News

Hi! I have some questions about my current situation. Hopefully u can shed some light! House: punggol 4 bed EC 1,442 sq ft/bought 1.16mil/ valuation ~ 2Mil now. Outstanding loan 545k. Decoupled. I own 100% now. My CPF+ accrued ~ 150k.  Servicing 2.4k cash monthly. Our eldest girl got a placement in PLMGS, hence looking at Minton. Options: We r quite torn on the options. Paying 60k+ to the govt for BSD for a new spacious Minton, or just stay Punggol and schoolbus them. Hope u can advise. Thank u. Hi there, Thanks for writing in. Having your current property solely under your name provides flexibility if you decide to purchase a second property for investment under your wife’s name without incurring any Additional Buyer’s Stamp Duty (ABSD). Any property purchase will still incur Buyer’s Stamp Duty (BSD), which, as you mentioned, can be substantial if the property value is high. Therefore, this is still an important factor to take into consideration. As such, we will cover: Let’s start by assessing your wife’s affordability. Based on her age of 37 and monthly income of $5,500, at an interest rate of 4.8%, the estimated maximum loan she can take is up to $558,490 for a private property with a loan tenure of 28 years.  To purchase a $2M property solely in her name, you would need $1.5M in cash and CPF funds, which is quite a significant amount. For this case, we will assume you have the necessary funds. Since the current project you’re living in is not revealed, we’ll examine the performance of Executive Condominiums (ECs) in District 19, focusing on units larger than 1,400 sq ft. If we compare the ECs in D19 versus all ECs across the island, we can see that the average growth rate over the last 10 years is comparable.  However, when comparing the average growth rates of ECs to private condos and apartments in District 19, ECs come out ahead. The table shows that over the past four years, the price gap between ECs and condos has been closing. As of 2023, the average price per square foot (PSF) for condos and apartments in District 19 is only 12% higher than that of ECs.  Now, let’s examine the two properties you’re considering: The Minton and an executive HDB in Lorong Ah Soo. Since the first resale transaction for The Minton occurred only in 2015, we have just eight years of data to look at. Although The Minton has the lowest growth rate compared to other non-landed properties in District 19 and across the island, its prices have been steadily increasing. Additionally, there is no other development of comparable size nearby. Being within 1 km of the popular Paya Lebar Methodist Girls’ School could also contribute to the demand for this project. These are some of the recent 4-bedroom transactions in The Minton: Although the average growth rate over the past 10 years for Executive flats in Hougang matches that of Executive flats overall, the year-on-year growth rate shows a different story. Before the pandemic, prices for Executive flats in Hougang were relatively stagnant, with most years experiencing negative growth. Despite being the largest available HDB type and no longer being built, the units along Lorong Ah Soo are 39 to 40 years old, potentially raising concerns about lease decay for future buyers. Furthermore, as the HDB market recovers, it is unlikely we will see the same level of growth as observed in the past three years. These are some recent Executive flat transactions along Lorong Ah Soo: Now let’s take a look at the options you’re considering.  As previously calculated, purchasing the property with your wife’s income alone will require a substantial amount of CPF and cash. Without knowing which development you’re currently residing in, it’s challenging to advise on whether you should retain your property. However, overall growth rates for ECs larger than 1,400 sq ft in District 19 suggest they are outperforming other non-landed property types in the area. Now, let’s examine the costs involved. For calculation purposes, we will assume you have the necessary cash and CPF funds for the purchase. We will presume a 10-year holding period and a rental yield of 3% for your current property. Cost of holding the $2M property Cost of holding your current property This could be a viable option, as it allows you to avoid rushing into a purchase while remaining close to your daughter’s school. Additionally, rental income from your current property would help offset some expenses. However, let’s examine the numbers to ensure they make sense. Given the uncertain timeline and not knowing if the next property will be purchased under your name, your wife’s name, or both, we will assume for calculation purposes that you rent for two years and then purchase the next property under your name alone. Sale of current property *This is assuming you only have the CPF funds that is currently in your property Looking at the rental transactions for 4-bedders in The Minton over the last 3 months (Feb – Apr 2024), the average rent is $6,633 which we will assume as the rental price. As before, we will presume a 3% rental yield on your current property. Cost of renting at The Minton and renting out current property for 2 years Since there isn’t any mention of a preferred project besides The Minton, let’s say you purchase a unit there after 2 years.  We will use the average price of 4-bedders at $2,476,000 as the purchase price. Cost of holding the property for 8 years In this scenario, if you wish to purchase an HDB, you’ll need to sell your current property and adhere to the 15-month wait-out period. Since you’re a married couple, both your names must be listed in the HDB. Even though you can designate one person as the owner and the other as the occupier, the occupier cannot already own a private property. They can only purchase a private property after the HDB fulfils its Minimum Occupation Period (MOP). Therefore, if your plan is to retain your current property and buy an HDB under your wife’s name, that won’t be feasible. As indicated in the previous calculations, acquiring a $2M property solely under your wife’s name requires a considerable amount of cash and CPF funds. Considering the average price of a 4-bedroom unit at The Minton, even more funds would be necessary for the purchase. If your intention is to own two properties, it might be more prudent to sell your current property, buy The Minton under your name, and acquire another more affordable unit for investment under your wife’s name. This approach optimises your resources and time, as your wife can proceed to purchase the investment property without any waiting period. For completeness, we will examine the costs associated with both scenarios. Let’s say you were to rent at The Minton during the 15-month wait-out and purchase the HDB under your wife’s name. Wife’s maximum loan (for the purchase of an HDB) based on the age of 38 with a fixed monthly income of $5,500 at 4.8% interest: $287,960 (25-year tenure) We will use the average price of Executive HDBs along Lorong Ah Soo at $880,000 as the purchase price.  Cost of holding the HDB for 9 years + rental of 15 months Let’s say that you were to purchase a $1.5M property for investment after the MOP and rent it out at a 3% yield. Cost of holding the investment property for 4 years With the sales proceeds from your current property and with 6 years to save up, you may be able to purchase the investment property without taking up a loan. Let’s presume you pay for this property in full.  For this calculation, we will assume the average price of 4-bedders at The Minton of $2,476,000 as the purchase price and $1.5M for the investment property. Both of these have a 10-year holding period, with the investment property being rented at a 3% yield.  The Minton  $1.5M investment property (Similarly, we will assume that you do have sufficient funds to pay for the shortfall) Considering the differing purchase prices of the various properties under consideration, it’s not a completely equitable comparison, as higher-priced properties typically entail higher costs. Additionally, the method of ownership will impact the incurred expenses, given the varying loan amounts accessible to you and your wife. But let’s do a quick summary of the costs involved for the different options. By owning two properties and renting one out, the rental income can help offset some expenses. From an investment perspective, holding two private properties might be preferable to holding one HDB and one private property, considering their growth rates. However, this hinges on selecting the right property. Over the past decade, non-landed private properties have demonstrated a higher growth rate of 2.9% compared to HDBs at 2.3%.  Without knowledge of your current property’s location, we cannot advise on its performance or whether you should sell or retain it. For Option 1, the incurred costs are the lowest because your wife’s eligible loan quantum is relatively low, so acquiring a $2M property solely under her name requires a substantial amount of cash and CPF funds. If you’re looking for a 4-bedroom unit near your daughter’s school in a newer, sizable development, the cost would most likely exceed $2M. Staying in your current property and perhaps acquiring a smaller unit for investment under your wife’s name might be a more prudent option if you’re considering a location that isn’t close to her school. Option 2 provides time to find a suitable property while remaining near your daughter’s school, but the timeline is uncertain. Unless the rental income covers most or all outgoing expenses during the rental period, the rental costs incurred would diminish profits from your property sale. Option 3 offers a comfortable, affordable living space with an HDB, but involves a 15-month waitout and a 5-year MOP. Costs are low assuming the investment property is fully paid off, but if a loan is taken, costs would definitely rise. Considering opportunity costs, this is the least preferred option. Option 4 allows staying in your preferred development while acquiring a second unit for investment. However, high costs are incurred due to increased loans for both properties and substantial Buyer’s Stamp Duty (BSD) payable. It will also require a significant amount of cash and CPF funds. Depending on your current property’s performance, Option 1 might be the most favourable. Holding two private properties with a lower outstanding loan compared to a purchase like The Minton reduces incurred costs. The difference in terms of monthly repayment is also huge. At the moment, you’re paying $2,400/month, but if you were to take up a loan of $1,082,203 for the purchase of a unit at The Minton, with a 22-year tenure and 4% interest, the monthly repayment goes up to $6,171. This may possibly impact your existing lifestyle. Acquiring a more affordable property for investment under your wife’s name would also lessen cash and CPF outlay. We hope that our analysis will help you in your decision-making. If you’d like to get in touch for a more in-depth consultation, you can do so .