HDB vs Condo: Which one should I buy for my first home?

23-Year-old Singaporean woman buys condo

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You might already be aware of the recent news on social media featuring a 23-year-old who successfully acquired her first condominium just a few months ago. Achieving the milestone of purchasing your initial property is undoubtedly a formidable accomplishment, especially when it involves a condominium at such a young age.

How did she manage to accomplish this feat? Well, it primarily came down to her unwavering commitment and hard work.

Min Chen, the determined individual in question, is well-acquainted with the hustle of balancing work and education. She took on multiple part-time jobs and ran a home-based bakery business, diligently saving between $250,000 to $300,000 over approximately three years.

Finally, she made the momentous decision to invest in a condominium, officially becoming a proud property owner.

Although achieving such a milestone is within the realm of possibility, it is an unconventional path that may not be feasible for every individual aiming to purchase their first property. While certain individuals may experience fewer obstacles on their journey to property ownership, the situation can be markedly different for others.

This brings us to the primary and crucial factor to contemplate: the cost of buying a HDB vs condo.

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Cost of buying HDB vs Condo
At first glance, the primary consideration regarding cost undoubtedly leans towards the fact that HDBs are generally more affordable to own in comparison to condominiums. However, upon closer examination, numerous factors might give you pause for thought.
HDB more affordable than condo
While HDBs are cost-effective and offer government grants, it’s crucial to acknowledge the extensive regulations surrounding them. These include the stipulation of a minimum age of 35 for singles before they can acquire a flat, restrictions for Singaporeans with foreign spouses who own overseas properties, and a host of additional eligibility requirements to qualify for government grants.
Condos more expensive than HDB
Although condominiums typically come with a higher price tag, they offer greater flexibility in terms of financing. The government imposes home loan limits through the Monthly Servicing Ratio (MSR) for HDBs, which is capped at 30% of your gross monthly income.
Condos require larger home loan quantum
In contrast, qualified buyers have the opportunity to secure a larger home loan with the Total Debt Servicing Ratio (TDSR) for private properties, allowing for up to 55% of gross monthly income (assuming the absence of other personal loans), potentially enhancing affordability.

Of course, enhanced affordability doesn’t always translate into a positive outcome, as a larger home loan also entails greater pressure when it comes to servicing the mortgage. All in all, the overall cost is significantly influenced by the specific types of housing you are considering.

This leads us to the next factor: what are the various housing types available within HDB and condominiums that you can contemplate?

HDB BTO vs Sale of Balance (SBF) vs Resale

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HDB flats are categorised into three distinct types: BTOs (Build-To-Order), SBF (Sale of Balance Flats), and resale flats. The following table provides a concise comparison of these categories and other essential factors for your consideration:

[["","HDB BTO","HDB Sale of Balance (SBF)","HDB Resale"],["Pros","\u2013 Lowest cost amongst all 3\n\u2013 Various subsidy available\n\u2013 Brand new with 99-year lease\n\u2013\u00a0Minimal renovation required","\u2013 Brand new with 99-year lease\n\u2013\u00a0Minimal wait\n\u2013\u00a0Cheaper than\nresale\n\u2013\u00a0More options for locations","\u2013\u00a0Move-in ready most of the time\n\u2013\u00a0Unit sizes may be larger\n\u2013\u00a0More options to choose from"],["Cons","\u2013 Long waiting period\n\u2013\u00a0High opportunity cost due to min. 5 year MOP\n\u2013\u00a0Smaller than older resale flats\n\u2013\u00a0Requires luck to ballot","\u2013\u00a0Higher cost than BTO\n\u2013\u00a0Limited choices for units\n\u2013\u00a0Limited supply","\u2013\u00a0Reduced probability of capital appreciation\n\u2013\u00a0Lease decay\n\u2013\u00a0May require more renovation due to dated design"]]
*BTO: Built-to-Order, MOP: Minimum Occupation Period
Considering your requirements, evaluating the advantages and disadvantages of the three available flat types can assist you in making a more informed decision about which one aligns best with your needs.

New Condo vs Resale Condo vs Executive Condo (EC)

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Next, let’s explore the various categories of condominiums you can consider:

[["","New Executive Condo","Resale Executive Condo","New Condo","Resale Condo"],["Pros","\u2013\u00a0Condo amenities without private condo price tag\n\u2013\u00a0High capital appreciation potential\n\u2013\u00a0Full lease tenure\n\u2013\u00a0Minimal renovation","\u2013\u00a0Faster move-in period compared to new EC\n\u2013\u00a0No MOP\n\u2013\u00a0More choices available\n\u2013\u00a0More affordable due to TDSR","\u2013\u00a0Higher capital appreciation potential\n\u2013\u00a0No MOP\n\u2013\u00a0Most choices available\n\u2013\u00a0Better finishings and amenities","\u2013\u00a0No MOP\n\u2013\u00a0More locations\navailable\n\u2013 More affordable due to TDSR\n\u2013\u00a0Usually larger than new condos"],["Cons","\u2013\u00a0Long waiting period + MOP\n\u2013\u00a0Smaller than HDBs and older ECs\n\u2013\u00a0Less affordable than resale ECs due to MSR","\u2013\u00a0May require more renovation\n\u2013\u00a0Only bank loans applicable\n\u2013\u00a0Lower tenure\n\u2013\u00a0Less profitable compared to new EC","\u2013\u00a0Highest in cost\n\u2013 Usually smaller in size\nthan older condos\n\u2013\u00a0Long construction period","\u2013\u00a0Less choices in units\n\u2013 May require minimal\nrenovation\n\u2013\u00a0Dated amenities with higher cost of maintenance and repair"]]
* MSR: Monthly Servicing Ratio, EC: Executive Condominium, TDSR: Total Debt Servicing Ratio
In the realm of condominiums, there’s a wealth of factors to consider, including affordability, location, and if there’s no immediate need for occupancy, your range of options expands significantly.

Buy house near parents or workplace?

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For certain homebuyers, financial considerations may not be at the forefront, as they prioritise other significant factors.

For instance, some individuals may prioritise purchasing a condominium unit within the same neighborhood as their parents, facilitating easy visits and quality time with their grandchildren.

On the other hand, a resale unit located near their workplace might be the preferred choice. For those without children, a cosier living space may be more appealing, whereas individuals with plans for a family might seek housing in close proximity to schools.

Condominium Amenities

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Evaluating and ranking these factors empowers you to arrive at a well-considered decision. A noticeable contrast in this aspect, often leading to a preference for condominiums, is the greater number of amenities and enhanced security measures that accompany the relatively higher property cost.
Condo Swimming Pool
Condominiums generally provide a broader range of facilities and amenities compared to HDB flats, including features like swimming pools, gyms, and security services. However, it’s important to note that these amenities are associated with additional expenses, leading to higher maintenance fees.
Condo Maintenance Fee
Ultimately, the choice is yours to determine whether the extra expenditure justifies the monthly payment, as some individuals may not fully utilize the provided amenities and perceive it as a somewhat inefficient allocation of funds.
Condo Security
The security measures in condominiums are generally more robust when compared to HDB flats. Condominiums typically feature 24/7 security guard surveillance, fortified perimeters with walls and fences to deter unauthorized access, and continuous monitoring through surveillance cameras.

While HDB neighborhoods also incorporate some security elements such as CCTV cameras at lift lobbies and staircases, occasional police patrols, it is not as comprehensive in security as observed in private developments.

Consider your future life

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Contemplating the future may appear overwhelming as you embark on the initial stages of property purchase. However, forward-thinking can often lead to wiser decisions, ultimately resulting in a smoother journey ahead.

If you plan to make your purchased property your lifelong residence, you may not need to extensively contemplate whether its value will increase or decrease over time. Instead, your primary focus may shift to other immediate life priorities, such as the property’s location.

If you are open to and considering an upgrade in the future when your finances permit, this is when you should pay closer attention to the type of housing you are investing in. HDBs and condominiums exhibit substantial disparities in capital appreciation.

Typically, HDBs tend to experience slower capital appreciation, while the broader buyer base for condos offers greater potential for capital growth.

Additionally, condominiums often come with extended lease options such as freehold and 999-year leases, alleviating concerns about lease decay. Even for 99-year leasehold condominiums, the possibility of en bloc sales can help maintain the property’s competitive pricing.

HDB vs Condo (Summary)

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In conclusion, there are a plethora of factors to consider when contemplating the choice between an HDB flat and a private condo unit, and there is no definitive or straightforward answer in making this decision.

It could be beneficial to outline your preferences and the compromises you’re willing to make. Once this is accomplished, assess whether your financial resources enable you to comfortably manage the loan obligations in the long run.

Various housing options also present distinct potential returns on investment. Given that many individuals do not reside in the same property indefinitely, the appreciation in property value is always preferred, especially if you intend to sell it later on.

The numerous factors to weigh can make property acquisition a particularly complex endeavor. It’s essential to remember to seek guidance from trusted family and friends or consult with property advisors to navigate this journey effectively.

This article was originally published in Home & Decor.