Despite our weakened economy during Covid, Singapore's condo resale prices are still going strong. And an increasing number of Gen Z are considering to buy a condo for investment purposes before even securing a HDB for their own stay.
So should you or should you not?
Besides the huge upfront capital outlay, let's take a look at some other important considerations.
Seller Stamp Duty* (SSD)
Introduced as a cooling measure to curb buyers from flipping properties, the SSD can greatly influence the time of your sell-off of your condo.
*OTP is option to purchase
This means that in a scenario that your condo's price has risen by 10% after 1 year, you will make a 2% profit after paying the SSD. That is less than 2.5% interest that your CPF-OA offers!
And if you bought a condo in a newly launched project, the time to TOP* ranges from 1 to 5 years, depending on the project size. This means that you may have to wait beyond the min. 3 years (to avoid paying SSD) to sell your condo, should majority of the condo resale buyers only want to buy move-in ready units.
*TOP stands for Temporary Occupation Permit, which allows homeowners to live in residential development.
Instant Mortgage Instalments
Even if you buy a condo that has yet to attain TOP* status, you will start paying for your monthly mortgages instalments as soon as the sale is completed. And as there is a good chance that you will have to use cash to partially fund your instalments, this means that you will have to be very precise in calculating your for at least the next 3 years (to avoid paying SSD). Potential near term commitment includes:
One miscalculation could adversely affect the planning of your other milestones in your life!
HDB Flat Ownership Restrictions
Buying a BTO flat is one of the most utilised birth right of Singaporeans. But if you already own a condo, then it will be less straightforward.
To be eligible to apply for a BTO, you will need to have sold off your condo at least 30 months (2.5 years) beforehand. This means that you will be unable to hold on to your condo while bidding your time for the "perfect BTO sales launch" to coming along.
If you choose to buy a resale HDB flat. there will be a rush to sell off your condo within the following 6 months. This means that in the event that the 6 months is nearing, you may have no choice but to sell your condo at a less than ideal price.
2: You cannot apply for a HDB concessionary loan
You have to pay 25% downpayment instead of 10% for your BTO flat.
A Min of 5% of the purchase price must be paid in cash, whereas such criteria is not required for those taking the HDB Concessionary Loan.
Is it worthwhile, Timewise?
Owning an investment condo in our 20s definitely gives a great sense of achievement. But all investments have opportunity costs, and the bigger the investments, the bigger the costs.
Even if you buy a resale HDB flat instead of BTO flat, it is likely that you will do so in your 30s.
Will you only get married after buying your HDB flat?
If no, where will you and your partner stay at after getting married but are unable to buy a HDB flat yet?
Will you delay starting your family (having children) after getting your HDB flat?
Deciding whether to buy a condo for investment is much more than just figuring out whether you can afford the downpayment or monthly instalments. There is a good chance that it will have big impact on plans for your future home ownership. Naively thinking that an investment condo is guaranteed to earn you big bucks might just end up being a million dollar mistake!
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