Is Upgrading to A Condo Possible for Young Singaporeans in 2024?

HDB 4 Room (Unit size 700 sqft – 1000sqft)

Let’s specifically examine the 4-room flat, widely regarded as the most common type of public housing:

As of January 2024, a median resale price of $520,000 is observed in prices. The typical 4-room flat, spanning around 960 sq. ft. (with variations in some being slightly larger)

So looking at the probable price gaps faced by upgraders today, we have:
A possible gap of over $2 million between a resale 4-room flat and a new launch three-bedder condo. And approximately $1 million price gap when considering upgrading to a new launch EC.

How is upgrading to a condo impacted by the home loan situation in 2024?

Assuming that an upgrader qualifies for the full 75 per cent Loan To Value (LTV) ratio and can secure a loan tenure of 25 years, it’s important to note that under the Total Debt Servicing Ratio (TDSR), the monthly loan repayment must not exceed 55 per cent of their monthly income.

Also, note that the floor interest rate for TDSR calculations is four per cent per annum.
We will also assume our upgraders sell their flat before buying their condo, thus avoiding the Additional Buyers Stamp Duty (ABSD).

For a new launch three-bedder at $2.53 million, our upgrader would need:
$126,500 in cash (the first five per cent of the down payment)
$506,000 in any combination of cash or CPF (the next 20 per cent of the down payment)
Buyers Stamp Duty of $96,100
The total loan quantum after this (75% of the price) would be $1,897,500.
But can an HDB upgrader afford this?
To calculate the affordable to upgrading to a condo or executive condo bigger HDB, use Myhomecal – Affordability, Singapore’s simplest property mortgage calculator. Source: Myhomecal.com

What’s the difference between 2024 and previous years?

The most noticeable distinction is likely to be found in the amounts involved, with regular stamp duty increments in various transaction values. However, setting aside those considerations, there are a few factors that extend beyond the numerical aspects. Firstly, there is a considerable increase in the interest rate compared to previous years. For instance, if the last home purchase was a decade ago, you might have been accustomed to an interest rate of two per cent or below. The noteworthy aspect here is that your home loan interest rate is no longer surpassed by your CPF interest rate (2.5 per cent).

The second distinction lies in the resale market, which offers a more favourable opportunity for upgraders. Naturally, patience is required to find a home that aligns with their criteria. Additionally, there is a reliance on the hope that the bank valuation can align with the seller’s asking price. A notable challenge arises as sellers grapple with reconciling their expectations with the valuations provided by the bank. This is all happening against a backdrop of growing geopolitical issues, from the upcoming US elections, the possible interest rate continues increasing, increasing the influence of BRICS, and how the US economy going to respond.

The original BRICS cohort comprising Brazil, Russia, India, China, and South Africa added substantial new financial firepower and geopolitical clout with the inclusion this month of new Middle East and North Africa (MENA) members Egypt, Ethiopia, Iran, Saudi Arabia, and the UAE. The BRICS bloc now represents more than 45% of the world’s population and accounts for a larger share (nearly 36%) of global GDP than G7 countries (30%) when adjusting for purchasing power parity (PPP). source: Henleyglobal – BRICS Wealth Report 2024

Conclusion