Should you stay at your HDB or upgrade?

Buying a private property for investment vs upgrading to stay at a private property

To a certain extent, I would agree that purchasing a private property in a good location with a good entry price would have a lot more capital gains as compared to a HDB. After all, HDB properties have always been meant for living purposes and not for speculative reasons.

However, one should not plunge immediately and sell one’s HDB just for the sake of wanting to own a private property. After all, staying in a HDB allows one to keep living expenses low as compared to staying in a private property.

A breakdown of a HDB flat’s living expenses:

1) Conservancy charges: $30 to $100 per month on average, depending on flat type 2) Property tax: $200 to $400 per year on average, depending on flat type 3) Utilities: It varies depending on individual usage. But from some observations, a HDB owner seems to be paying much lesser than a private owner 4) Parking charges: $90/month for surface car park and $120/month for sheltered car park

For HDB dwellers, there are discounts and rebates given from time to time, which can amount to considerable savings over time. For private property owners, they will be deprived of those privileges.

A breakdown of a condo’s living expenses:

1) Condo maintenance fees: from around $300/month to over $1000/month, depending on condo type and location 2) Property tax: from around $1000/year to over $2000/year, depending on condo type and location 3) Utilities: Again, it varies depending on individual usage. But from my observations, most of the condo owners seem to be paying more than $200/month, and some of them are even paying an excess of $500/month 4) Parking charges: Maintenance fees would usually include parking charges

At a glance, it’s clear that the monthly expenses for staying in a condominium are significantly higher than staying in a HDB. Moreover, the monthly loan instalments for private properties will be a lot higher – at least around an extra thousand dollars every month.

But does that mean that we have to stay in our HDB flat forever?

Not necessarily so! There are a few questions you have to ask yourself first before you make the decision to sell:

1) After selling your current HDB flat, would the sale proceeds be adequate for you to buy another condominium for your own stay? Or is it enough to even buy two private properties (one for your own stay and one for investment?) 2) Would you be very comfortable paying the monthly projected expenses and loan instalments if you really make the move? 3) If you and/or your spouse become unemployed, would you still be comfortable in paying your monthly expenses? 4) Do you have enough cash and CPF reserves for rainy days? For example,

a) At least 12 months’ worth of reserves for property expenses b) Unexpected expenditures in the family such as medical expenses, etc. c) If you’re buying to rent out, are you able to get by with lower than expected rent or when you cannot find a tenant in the short term?

Of course, living the condo lifestyle, the dream of financial freedom or early retirement is something many of us yearn to have. However, the most important question is, if things do go wrong, will it significantly affect the current life you and your loved ones have?

Exercise prudence as always; tread with caution and calculate your risks!

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