There comes a time in a homeowner’s life when they start considering if it’s worth upgrading their humble HDB flat into a swanky condo. But for all the perks that come with ownership of private property, the downside is the convoluted process of making this real estate move.
To guide potential condo owners through upgrading their HDB flat to a condo, here’s an explainer on how you can tackle this.
Ensure your Minimum Occupation Period (MOP) is over
Before you even go and view a potential condo’s show flat, the first thing you have to ensure is that your Minimum Occupation Period (MOP) is over. This is 5 years for most HDB flats, and 10 years for Prime Location Housing developments.
If you’re unsure about your MOP date, you can check the My HDBPage portal which should tell you when you’re eligible to sell your flat.
Selling your HDB flat
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Unless your bank account is loaded or you won the Toto Grand Prize, the odds are good you’ll be looking at selling your HDB flat to fund the purchase of a condo. Selling your HDB flat can be done either before or after you buy the condo, and each of these options has its own pros and cons. Before we get into that, here’s a quick guide on how to sell your HDB.
Registering your Intent to Sell
You can’t just list your HDB unit willy-nilly on a property site and call it a day. Registering your Intent to Sell with HDB is super important and it has to be done by you, the owner of the house; your agent cannot register on your behalf. This also lets you check whether you’re eligible to sell your flat and it’s free to register.
The Intent to Sell will be valid for 12 months; you’ll have to register again if you have not sold your unit within the timeframe.
Selling your HDB flat with an agent
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The easiest and fuss-free way to sell your current home is to find an agent and let them handle everything from the paperwork to the viewings to the listing. They’ll also be able to negotiate the move-out-move-in dates between you and the homebuyers.
One thing to note is that engaging an agent would mean you’ll be paying them a fee. Most agents command a fee of 2%, although that could be higher if you are under an urgent deadline to sell your home.
Selling your HDB flat without an agent
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Something many homeowners are doing these days is selling their HDB flat by themselves with no agent involved. While this lets them save a considerable sum of money, it is a process that can take up a lot of time, especially for the inexperienced.
Once you’ve registered your intent to sell, the next step is to market your property and get the word out that your house is for sale. If your marketing strategy is on point, you should have a couple of offers rolling in.
When you have accepted an offer, the next thing to do is to grant your buyer the Option-to-Purchase (OTP). You should also collect an Option Fee from them to ensure some form of commitment; the market rate for the fee is around $1,000. The OTP is the only contract valid in HDB’s eyes. Whatsapp messages or verbal agreements are not good replacements.
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If the buyer decides to exercise the option within 21 days, they’ll have to pay you another Option Exercise Fee. This is separate from the original Option Fee, but the total sum of both cannot exceed $5,000.
Things are smoother sailing from here. You and the buyer will have to submit the resale application documents to the HDB Resale Portal within 7 days of each other. So be sure to coordinate in case someone forgets and does an oopsie. Once HDB accepts the documents, you’ll have to get them endorsed and pay your resale fees.
Your application should then be approved by HDB within 2 weeks, and they’ll schedule a date to hand over your keys to the new homeowners within 8 weeks of the acceptance of documents.
Last, you might want to consult a lawyer to assist with any legal issues or hire them to draft the necessary documents and contracts so the sale goes smoother.
Buying a condo unit
The other half of this HDB-to-condo upgrade is buying the condo unit. As mentioned, you can either buy it before you sell your HDB or wait till you’ve sold your previous flat before looking at condo options. Here are some of the most common scenarios when making the upgrade from an HDB to a condo:
Option A: Buy the condo before selling your HDB
Some homeowners who are a little more kiasu might elect to buy the condo of their dreams before selling their HDB flat. However, this means that the condo would be considered their second property and will incur the additional buyer’s stamp duty (ABSD) of 17%. That’s $170,000 on a condo worth $1M. Yikes.
But there’s good news. Married couples that manage to sell their HDB within 6 months of procuring their condo unit can apply for the ABSD refund and get all that money back. This condition is pretty strict though, and there are no extensions available.
And as tempting as buying a brand-new condo might be, getting a resale condo might bode better since you can move in soon after you’ve bought it. This would make the transition a little more seamless as you won’t have to worry about finding a temporary home.
Another factor to consider is your loan-to-value ratio. For your second property purchase, you’ll only be able to take up to a 45% bank loan to service your mortgage. This would not be an issue if you have already paid off your initial HDB mortgage – you can then proceed to loan up to 75% of your condo’s value as per usual.
Option B: Sell your HDB & stay somewhere temporarily before buying the condo
Another option for couples looking to make the jump is to sell their HDB first before buying a condo unit. Those who choose to go this route would not need to pay any ABSD since their “new” condo will be considered their first property. There will also be no rush to sell their HDB within 6 months just to qualify for the ABSD refund. However, there are some slight caveats still.
You’ll have to find temporary living arrangements either with parents or by renting out a unit. The former will let you save a bit on rent, but either way, you’ll have to move houses twice which can be a hassle.
By waiting to sell your HDB, you also run the risk of losing out on the ideal unit you have your eyes set on. Waiting on a similar condo to appear on the market would only mean you’ll be spending time not living in your own personal space.
Option C: Own both an HDB flat and a condo
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The third choice is for those who can afford both a HDB flat and a condo at the same time on top of all the fees and mortgages that they have to pay. Basically, if you have no qualms about paying the hefty 17% ABSD, the world is your oyster and you can have 2 houses to call home.
Alternatively, you can also rent one of the properties out to help cover the mortgage. Renting a 4-room HDB flat can start from $2,050/month in Choa Chu Kang all the way to $2,900 in Queenstown*. Renting out a 1,000sqft condo in CCK on the other hand, starts from $2,900, while a similar condo unit in Queenstown starts from $4,450**.
*Prices derived from HDB.
**Prices derived from Squarefoot.
Tips on making the upgrade from a HDB to condo
Speaking to some homeowners who have upgraded from a HDB to a condo, they dished some sage advice for those who are looking to do the same.
1. Ideally you’re shopping around for a freehold or 999-year lease private property
Mr Pang, who moved from an HDB flat in Hougang to a condo in Pasir Ris, advised that house hunters find a freehold condo or 999-year-leasehold property where there’s no expiry date looming over your head. Owning property in perpetuity ensures that your future children and their children will have a roof over their heads, especially in land-scarce Singapore.
However, it’s important to consider whether freehold condos in ulu parts of Singapore are more valuable compared to leasehold condos in sought-after areas. If the price difference between the two is negligible, the perks that come with living nearer to the heart of town might make up for the lack of 900 years on the lease. We’d pick commuting to City Hall from Tiong Bahru rather than from Sembawang any day.
2. Rent out your BTO flat & stay with your parents while saving up for a condo
Another piece of advice from Mr Pang was to rent out your BTO flat and move in with your parents. This lets you save up for your condo’s down payment or renovation costs.
We get that this might not be for everyone as different families have different dynamics and housing situations. But if your family is close, this can be a good way to accrue some funds. Just be sure to invite your parents to your housewarming party.
3. Extending your Option-to-Purchase to 12 weeks
Yes, it’s possible to extend your OTP when you’re selling your HDB flat from 14-21 days to longer, as long as both parties are agreeable to the conditions.
4. Negotiate to stay in your HDB if you need while waiting for condo renovations
If need be, you can negotiate with whoever bought your HDB flat for you to stay in your HDB for a while longer. This can come in handy if you’re just waiting for 3 months for your condo’s renovations to finish.
All these negotiations and terms should be listed in the Option to Purchase so it’s all in black-and-white.
How to upgrade from an HDB flat to a condo
Upgrading from an HDB flat to a condo is a pipedream for plenty of homeowners. Some people do it because of the posh amenities like steam rooms and pools, while others just want the knowledge that they’re owning a piece of property for life. Whatever your reason, making the leap is no small feat, but it doesn’t have to be hard.
As long as you upgrade within your means and don’t overestimate your finances, you too can live a life of gated real estate. Even if you aren’t able to afford it now, you can always put it on your vision board to manifest it in the future.
Read more related articles:
- Condos with panoramic sea views
- Affordable freehold condos near MRTs
- ECs and condos launching in 2022
- HDB vs Condo as an investment
Cover image adapted from (left): TheSmartLocal
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