Upgraders can offset condo mortgage with HDB rent

[lifeafter41]

Upgraders can offset condo mortgage with HDB rent

By Lin Zhiqin / The Edge Property | September 26, 2015 9:00 AM MYT

Based on URA’s caveat data, buyers with HDB addresses accounted for 54% of private non-landed home transactions in Rest of Central Region and Outside Central Region last year. Demand from this demographic was higher in the primary market as evidenced by 60% of the transactions having buyers with HDB addresses, compared to just 43% in the resale market.

The Edge Property sought to identify the most ideal towns for upgraders who wish to use their HDB rental proceeds to offset the monthly mortgage payments for their new condo. The study is based on data as at Sept 8, 2015 and does not account for future fluctuations in price and rent. Assuming the flat is fully paid for, HDB towns with the highest rents would ease the mortgage load of their upgraders the most. The exercise also assumes that upgraders aspire to stay within the same region. For example, upgraders in Hougang, Sengkang and Punggol might be looking for condos in the Northeast Region.

In the East Region, Tampines flats commanded the highest rents of $2,350 per month for four-room flats and $2,500 for five-room flats in 2Q2015. Meanwhile, the median price for new condos and apartments in the region stood at $1,239 psf. Using the example of a 1,000 sq ft unit and an 80% loan with a 3.5% interest rate per annum for 30 years, the condo mortgage would amount to $4,451 per month. Four-room upgraders who rent out their flats would only need to fork out an additional $2,101 per month, and five-room upgraders another $1,951 per month if they use their HDB rent to offset their condo mortgage (see Table 1).

Towns with higher HDB rents would give their prospective upgraders higher purchasing power. In the Northeast Region, for example, upgraders who own HDB flats would need to fork out less than $1,500 when they upgrade to condos in the same planning region. Queenstown and Bukit Merah topped the rental chart in the Central Region, Clementi and Jurong East in the West Region, Yishun and Sembawang in the North Region and Serangoon and Ang Mo Kio in the North East Region.

Using HDB sales proceeds to finance a condo

We then sought the towns where upgraders will need to fork out the lowest mortgage payment if they were to sell their HDB flats instead of renting them out. The exercise assumes the HDB flat is fully paid for and all the resale proceeds can be used to finance the new condo.

For example, households who own a 4-room HDB flat in Tampines would need to top up $819,000 for a brand new condo unit in the East Region worth $1,239,000 after selling their existing flat for $420,000. This translates into a monthly mortgage payment of about $3,678 for a 30-year loan with 3.5% interest per annum.

Bukit Merah and Bukit Timah topped the chart in the Central Region, Clementi and Bukit Batok in the West Region, Sembawang and Woodlands in the North Region, and Serangoon and Ang Mo Kio in the North East Region.


Table 1

http://dkc9trqgco1sw.cloudfront.net/s3fs-public/editorial/sg/2015/09/21/upgrade_T1.JPG

Source: HDB, URA, The Edge Property


Table 2

http://dkc9trqgco1sw.cloudfront.net/s3fs-public/editorial/sg/2015/09/21/upgrade_T2.JPG


Source: HDB, URA, The Edge Property

Sell or rent?

Upgraders who are wealthy enough that they do not need to finance their new home with the resale proceeds or rental income of the existing HDB flat will have the luxury of weighing the potential returns between selling and renting.

Given that the gross rental yield for a resale HDB flat is relatively high at 5% to 7%, renting it out would likely be wiser from a financial standpoint. HDB rental income also serves as a hedge against potential loss in employment income. However, it must be noted that renting out an existing HDB unit carries regulatory risks. While the scenario is unlikely, the authorities could make HDB subletting illegal.

Interested in upgrading to a condo in the North East region? Click here to search now

This article appeared in The Edge Property Pullout of Issue 696 (September 28) of The Edge Singapore.


Much as one wants to rent out their HDB to cover their condo mortgage, it never mention on one to get the DP for condo.

 

[frenchbriefs]

nice nice,this is one reason to keep my sg citizenship.ill be back in 10 or 15 years time to buy my condo/hdb offset.

 

[lifeafter41]

nice nice,this is one reason to keep my sg citizenship.ill be back in 10 or 15 years time to buy my condo/hdb offset.

And continue to serve your NS liability (Reservist) too........

 

[yahoo55]

So many Sinkies are doing this upgrading thing, they bought their million dollar private condo thinking that they can easily rent their flat for "market rate" to finance their condo purchase. But they failed to realize is that there's a huge oversupply coming and economic downturn, vacancy rates are rising towards 10% and rents have been falling.

Soon many Sinkies will have much difficulty in finding tenants and have to slash their rent prices significantly below "market rate" to attract tenants. Hope these Sinkies have enough salary to pay their condo mortgages and other expenses while their flats remain vacant.

 

[Onitsuka]

Doesn't HDB require the HDB Lessee who bought a condo to live in the HDB flat ?

So how can one use rental income from HDB flat to pay for the condo ?

 

[Papsmearer]

Doesn't HDB require the HDB Lessee who bought a condo to live in the HDB flat ?

So how can one use rental income from HDB flat to pay for the condo ?

Not exactly. If you are a HDB flat dweller, as long as you have fulfilled the Minimum Occupation Period of 5 years, you can buy a private condo and still keep your flat. However, if you are a private condo owner and you want to buy a HDB flat, you must sell your private condo.

 

[lifeafter41]

So many Sinkies are doing this upgrading thing, they bought their million dollar private condo thinking that they can easily rent their flat for "market rate" to finance their condo purchase. But they failed to realize is that there's a huge oversupply coming and economic downturn, vacancy rates are rising towards 10% and rents have been falling.

Soon many Sinkies will have much difficulty in finding tenants and have to slash their rent prices significantly below "market rate" to attract tenants. Hope these Sinkies have enough salary to pay their condo mortgages and other expenses while their flats remain vacant.

To pay the amount of S$4451 mortgage loan for the next 30 years is really no joke. The loan amount is almost 1 millin dollars, not forgetting one need to pay the stamp fee of what? 3%, 5% or even 7%. Assuming its at 5%, that is almost S$62,000. (of 1,239,000)

Would suggest Singaporean think twice or thrice before committing to these loans.

 

[ginfreely]

Not exactly. If you are a HDB flat dweller, as long as you have fulfilled the Minimum Occupation Period of 5 years, you can buy a private condo and still keep your flat. However, if you are a private condo owner and you want to buy a HDB flat, you must sell your private condo.

This must be qualifed as the most stupid govt policy on earth. Only PAP can do it.

 

[xebay11]

This must be qualifed as the most stupid govt policy on earth. Only PAP can do it.

They restricted private property buyers from owning HDB but not the other way around, as about 70% live in HDB, it doesn't take a genius to figure out why this policy is so. 70% voted for it

 

[ginfreely]

They restricted private property buyers from owning HDB but not the other way around, as about 70% live in HDB, it doesn't take a genius to figure out why this policy is so. 70% voted for it

Doesn't make sense to have a policy based on sequence of buying. Buy HDB first can buy condo and keep both, but the reverse sequence cannot. Why the disparity in treatment? A sound policy should base on substance over form.

 

[xebay11]

A sound policy should base on substance over form.

Since when has the PAP ever made sound policies based on substance over form?

 

[Manager]

it has already happened and it is because of bastard WP 0 FT increment policy and their opposition turds supporters who demand the reduction in the number of FT. :oIo:
FUCK the WP :oIo:

So many Sinkies are doing this upgrading thing, they bought their million dollar private condo thinking that they can easily rent their flat for "market rate" to finance their condo purchase. But they failed to realize is that there's a huge oversupply coming and economic downturn, vacancy rates are rising towards 10% and rents have been falling.

Soon many Sinkies will have much difficulty in finding tenants and have to slash their rent prices significantly below "market rate" to attract tenants. Hope these Sinkies have enough salary to pay their condo mortgages and other expenses while their flats remain vacant.

 

[yahoo55]

it has already happened and it is because of bastard WP 0 FT increment policy and their opposition turds supporters who demand the reduction in the number of FT. :oIo:
FUCK the WP :oIo:

The land supply is controlled by PAP and the last few years PAP flooded the market with private and EC land sales. PAP did this basically for 2 reasons. First reason is greed, land prices are at an all time high in the suburbs, it's a great time for PAP capitalize and sell land to the Sinkie suckers. Second reason is PAP wants property prices to go down, and their strategy is to greatly increase land supply as well as the cooling measures. PAP's property cooling measures are still intact because prices have not dropped enough due to the greedy rich developers holding prices.

PAP has said that Singapore is in a property bubble and PAP have not made any secret about wanting property prices to go down to deflate the bubble. If Sinkies with failed property investments want to blame someone, they have to blame PAP as they are the ones who controlled property supply and the cooling measures. The 70% have voted for this so they have only themselves to blame.

As for FTs, the economy is in a downturn and there's more retrenchments and less good jobs created. In fact according to MOM, there was a net jobs loss in Q2 2015 and citizen unemployment rate is increasing. If PAP increases the inflow of FTs, there will be even more Sinkies unemployed, underemployed or suffer deep pay cuts. When more and more Sinkies are unemployed or earning much less, how are they going to afford to pay their mortgages and other expenses??

And I haven't even mention the likely interest rates increases yet, which is another factor in the sinking Singapore property prices.

 

[Papsmearer]

Doesn't make sense to have a policy based on sequence of buying. Buy HDB first can buy condo and keep both, but the reverse sequence cannot. Why the disparity in treatment? A sound policy should base on substance over form.

The theory centres on HDB as "subsidized" "affordable" housing. Therefore, because they are subsidized and affordable, they need to be reserve for only the people that are lower income and less fortunate. SOme one who already owns a private condo is obviously far wealthier then the typical flat dweller, therefore they do not pass the rule of affordability and hence cannot receive subsidized housing. Whether HDB flats are truly affordable or subsidized is open to debate.

 

[Papsmearer]

The land supply is controlled by PAP and the last few years PAP flooded the market with private and EC land sales. PAP did this basically for 2 reasons. First reason is greed, land prices are at an all time high in the suburbs, it's a great time for PAP capitalize and sell land to the Sinkie suckers. Second reason is PAP wants property prices to go down, and their strategy is to greatly increase land supply as well as the cooling measures. PAP's property cooling measures are still intact because prices have not dropped enough due to the greedy rich developers holding prices.

PAP has said that Singapore is in a property bubble and PAP have not made any secret about wanting property prices to go down to deflate the bubble. If Sinkies with failed property investments want to blame someone, they have to blame PAP as they are the ones who controlled property supply and the cooling measures. The 70% have voted for this so they have only themselves to blame.

As for FTs, the economy is in a downturn and there's more retrenchments and less good jobs created. In fact according to MOM, there was a net jobs loss in Q2 2015 and citizen unemployment rate is increasing. If PAP increases the inflow of FTs, there will be even more Sinkies unemployed, underemployed or suffer deep pay cuts. When more and more Sinkies are unemployed or earning much less, how are they going to afford to pay their mortgages and other expenses??

And I haven't even mention the likely interest rates increases yet, which is another factor in the sinking Singapore property prices.

I have several comments on your post. One, the PAP has absolutely no interest in lowering the property prices in singapore. I can 100% guarantee you this. They only instituted the cooling measures because the election was coming up and the housing prices was a hot election topic. The PAP and its cronies, lackeys and MIWs are collectively the largest property owners in singapore. I know so many PAP insiders who bought private condos using privileged information, as well the Lee/Kwa axis alone are the single largest property owners. Why would they want to see their personal real estate portfolios decline? Of course not. If they really want to cool the property market, they can simply price all new BTOs and new build HDB flats starting price at $150,000, and maxing out at $250,000. If they did this, the market will drop 20% overnight. All those buyers looking for resale flats will not buy those and instead try for a new one at that low pricing. Trust me the HDB will still make money at those prices when they paid peanuts for the land. Additionally, the PAP has always touted the wealth of the people by claiming they have a lot of money in their flats and they can monetize it to use for their retirement. How does that sound now when they are deliberately cooling the prices?

 

[frenchbriefs]

To pay the amount of S$4451 mortgage loan for the next 30 years is really no joke. The loan amount is almost 1 millin dollars, not forgetting one need to pay the stamp fee of what? 3%, 5% or even 7%. Assuming its at 5%, that is almost S$62,000. (of 1,239,000)

Would suggest Singaporean think twice or thrice before committing to these loans.

the people who can afford condo loans are shit skins and south indian talents,i believe their finance and job security is much much better than you, why you worry?

 

[GirlsOnFilm]

good good prices to keeping falling lol

 

[xebay11]

The theory centres on HDB as "subsidized" "affordable" housing. Therefore, because they are subsidized and affordable, they need to be reserve for only the people that are lower income and less fortunate. SOme one who already owns a private condo is obviously far wealthier then the typical flat dweller, therefore they do not pass the rule of affordability and hence cannot receive subsidized housing. Whether HDB flats are truly affordable or subsidized is open to debate.

Then why cannot buy resale? Technically these are unsubsidised flats.

 

[frenchbriefs]

The theory centres on HDB as "subsidized" "affordable" housing. Therefore, because they are subsidized and affordable, they need to be reserve for only the people that are lower income and less fortunate. SOme one who already owns a private condo is obviously far wealthier then the typical flat dweller, therefore they do not pass the rule of affordability and hence cannot receive subsidized housing. Whether HDB flats are truly affordable or subsidized is open to debate.

i dont see whats so special about this subsidized affordable public housing when 80 percent of the population lives in it.are u saying 80 percent of sinkies are broke ass poverty negros?in the first place government housing is meant for the poorest of the poorest in most countries and usually found in ghettos and projects,not meant for 80 percent of the population to live in,20 to 30 percent max.the construction is ugly,utilitarian,cheap and meant to maximise efficient low cost housing.this is another one of PAP's policies that have been taken to the extremes.now pigeon holes hdb flats are highly expensive,massively speculative.million dollar flats that cost up to 30 years to pay off the mortgage,that shackles a person to debt slavery for his entire life.totally defeats the purpose of low cost public housing.

 

[AaronKwok]

Good to see prices falling. What goes up must down.