Should You Buy Private Condo as Your First Home (3 Factors for Consideration)?

Majority of Singaporeans will likely buy a BTO or resale HDB flat as their first home. Should you choose to buy private condo as first home? Below are 3 factors for consideration.

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     Table of Content

• Factor 1: HDB is more regulated but affordable
• Factor 2: Condo is expensive but has more financing flexibility
• Factor 3: Condo have better capital appreciation & en bloc potential

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    📌Factor 1: HDB is more Regulated but Affordable

• HDB is the preferred first home for younger couples because it is affordable and comes with government grants.
• However, HDB has many regulations
• singles below the age 35 cannot buy a HDB flat.
• A Singaporean with a foreign spouse cannot buy a BTO flat if they own an overseas property.
• Permanent Residents (PR) can only buy a resale flat after 3 years of obtaining residency.
• To sell your HDB flat, you must fulfill the 5 years Minimum Occupation Period (MOP).
• The buying and selling restrictions for HDB are plenty.
• For private condo, you can buy as a married couple, single or with friends.
• Technically, you can buy today and sell tomorrow (Seller Stamp Duty Applies)
• The biggest challenge for private property owners happens when they switch to HDB.
• After selling, they need to wait 30 months before they can apply for a BTO flat.
• This group of buyers will likely opt for resale HDB flat as the waiting period is shorter (15months*)

Updates: On 30 Sept 22, the Government introduced a 15-month wait-out period for private home owners before they can purchase a HDB resale flat. This wait-out period will not apply to seniors aged 55 and above who are buying a four-room or smaller resale flat

    📌Factor 2: Condo is Expensive but has more Financing Flexibility

• Condos are generally more expensive but has more financing options.
• Monthly Servicing Ratio (MSR) & Total Debt Servicing Ratio (TDSR) are home loan limits imposed by the government.
• MSR (for HDB) is capped at 30% of your gross monthly income.
• Qualified buyers will be able to take a bigger loan with TDSR (for private properties) at 55% of gross monthly income (assuming no other personal loans)
• However, a bigger loan will also mean more pressure servicing mortgage.
• You must be mentally prepared to service this loan for the next 20-30 years.
• Younger buyers can use pledging or show cash methods to take bigger loans for private properties if they have support from their family members.
• Another benefit of owning a condo is that you can cash out by taking equity loans without selling.
• HDB owners will need to sell their flats if they need cash.

    📌Factor 3: Capital Appreciation & En bloc Potential

• HDB is a successful public housing program for Singaporeans. 
• It is not meant for speculation and must be kept affordable.
• This translates to slower capital appreciation.
• Singapore is a top investment destination for foreign investors.
• Foreigners are allowed to buy private condos
• This makes the buyers’ pool bigger and allows more room for capital appreciation.
• Older HDB flats face lease decay issues and 96% of HDB flats will be returned to government when their lease expires.
• Condos that are of freehold status or 999-years lease will not have such worries.
• A price increase is observed when condos reach 31 to 40 years old.
• This phenomenon could be attributed to the stronger en bloc potential of older condominiums.

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