Should you keep HDB and buy condo when upgrading (i.e. Pay ABSD)?

This is a common dilemma (albeit a happy one) for many HDB upgraders whose family finances allow them to keep HDB and buy a condo. Should they pay ABSD for the condo and rent out their HDB flat for passive rental income? Below are 4 factors for your consideration before making the final decision.

keep HDB and Buy Condo


     Table of Content

  • Factor 1: Special & Sentimental Reasons
  • Factor 2: Financing & Loans     
  • Factor 3: Sense of Security
  • Factor 4: Rental Yield Vs Capital Appreciation


 📌 Factor 1: Special & Sentimental Reasons

  • The law allows Singaporeans to first buy a HDB flat and then a condo after fulfilling the MOP but not the other way round.
  • This is one reason why many Singaporeans want to keep this “Special Privilege”
  • Another factor to keep the flat is Sentimental reasons
  • You may have many fond memories with your family there
  • These memories are precious and cannot be easily quantified in monetary terms
keep HDB and Buy Condo

📌 Factor 2: Financing & Loans

  • Putting sentiments aside, to “keep HDB and buy condo” will need you to consider the financial aspect of your decision.
  • Keeping the flat will require you to pay 17% ABSD based on the condo price.
  • Your HDB flat will need to be fully paid with no outstanding loans.
  • Otherwise, your maximum loan for your condo will be limited to 45% if you take a second home loan.

📌 Factor 3: Sense of Security

  • HDB flats is public housing and belongs to the Government of Singapore.
  • HDB owners get a sense of security because the government is unlikely to behave like a profit driven commercial entity
  • These flats serve as a backup for the owners in any crisis
  • Rental yield for HDB can be as high as 5-7% because a HDB flat costs much less than a condo.
  • This rent can help to offset their condo’s monthly mortgage, which reinforces this sense of security
keep HDB and Buy Condo

📌 Factor 4: Rental Yield Vs Capital Appreciation

  • When buying a property for investment, one should look at both rental yield and capital appreciation.
  • From my own investment experiences, capital appreciation should be the bigger consideration.
  • Let us take the private condos in Geylang as an example.
  • They tend to have higher rental yields but the capital appreciation is slower because of bank loan limitations for the area.
  • Overall, condo will have higher capital appreciation than a HDB flat because of the following reasons
  • HDB flats has low enbloc potential
  • Only about 4% of HDB flats qualify for Selective En bloc Redevelopment Scheme (SERS)
  • As such, to idea to “keep HDB and buy condo” is not favored by investors who want maximum investment returns
  • In Singapore, not many condos survive beyond 40 years
  • There are also more flexibilities for condo
  • You can cash out by taking equity loans without selling your property
  • You can buy alone or with your friends
keep HDB and Buy Condo

When you pay ABSD in order to keep your HDB flat when buying a condo, it is most likely because the special sentiments and sense of security factors are larger than economic ones

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This is a big decision that will likely require additional financial commitments. Sit down and discuss with our Property Den experts to assess if this course of action is suitable for you.

Dennis Lim

Dennis has more than a decade of experience investing in real estate. Like many fellow Singaporeans, he grew up in a HDB flat with dreams to live in a condominium. Through careful financial planning & hardwork, this became a reality when he was 30. He now owns 3 private properties in Singapore and has helped hundreds of Singaporeans to achieve their goal of upgrading their homes in land-scarce Singapore.

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