6 Important Considerations Before Upgrading from HDB to Private Property

About 79% of Singaporeans today stay in a HDB flat and many plan to upgrade to a private residential property of their dreams (condo, terrace house, bungalow?) when they can afford to do so. What does it take to upgrade? What should a potential upgrader consider before making such a move? While there are many factors to consider, this article covers 6 important things which every upgrader should keep in mind to avoid unpleasant surprises halfway into the journey. The worst thing that can happen to an upgrader is that he or she has paid a non-refundable option fee  (typically 1-5% of the property value) to purchase the next residential private property, only to realise that he or she cannot proceed with the purchase. Over here, we will help you avoid getting yourself into such a sticky situation.

1. Are you eligible to upgrade?

While affordability is key, it is very important to understand whether HDB regulations allow you to upgrade at this point in time. Based on HDB rules, most HDB owners are subject to a Minimum Occupation Period (MOP) of 5 years – i.e. you may not sell your HDB or acquire another residential property within 5 years of collecting the keys to your HDB flat. If you are considering to upgrade, you can only do so after this 5-year period has elapsed.

Image: The Tapestry (Bedok Reservoir)

2. Should you keep or sell your HDB?

In the past, many HDB owners kept their HDB flats when upgrading to a private residential property. Subsequently, they will move in to the private residential property and rent out their HDB flats which typically offers a higher rental yield than private residential properties.

With the recent cooling measures in July 2018, such buyers will now have to pay 12% Additional Buyer’s Stamp Duty (ABSD) of the value/price of their 2nd property. In addition, such buyers are only able to take a housing loan of max 45% of their 2nd property value if they have any outstanding housing loans on residential properties. In layman terms, if you have outstanding loans on your HDB, and you are planning to buy a 2nd private residential property which is worth $1m, you will incur $120k ABSD* and need to fork out at least $550k in cash/CPF for your 2nd property. After including 3% Buyer’s Stamp Duty, this works out to be about $700k cash/CPF upfront for a $1m property, which most people cannot afford!

Due to the above-mentioned reasons, most HDB owners will find difficulty buying their 2nd private residential property without first selling their HDB flats. Even if you have sufficient cash/CPF to overcome the above-mentioned financial challenges, it may be a loss-making endeavor to keep a HDB flat for rental when purchasing a 2nd residential property. Contact us and we will explain to you why in greater detail.

*ABSD may be refunded if certain criteria are met. Refer to IRAS guidelines here. For more ideas on how to save on ABSD, contact us for a non-obligatory discussion.

Image: Martin Modern (River Valley)

3. How much cash proceeds can you get from selling your HDB?

When buying a private residential property, at least 5% of the sales price has to be paid in cash (not CPF). At least another 20% of the sales price will need to be paid by cash or CPF. Will you have enough cash to proceed with the purchase? You can estimate your cash proceeds from selling your HDB flat as follows:

Cash proceeds = Sale value – outstanding loan – CPF utilized including accrued interest#

#You may obtain this amount by logging into CPF website using SingPass for each respective HDB owner.

Do you know that even if you have fully repaid your loans, the CPF which you have utilised for your HDB continues to accrue interest at 2.5%p.a.? In layman terms, if the price of your HDB flat does not increase, the longer you take to sell your flat, the less cash proceeds you will receive in future.

4. How much housing loan can you get for your next purchase?

This depends on 2 main factors which are governed by MAS – Total Debt Servicing Ratio (TDSR) and Loan-to-Value (LTV), and we will break these down into layman terms below.


The chart on below illustrates the max LTV that you can qualify for based on the loan tenor and your age at the end of the loan tenor. For example, if you have no outstanding residential housing loans, taking a housing loan of 20 years, and you are now 46 years old (i.e. loan will be fully repaid when you are 66 years old), you may only qualify for max 55% LTV for your purchase.

As most buyers require LTV of 75%, they will try to keep the loan tenor within 30 years or the number of years between the loan commencement date until their 65th birthday, whichever is shorter.


Compliance with TDSR means that the amount borrowers can spend on debt repayments is limited to 60 percent of their gross monthly income. This includes all types of loans including housing loans, car loans, personal loans, credit cards, etc. For example, if you have a fixed salary of $10k, you can only borrow up to an amount which will create monthly repayment obligations of max $6k.

What property value can you afford?

At the end of the day, how much housing loan can you qualify for, and what is the maximum value of the property that you can purchase? These will be determined by the amount of your savings, CPF, max LTV and TDSR computation.

How do you compute the max loan tenor if you are buying your next property jointly with another person who is younger/older and/or has a different income from you?

Contact us for a non-obligatory discussion and have all your questions answered!

Image: Parc Esta (Eunos)

5. How much CPF can you use for your next purchase?

You can use your CPF Ordinary Account (OA) savings to buy or build private residential property for occupation or investment. The CPF OA can be used for paying the purchase price, housing loan, construction loan (if you are constructing a house on your land) and ancillary fees (such as legal fees, stamp duty, survey fees, etc).

You cannot utilize your CPF to purchase this property if any condition below is met:

  1. you are buying a private property with a remaining lease of less than 30 years; or
  2. you are buying a private property with a remaining lease of less than 60 but at least 30 years and your age plus the remaining lease of the private property is less than 80 years;

The amount of CPF OA that can be used is subject to the following restrictions:

i) Are you buying a property with remaining lease of less than 60 years?

If yes, use the Property with Less Than 60 Years Lease Calculator to find out the amount you can use for such properties.​

ii) Do you have existing properties which you have used your CPF for any payments?

If you’re below 55, you need to set aside the current Basic Retirement Sum in your Special Account, including the amount used for investments, and Ordinary Account before you can continue to use your CPF savings to buy your next property.

If you’re above 55, you need to set aside your Basic Retirement Sum in your Retirement Account, Special Account (including the amount used for investments) and Ordinary Account before you can continue to use your CPF savings.

Image: Jadescape (Marymount)

6. Should you upgrade?

This is the most important question because upgrading is a major decision which involves a lot of your hard-earned money! Over here at Powerhaus, we have analysed for you what types of HDB flats have made money in the past few years so that you can make a better prediction about the price movements for your current flat.

The prices of your existing flat might still go up, but according to a research done by Credit Suisse released on 19 Sept 2018, it expects the price gap to widen between HDB flats and private apartments over time. Those who can afford it will also turn to private homes as a better store of value. As a result, the proportion of residents living in HDB flats is expected to decline. According to the report, the proportion has fallen from 88 per cent of households in 2000 to 79 per cent last year.

If you have a long term plan to upgrade to a private residential property, you may save more money by upgrading earlier than later. As you get older, your max loan tenor decreases, your monthly installment increases (based on the same property value) and your max loan decreases as well (due to TDSR). More importantly, looking back 10 years, would you have made more profit if you have bought a private residential property then instead of a HDB flat?

Image: Parc Botannia (Sengkang)


Buying a property today is much more complex than it was 10 years ago. The numerous rounds of cooling measures have made it difficult for consumers to keep track of the latest regulations and work within their constraints.

Are you OVERWHELMED by the information discussed above? Don’t worry, you are not alone!

Let’s have a non-obligatory discussion over coffee and we will guide you step-by-step for planning your next purchase. And don’t worry, you don’t have to pay a cent for this discussion. Our foremost objective is to protect your interests so that you can upgrade smoothly and be a happy owner of your next property!

* I wish to learn more about my current property and what are my options to maximise profits over the next few years.