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Case Study: Upgrade to a Condo or a bigger 5 room HDB flat?
- Kar Hoon
- Jul 30
- 4 min read
If you like to know more about Punggol, read my earlier articles!
Today, let's do a case study.
Lim Family profile: Mr Lim and Mrs Lim have 2 boys (age 10 and 14). They currently own a 4 room flat in Punggol valued at about $650,000, with no outstanding loan. They are thinking of upgrading either to a 5 room flat or a condo in Punggol because the boys' schools are in Punggol.
Case study: Lim Family
Mr Lim | Mrs Lim | ||
Age | 45 | 42 | |
Income AWS | $9,000 $9,000 | $6,000 $6,000 | |
CPF OA account balance | $100,000 | $80,000 | |
CPF OA amount used in their 4 room flat + accrued interest. (This amount goes back to CPF OA and can be used for the next property purchase) | $220,000 | $130,000 | |
Cash available for the new home | $200,000 | $100,000 | |
Outstanding loan such as car loan, credit card loan | $1,000 car loan per month | 0 | |
Private property, based on Total Debt Servicing Ratio (TDSR - 55%) | Combined Loan amount: $1,316,634 Property price: $1,755,512 Estimate monthly mortgage: $6,094 | ||
HDB flat, based on Mortgage Servicing Ratio (MSR - 30%) | Combined Loan amount: $810,996 Property price: $1,081,328 Estimate monthly mortgage: $3,944 | ||
In this case study, the mortgage loan covers up to 75% of the property price. Besides determining the loan amount, we also need to check if there is sufficient cash and CPF OA amount to cover the balance 25%, buyer stamp duty (BSD), legal fees and also renovation works for the next property.
Estimated cash proceed from the sale of the current 4 room flat:
Estimated market value: $650,000
Less outstanding loan: $0
Less CPF OA used + accrued interest: $350,000
Less 2% agent fee (with GST): $14,170
Less estimated legal fee: $3,000
Estimated cash proceed: $282,830
Condo (At least about 1200 sqft), Twin Waterfalls | 5 room HDB (About 13 years old), Punggol Sapphire | The elder boy studies at Edgefield Plain Secondary and the younger one at Punggol Green Primary. Hence we look at Twin Waterfalls condo and Punggol Sapphire flats. | |
Estimate current market price Buyer stamp duty | $2,100,000 $74,600 | $900,000 $21,600 | |
Loan amount Loan Shortfall | $1,575,000 $258,400 ($1.575m-$1.316m) | $675,000 0 | Loan amount is 75% of property price. |
Total cash available Amount used for next property Balance cash | $582,830 $105,000 $477,830 After covering the loan shortfall of $258,400, balance will be $219,430 | $582,830 $54,990 $45K (5%) + $9810 (agent fee) + $180 admin fee to HDB $527,840 | 5% booking fee use cash. For HDB, assume no cash over valuation. $5K for OTP and exercise deposit (part of the 5% cash), 1% agency service fee (incl. GST) $9,810 |
Total CPF available Amount used for next property Balance CPF | $530,000 $420K (20%) + $74.6K (BSD) + $3K =$497,600 $32,400 | $530,000 $180K (20%) +$21.6K (BSD) + $3K (legal fee) = $204,600 $325,400 | $180K (OA bal) + $350K (return to CPF OA on sale of current flat) CPF can be used to pay the buyer stamp duty and legal fee (assume $3K) Mr and Mrs Lim may want to consider using more CPF in the OA balance to pay for the flat to reduce the mortgage loan. |
Estimate monthly mortgage CPF OA used Cash | $6,094 (assuming they use cash to cover the loan shortfall) $2,940 $3,154 | $3,341 $2,940 $401 | Mortgage calculation is estimated based on Mr and Mrs Lim case study, using prevailing bank loan rates. Partly covered by monthly CPF OA contribution and some cash Mr Lim: $1,680 Mrs Lim: $1,260 |
Is the property affordable? | Yes | Yes |
Monthly Cash Outlay
Based on the above financial calculations, the Lim Family has the option to upgrade either to a condo or a 5 room HDB flat. If you are Mr and Mrs Lim, what would be your considerations? The cash outlay is one consideration, besides the monthly mortgage, there is also MCST maintenance fees to pay for condo and sinking fund contribution. The conservancy, service and maintenance charges for HDB flats and property taxes is definitely lower compared to a condo.
Lifestyle
In a condo, one gets to enjoy facilities such gym, swimming pool, function room, BBQ pits and tennis court. In Punggol, the Active SG Mega Sports center is going to open soon. Olympic size swimming pool, indoor courts, football field, etc. there is no lack of facilities in the neighbourhood when one stay in the public housing in Punggol.
Capital Appreciation
Is capital appreciation for a Condo better than HDB flat?
See the graph presented below, the average PSF for Twin Waterfalls grew 93.3% (+$754 profit) while the average PSF for the 5 room HDB flat in Punggol grew 61.3%. Twin Waterfalls has appreciated at a higher rate than the 5 room HDB in Punggol in the same time period. If you are the buyer who bought a 1238 sqft unit at Twin Waterfall in 2017 and sold it in 2026, your estimated gross profit could be $933,452! Will Twin Waterfalls continue to appreciate at this rate, unlikely, because it will be 21 years old in another 10 years time.
As a leasehold property gets older, the rate of growth slows down, lease decay sets in. So before you make any offers to purchase a property, ask your realtor to run through the risk and investment potential and the recent transactions.
You need to be confident that you are buying the best property that suits your needs, at a good price and it still has a good potential to appreciate in value.
If you are Mr and Mrs Lim, would you choose to upgrade to a condo that can potentially help you create wealth through better capital appreciation or would you choose to buy a 5 room HDB so that your financial commitment is lesser. What would you do with the cash that you are holding, knowing that cash deposit in a bank does not earn enough interest to fight inflation. Do you know how to invest your cash to accumulate and grow your wealth?
Contact me at 89232427 to have a chat.
Kar Hoon is a realtor active in District 19. She has lived in Punggol for more than 20 years and is very familiar with the estate. She works with clients to plan their asset progression journey. Her goal is to help others acquire their dream homes and navigate their real estate investment journeys with confidence and care.
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