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While close to 8 in 10 locals are living in HDB flats today, many aspire to upgrade to a condo or Executive Condominium (EC) at some point. That way, they too can have a gym, BBQ pit, and swimming pool at their doorstep. Or maybe they’re just looking to invest for long term capital appreciation or rental income. In any event, here’s how much money you’re going to need to buy a condominium in Singapore.
Ballpark figures on condos in Singapore
According to the latest first quarter 2021 transactions listed on the URA website, the average price of condominiums in the Outside of Central Region (OCR) is about $1.1 million. The average size of the condominiums are about 1,100 sqft.
The OCR areas represent less attractive locations compared to condominiums in the Rest of Central Region (RCR) or Core Central Region (CCR). The OCR regions include towns such as Bedok, Tampines, Pasir Ris and Sengkang in the east, Jurong Choa Chu Kand in the west and Woodlands, Yishun and Sembawang in the north.
Condos in the RCR and CCR tend to be much more pricey.
The cost breakdown for upgrading to a condominium
1. Additional Buyer’s Stamp Duty (ABSD)
The first thing you need to consider, when upgrading, is whether you’ll buy your condo before you sell your HDB flat, or after.
As a Singapore citizen, you will be subject to 12% Additional Buyers Stamp Duty (ABSD) on your second property. And yes, buying a condo before you sell your flat counts as buying your second property. So, be prepared to fork out another $130,000 on top of the average $1.1 million condominium.
Yes, it’s a hefty outlay. However, you can get the ABSD money back later, if you sell your existing HDB flat within six months of upgrading to your new condominium. While you have to pay for this cost in cash up front, you can also apply to use your CPF funds, and effectively get back a reimbursement. This is more for those who still want to keep their HDB flat as you would otherwise just apply for ABSD remission if you sell your HDB flat within six months.
If you can wait, you might want to seriously consider selling off your flat before you buy a condo. This will save you from forking out the ABSD, but you’ll have to find an alternative living arrangement if you pursue this strategy.
There are pros and cons to either methods.
2. Loan-to-Value (LTV) ratio
The second consideration is your LTV limit. If you try to take a home loan when you already have an outstanding one, you can only get a home loan worth 45% of the purchase price or valuation (whichever is lower). This means you have to fork out a down payment worth a whopping 55% on the second home loan. This can be very restrictive for many upgraders.
3. Prepayment penalty
After you sell your house, your first priority will probably be to pay off your outstanding home loan, and take another one for your condo.
Here’s the bad news: many banks impose a fee, if you try to pay back your home loan early. That’s to make up for the interest they would lose. Typically, the prepayment penalty is one to 1.5 per cent of the repaid amount, but it can vary with each bank.
For example, if you still owe $270,000 on your existing home loan at the time you decide to sell and upgrade. You repay the rest of this loan with the sale proceeds from your existing home. The bank might charge you a prepayment penalty of 1.5% of the $270,000, or $4,050.
4. We look at the costs of your fancy new condo.
The main costs will be:
i. The initial down-payment
Given the high property prices in Singapore, you will most likely need a home loan to buy a condo. The maximum LTV ratio from the bank will be 75%. This means your down payment will be 25 per cent, of which the first 5% must be paid in cash. The remainder can be paid in a combination of cash or CPF Ordinary Account (OA) monies.
Of course, this is if you sell your existing HDB home before purchasing the condominium. Otherwise, the scenario LTV limit above applies – and you will be required to pay a down payment of 55%.
75% from bank home loan
25% from cash or CPF for your down payment, of which 5% must be in cash
For example, say you purchase a condominium worth $1.1 million. You would have to pay a down payment of:
- $55,000 in cash (5%)
- $220,000 through a combination of cash and/or CPF OA funds
The remaining $825,000 can be financed by the bank home loan, assuming you get the full LTV of 75 per cent.
ii. The stamp duties and legal fees
Legal fees – also called conveyancing fees – range between $2,500 to $3,000. You can use a cheaper law firm if you can find it, so long as the bank accepts the firm (tip: get a mortgage broker to do this for you for free, because checking out law firm prices can be a mind-numbing process.)
Next, you need to pay the Buyers Stamp Duty (BSD). This is how BSD is charged:
First $180,000 of property price or value:
1% of this amount
2% of this amount
3% of this amount
Any amount exceeding $1 million
4% of this amount
For your $1.1 million property, the BSD will come up to:
1% of the first $180,000 = $1,800
2% of the next $180,000 = $3,600
3% of the next $640,000 = $19,200
4% of the remaining $100,000 = $4,000
Total = $28,600
The BSD is payable within two weeks of signing the Option to Purchase (OTP), and can be paid with your CPF.
If you are purchasing the condominium as your second property, you will also have to fork out the 12% ABSD. This can come up to $132,000.
3. The monthly loan repayment
Typically, interest rates are lower during the first three years, but can rise much higher from the fourth year onwards. You may want to re-finance or reprice (switch from one loan package to another) on the fourth year or beyond, if your loan gets too expensive.
Nonetheless, we will go with an interest rate of 1.2% per annum, which is being offered at the time of writing. The borrowed amount is $825,000 (75% of the purchase price), and the loan tenure is assumed to be 25 years.
Overall, this comes to a monthly repayment of around $3,185, which can be paid via cash or CPF. You can calculate mortgage repayment sums here.
4. Maintenance fees
Most condos have maintenance fees of around $250 to $350 per month. The fee will vary based on the share value of your unit; the bigger the floor space of your property, the higher of the maintenance costs.
For higher-end condos, this can come to over a thousand dollars a month. So, ask before you buy!
5. Property taxes
Your property tax is based on the Annual Value (AV) of your condo unit, as assessed by the Inland Revenue Authority of Singapore (IRAS). The AV is the estimated amount of rental income your condo could generate, in a year (whether or not you actually rent it out).
You’ll have to visit the IRAS site to determine your specific condo’s AV.
There are two property tax rates for condos: the first is for owner-occupiers (lower rate), and the second is for condos that are rented out (higher rate).
To keep things simple, just use the IRAS calculator to determine your property tax.
For the $1.1 million property in the example, you can use an AV of $33,000. This comes to an annual tax rate of $1,000, or $85 per month.
Most condos have a renovation cost of between $40,000 to $50,000. Note that renovation loans are capped at $30,000 or six months of your income (whichever is higher).
For the condo in our example, we’ll assume you keep it to $40,000, and pay this in cash.
If you do want to take a loan for renovations, however, you’ll be paying an interest rate of between 3.0% to 4.2% per annum (around $800+ per month in repayments, over a five-year loan).
Total cost breakdown:
Initial cash payments = (5% down payment) + ($2,500 legal fees) + ($55,000 renovations) = $57,500
Initial amount paid from CPF = (20% down payment) + (BSD) = $248,600
Monthly payments = (Property tax broken down to monthly amounts) + (Maintenance) + (Home loan repayment) = $3,620
Note that this is a ballpark figure.
Lastly, remember to protect your shiny new condo with home contents insurance.
Since you’ve already paid a substantial amount for your home, you should also consider protecting your home with insurance. When you get home content insurance such as AXA SmartHome, you’re also covered for damage to your furnishings and fittings; you’ll even be covered if your house flooding / fire damages the neighbour’s place, and they hold you liable. You can learn more about AXA SmartHome here.
This article is for general information only and does not take into account the specific investment objectives, financial situation or needs of any particular person. The views expressed herein do not necessarily reflect the views of AXA Insurance Pte Ltd and should not be construed as the provision of advice or making of any recommendation. There is no intention to distribute, or offer to sell, or solicit any offer to purchase any product. We recommend that you seek the advice of a qualified financial advisory professional before making any decision to purchase an insurance or investment product. Whilst we have taken reasonable care to ensure that all information provided was obtained from reliable sources and correct at time of publishing, information may become outdated and opinions may change. We are not liable for any loss that may result from the access or use of the information herein provided.
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