Buying a second property : Can I own a HDB and a private property at the same time?

Asians and property have a very straightforward relationship. You don’t waste money paying rent. You buy one for yourself, scrimp and save for the next few years to buy more properties in order to rent out. And you sit back, relax and wait for the rent money to roll in..

In Singapore, where middle-income citizens get to purchase a new HDB at a subsidized rate, the plan has always been to buy an affordable HDB, stay in it for a few years to meet the MOP ( minimum occupation period) while paying off the housing loan and then buying a condo to stay in. The HDB flat can be rented out to help pay the mortgage on the condo. 

Sounds too good to be true? For many years this plan worked, and many Singaporean Citizens, especially those 50 years and above have benefited from this type of wealth accumulation. Unfortunately because of red hot property prices, the Government implemented several cooling measures to douse the flames.  This method is still possible today, but there are more obstacles to clear, especially if you don’t have deep pockets.

For Singaporeans the simple answer is yes, but you need to take note of the following 4 very important points. 

  1. You have to purchase the HDB first and meet the MOP of 5 years before you are allowed to purchase a private property. If you already own a private property and you are planning to buy a HDB flat,you will not be allowed to do so, unless you plan to dispose of the Private property within the next 6 months.  
  2. You will be subjected to the ABSD - Additional Buyers Stamp Duty which is an additional tax of 10%  of the price of the second property. The ABSD is payable on top of the regular buyer stamp duty (BSD) which everyone must pay when they purchase a property - both HDB and private. 
  3. If you have an outstanding mortgage loan on the first property, your next loan will be limited. The current LTV for those who have an existing mortgage is 45% of the second property for a loan period of up to 30 years ( The exact loan period depends on the borrowers age).  The LTV is lesser for longer tenures - which means that you need to pay for 55% of the property price in cash and CPF. ( If this confuses you, check out the case study below. )
  4. The amount that you can loan from the bank will be affected by the TDSR (Total Debt Servicing Ratio). The TDSR looks at all liabilities you have including other loans like car loans, student loans and items you buy on hire purchase.

Can I use my CPF to buy a second property? 

Yes, you can IF you meet the requirements that CPF has set out. You need to set aside half of the Retirement sum for your age bracket  before you can use the remaining amount that is still in your OA. You cannot use any money in your special account (SA) for property *but this amount might be able to contribute to the retirement sum.

*You might want to confirm with the CPF Board the exact amount that you are able to use before you commit to any purchase. 

Can Singapore Permanent Residents (SPRs) own a HDB and a Private Property at the same time?

Unfortunately, no. As part of the cooling measures announced on 11 Jan 2013, all PRs will have to sell off their HDB flat within 6 months of signing the OTP of the private property. This is even if the private property is a new launch and is still not completed.

 HDB also requires all PR to notify the HDB Branch office before signing the OTP.

  Source : https://www.hdb.gov.sg/cs/infoweb/residential/living-in-an-hdb-flat/acquiring-private-property

How much cash do I need to buy a second property?

If you are still keen to expand your property portfolio, these are practical examples of how much you will need to fork out. Look through the following case studies to see which ones resemble your situation the closest. 

Case Study 1 :

Buying a second property while you own a fully paid HDB Flat

 (no existing loan).


Mr and Mrs Ang own a 4 room HDB flat which is fully paid.

They are planning to buy a 3-room condo which cost $1 million dollars. 

Based on their combined salaries and their age, Mr and Mrs Ang can take a maximum loan of up to $800 000 for

30 years. (They can choose to take a lesser loan than that to reduce the monthly mortgage). 

This is what they need to have to purchase a second property in Singapore. 

Enter your text here...

Breakdown of costs when planning to purchase a second property costing $1 million dollars. 

Cell

Items / Components

Amount

Explanation

1

25% downpayment

(breakdown below)

See (1a) and (1b)

5% of the downpayment must be in cash and 20% remainder can be in  cash and/or CPF. 

1a

5% cash

$50 000


1b

20% CPF

$200 000

If you do not have sufficient CPF, you can top up the difference in cash. 

*Remember that you need to fulfil CPF's conditions before using the CPF for the second property. 

2

75%  loan

$750 000

Mr and Mrs Ang have a Loan to Value (LTV) of 75% - like that of a first time buyer - because they do not have an existing home loan.


 Even though they were eligible for a loan of $800 000 based on their income and age,  

they are unable to take out the full amount because of the LTV regulations. 


* If they choose to purchase a property that is under construction (BUC), the monthly mortgage payment will start small and increase progressively. 

3

Buyers Stamp Duty (BSD)

$24 600

This is the normal Stamp Duty that every property buyer has

to pay. 

For residential properties costing $1 million and above, stamp duty is calculated at 4% ( IRAS guidelines here

4

Additional Buyers Stamp Duty (ABSD)

$ 120 000

12 % of $1 million dollars which is payable within 14 days of signing the SnP or when exercising the OTP.


We write more about the ABSD here.

5

Legal Fees and Mortgage Stamp Fee

$3500

Hiring a lawyer can range from $1500 - $3000. 

Mortgage stamp fees is capped at $500 max.

6

Agents Fees

Variable

Agents will usually not charge the buyer for the purchase of a pte property, since they will be sharing the commission with the seller. 

However your agent might have a different arrangement with you.

If they choose to 

Case Study 2 : 

Buying a private property when you own 

a HDB Flat with an existing mortgage 


Mr and Mrs Lim own a 4 room HDB flat which still has an outstanding loan. 

They are planning to buy a 3-room condo which cost $1 million dollars. 

Based on their combined salaries and their age, Mr and Mrs Lim can take a maximum loan of up to 

$800 000 for 30 years. However, because they have an existing mortgage loan, their LTV is reduced and they can only get a loan of 50% of the property price. The amount of downpayment that they have to pay for the second property will increase. 


This is what they need to have to purchase a second property in Singapore. 

Enter your text here...

Breakdown of costs when planning to purchase a second property costing $1 million dollars. 

Cell

Items / Components

Amount

Explanation

1

55 % downpayment

(breakdown below)

See (1a) and (1b)

25% of the downpayment must be in cash and 30% remainder can be in  cash and/or CPF. 

1a

25% cash

$250 000


1b

30% CPF

$300 000

If you do not have sufficient CPF, you can top up the difference in cash. 

*Remember that you need to fulfil CPF's conditions before using the CPF for the second property. 

2

45%  loan

$450 000

The total amount you can loan is based on 45% of the property price, regardless of your loan allowance. 

3

Buyers Stamp Duty (BSD)

$24 600

This is the normal Stamp Duty that every property buyer has

to pay. 

For residential properties costing $1 million and above, stamp duty is calculated at 4% ( IRAS guidelines here

4

Additional Buyers Stamp Duty (ABSD)

$ 120 000

12 % of $1 million dollars which is payable within 14 days of signing the SnP or when exercising the OTP.


We write more about the ABSD here.

5

Legal Fees and Mortgage Stamp Fee

$3500

Hiring a lawyer can range from $1500 - $3000. 

Mortgage stamp fees is capped at $500 max.

6

Agents Fees

Variable

Agents will usually not charge the buyer for the purchase of a pte property, since they will be sharing the commission with the seller. 

However your agent might have a different arrangement with you.

As you can see, you would need a considerable amount of cash if you are planning to buy a second property while still servicing a mortgage loan. 

Case Study 3

You currently own a private property with a spouse / partner.


For couples who own a private property, you are still subjected to the same ABSD and LTV rules as those who own a HDB. (i.e. similar to the table above). However, there is a way to purchase another property which involves ‘decoupling’ and selling the shares of the your existing property to your spouse. 


How to decouple a private property ? 


 Decoupling can only be done for private properties and involves selling your 'shares' that you currently own to your spouse or another buyer. This frees you up to purchase another property as a first time buyer.  The calculation for this involves 

  • assessing your outstanding balance loan,

  • your current percentage ownership of the property, 

  • the current market price for that property, 

  • the LTV and TDSR  of the 'buyer' property and 

  • the amount of CPF used that needs to refunded. 

  • ABSD will still apply if you are a PR or a foreigner.

 Because of the complicated nature of the calculation we advise you to seek the advice of a trained professional agent who is experienced in the above. There are also some lawyers who are willing to work out the calculations for you. 

What is asset progression and how do I reduce cash outlay when buying another property? 

When the cooling measures first came out, there were many strategies to game the system but we do not recommend any of it. If you believe that property investment is the best strategy for you, you might want to consider restructuring your investments i.e. to start from scratch.  This is what some agents refer to as asset progression. This involves assessing whether your properties have appreciated enough to give you a decent return and to consider whether there is still potential for it to appreciate. 

If it has already appreciated sufficiently or if it is stagnant and does not have any more potential to appreciate ( for e.g. most resale HDB flats),  you might want to look into other properties that have better potential.

Strategies to reduce cash outlay when buying a second property.

We CANNOT STRESS enough how important it is to plan your finances and not over stretch yourself. Do not overstate your ability to own 2 properties or plan to cut down on living expenses just to do so. Property investment is a long term investment and it is extremely important for you to consider your finances over 5- 10 years at least. 

There is also the Sellers Stamp Duty which forces you to hold on to your property for at least 3  or 4 years depending on when you purchased it. 

A trustworthy and experienced agent would be able to assess your case to recommend a suitable long term strategy. 

  • Some couples are able to comfortably afford 2 private properties immediately and do not mind having an occasional negative cash flow from the rentals ( we will write on how you can profit even when the rental does not cover the mortgage - within limits, of course - soon. ) 

  •  Some purchase a property using both names but plan for an easy exit after a few years (i.e. use less CPF and plan for a smaller ownership percentage under Tenancy in Common for the exiting party ) 

  • Some couples plan for the long term and are able to purchase a resale HDB under one name for their own stay and invest in a private property once the MOP is reached, but this takes considerable planning.

To buy or not to buy? Can you afford that second property?  

The cooling measures were introduced and tightened in several stages over the last couple of years. The main objective is of course, to encourage financial prudence and to avoid a property bubble since home prices were steadily rising. 

There is always a big risk when investing. In buying property, the most common risk we see is the owners being over leveraged. Even though you plan for your rental property to be tenanted out 100% of the time, the reality is not always as rosy. So apart from the cash outlay to purchase the property, you should have at least 6 months worth of mortgage payments ( and additional funds for repairs or to accede to tenants requests, if any) to tide you through difficult times, regardless of how great your property’s location is. 

Property investment is no longer the quick money maker that it used to be, at least not in the Singapore property market. You need to plan for the long term and accept short term losses if you have a goal of passive income once the mortgage is paid up.

Good luck!

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Zubz Kadir is the founder of PropertyRocking.SG She believes that real estate is the biggest purchase one can make and such a decision should not be taken lightly. Knowledge can make or break a purchase. Zubz graduated from National University of Singapore (NUS) Bachelors with a Degree in Informations Communications and Sociology from the and a Masters of Mass Communications from Nanyang Technological University (NTU).