99 years	2019	05	732	$1,380,000	$4,223	3.7per cent
Margaret Ville	99 years	2021	03	700	$1,600,000	$5,088	3.8per cent
Parc Esta	99 years	2022	14	743	$1,580,000	$5,183	3.9per cent

Similarly, let's look at the cost incurred and potential profits or losses over a 10-year horizon.

Let's assume that Spouse A purchases a unit at Stirling Residences for your own stay. To date, there were seven three-bedroom units transacted in the development at an average price of $2,052,143. We will use this as the purchase price in our calculation.

Cost of holding Stirling Residences:

Description	Amount
Purchase price	$2,052,143
CPF funds + cash	$1,647,000
BSD	$72,207
Loan required	$477,350

Description	Amount
BSD	$72,207
Interest expense (Assuming loan of $477,350 with a 15 year tenure at 4.6per cent interest)	$160,492
Maintenance fees (Assuming $350/month)	$42,000
Property tax	$38,990
Total costs	$313,689

As for Spouse B, let's assume he/she purchases a unit at Parc Esta and rents it out for 10 years. To date, there have been 22 two-bedders transacted in the project at an average price of $1,464,682.

The outcome of holding Parc Esta for 10 years:

Description	Amount
Purchase price	$1,464,682
CPF funds + cash	$775,000
BSD	$43,187
ABSD	$73,234
Loan required	$806,103

Description	Amount
BSD + ABSD	$116,421
Interest expense (Assuming loan of $806,103 with a 16 year tenure at 4.6per cent interest)	$279,630
Maintenance fees (Assuming $250/month)	$30,000
Property tax	$115,910
Rental income (Assuming rent of $5,183/month with no vacancy period)	$621,960
Agency fees (Payable once every 2 years)	$27,990
Total profits	$52,009

Total costs incurred from holding both properties for 10 years: $313,689 – $52,009 = $261,680

As before, we will use the annualised growth rate for private residential properties over the last 10 years of 2.21 per cent to do a simple projection for the potential capital gains.

Project	Property price in 10 years	Capital gains
Stirling Residences	$2,553,533	$501,390
Parc Esta	$1,822,541	$357,859
Total profits	–	$859,249

After taking the costs incurred into consideration, the potential profits made over 10 years is $597,569.

While the total cost difference between the two options is around $10,000, opting to sell the existing properties and purchasing two separate properties can lead to significantly higher potential profits over a period of 10 years. This is mainly because more funds become available through the sale, allowing for investment in higher-valued properties.

Alternative pathway: Sell both properties and purchase a dual key unit

Combined affordability after selling both properties:

Description	Amount
Maximum loan based on ages of 49 and 50, monthly fixed income of $26K and 4.6per cent interest	$1,856,868 (15 year tenure)
CPF funds	$994,000
Cash	$1,428,000
Total loan + CPF + cash	$4,278,868
BSD based on $4,278,868	$196,332
Estimated affordability	$4,082,536

Another advantage of acquiring a dual key unit is that when the studio portion is rented out, it is not classified as renting out the entire unit. As a result, the property tax falls under the owner-occupied category, which incurs a lower tax rate compared to non-owner-occupied properties.

However, there are certain challenges associated with this option. Despite the significant increase in your budget, the market offers limited choices for four-bedroom dual key units. Additionally, dual key units tend to cater to a more specific audience, such as families desiring to live together while maintaining separate private spaces or owners seeking rental income while preserving their privacy. 

Consequently, this may pose difficulties when attempting to resell the unit in the future. Another disadvantage is that in the event that the property becomes profitable and you wish to cash out, your living situation will be affected.

At the moment, there is just one four-bedroom dual key unit in the central region that falls under $4 million:

Project	Tenure	Completion year	District	Size (sq ft)	Price
Mon Jervois	99 years	2016	10	1,905	$4,000,000

Let’s also look at the costs incurred and potential profits over a 10-year timeframe. There was a recent transaction for a unit of the same size in May, at $3.78 million.

Cost of holding Mon Jervois:

Description	Amount
Purchase price	$3,780,000
CPF funds	$994,000
Cash	$1,428,000
BSD	$166,400
Loan required	$1,524,400

Description	Amount
BSD	$166,400
Interest expense (Assuming a 15 year tenure at 4.6per cent interest)	$512,526
Maintenance fees (Assuming $500/month)	$60,000
Property tax	$162,680
Rental income (Assuming rent of $2,000/month with no vacancy period)	$240,000
Agency fees (Payable once every 2 years)	$10,800
Total costs	$672,406

As before, we will use the annualised growth rate for private residential properties over the last 10 years of 2.21 per cent to do a simple projection for the potential capital gains.

Project	Property price in 10 years	Capital gains
Mon Jervois	$4,703,549	$923,549

After taking the costs incurred into consideration, the potential profits made over 10 years is $251,143.

Comparing the 3 choices

Assuming a comparable growth rate, the second choice of selling the HDB and buying two separate units presents the highest potential profits.

When considering the expenses incurred over a span of 10 years, the difference between the first and second choice amounts to approximately $10,000, which in the grand scheme of things, is relatively minor. And as you've seen, the last option of buying a dual key unit will incur the highest cost.

[[nid:639903]]

Considering the less optimistic performance of the HDB unit, particularly given the still high current environment, it may be an advantageous time to sell and capitalise on a positive sale.

Your one bedroom condo, being in line with the overall market performance and being a freehold project, is better suited for a long-term hold. By decoupling from this property, Spouse B would incur lower ABSD compared to purchasing another property outright.

However, it is important to note that this unit holds a substantial amount of cash proceeds, which could expand the range of options for your own residence. Without selling the condo, the choices for a three-bedroom unit in the central region would be rather limited.

By selling both properties, a significant amount of cash would be unlocked, allowing for more flexibility in adjusting budgets for both properties. This pathway would provide more options for a preferred residence in the central region, while also enabling the acquisition of an investment property with a potentially better rental yield (at least at the present moment). Considering the minimal difference in costs incurred over 10 years between options 1 and 2, the latter choice appears more favourable.

While purchasing a dual key unit may appear viable, it is important to consider the drawbacks associated with this option. These include the limited availability of suitable units, potential challenges in the future when attempting to sell the property, the consolidation of your investment and personal residence, and the high cost of maintaining the property coupled with a low rental yield. Considering these factors, it may not be the most optimal choice.

ALSO READ: Guide to buying your first private property in Singapore (2023)

This article was first published in Stackedhomes.