Thanks ak.
Sorry, didn't make myself clear.
She's intending to sell current HDB to buy condo for own staying.
So rental probably not a big concern.
I'm just trying to consider when is a good time to do such "upgrading".
Sell HDB now will not lose but won't earn much.
But selling HDB during recession would save more if condo prices fall more so perhaps make sense to wait for recession.
Do you (just your own thoughts) think govt may lift ABSD if recession hits?
Hi R,
The health of the rental market will determine the market prices of real estate to a large extent. So, if the condo rental market continues to soften, condo prices will continue to come under pressure. For own stay or rental, this is something to bear in mind.
Our home is a consumption item. It would not be wise to overstretch our finances to stay in a more expensive home and I know a few people who overstretched.
If we are able to afford a condo quite safely (i.e. it does not impact our balance sheet badly and it is not reducing cash flow to a trickle), then, good.
If I had to sink further into debt and if my monthly cash flow is reduced drastically because of this purchase, I would worry.
Of course, always think about the opportunity cost. For example, if I had to dispose of income producing assets in order purchase this condominium, I would think twice.
Staying in a condominium does not give any financial security.
Personally, I do not think that the ABSD will be lifted soon. When interest rates start rising in a sustained manner, maybe. Just a guess.
However, you might want to ignore all that I have said as keeping your wife happy might be worth the price to you.
This is where I should stop talking to myself.
Best wishes,
AK
Related post:
Wife wants to sell HDB flat to buy condo.
Hi AK and R,
ReplyDeleteDuring a recession, jobs stability is uncertain and selling HDB would not get you a good price either.
You might want to take note of the total debt servicing ratio and also CPF accrued interest portion if you had utilised it to buy your HDB flat.
Lifting of ABSD if recession hits is quite possible but total debt servicing ratio would be here to stay. Bank lending will most likely be tightened during a recession.
A good time to do such "upgrading" will probably be clearer if you take reference to AK's rule of 15. :P
http://singaporeanstocksinvestor.blogspot.sg/2013/07/to-rent-or-to-buy-rule-of-15.html
Hi Kevin,
ReplyDeleteI believe that even the TDSR is just touching the tip of the iceberg. TDSR assumes that borrowers will be gainfully employed. It does not check if borrower has an emergency fund either. Well, better than nothing. Any measure to encourage financial prudence is welcome. :)
Hi R,
ReplyDeletePersonally I would not sell a HDB flat, HDB comes with many benefits such as higher govt handouts (when they do give), higher rental yield if you do rent, no need to pay maintenance fees, etc. Also, if you own a HDB, there's no limit to the number of private properties you can own. But if you sell your HDB to buy a private, you have to dispose all your private properties for 6 months before you can buy a HDB again. In the past it used to be 5 years, so you can say the opportunity cost is lower now, but to me the benefits of owning a HDB is still too good to give up.
Regarding the ABSD, it will likely be removed when the market is really bad. But when the market is bad, then that is also the best time to buy. I'm not sure about your finances, but my 2 cents would be to stay in HDB, invest and save till you're ready to buy when the prices are right. But you also have your wife to consider, and as they say, happy wife, happy life. So only you can decide what's best for your situation. Good luck!
Regards,
Adrian
Hi AK
ReplyDeleteThe CPF accrued interest from the CPF used for housing will be paid back to our Ordinary
Account after we sell our HDB flat, right? So we will be able to utilize this money when we make our next property purchase?
Thank you
Jason
Hi Jason,
ReplyDeleteIf a flat is sold with a capital gain, yes, accrued interest on funds used from the OA must be refunded into the OA. This can be used for approved purposes including buying of another property. :)
Reader:
ReplyDeleteHi AK, I am one of your newest fans. I am reading all your blogs, trying to catch up. However, please let me know what would you do if your wife wants you to upgrade your current home. I recently got a promotion and a generous raise, My wife thinks we should upgrade and move into a condo. I don't think we need to.
AK:
Welcome to ASSI. Please read this and also Part 1.