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Asked by Anonymous

What would your advice be? Wife and I are discussing and appreciate inputs 1) Downsize to HDB and grow CPF, 2) Sell the existing condo and buy a condo under each of our names or 3) Remain status quo? ?

What are possible gains and risks in each option? Wife and I are in our early 40s, have a teenage son, combined income of $15k. Each of us has CPF OA $230k, SA: $180k. There’s a $700k outstanding loan on the condo (bought new in 2012), which we use our CPF OA to pay for monthly.

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  • Loo Cheng Chuan
    Loo Cheng Chuan, Founder at 1M65 Movement
    Level 6. Master
    ‧
    Answered on 07 Nov 2018
    • I cannot tell you what you should do but here is my advice. I am not a big believer of property as a good investment vehicle.
    • The 2 reasons for property prices to rise are Population Growth and Economic Growth. At the moment, none of these are growing in Singapore right now, hence I will not invest much into property right now and for many years to come.
    • That said, I make sure that I am not overleveraged on my property purchase and it is not stretched beyond my purchasing power. On that note, I have always lived in HDB and I am very comfortable in it.
    • I will be skeptical of using property as a tool for retirement because it does not necessary grow well and there is a lot of property risks involved.
    • It is also my view that Government being very careful about property bubbles being formed and regularly step in to prick little bubbles that brew in the property market.
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    • Question Poster
      Appreciate your perspectives. Thank you. Would you say, a balanced approach would be to retain the existing condo (since it is only 3 years old and there is little to gain from the sale since the value hasn't risen much) and pay the monthly instalments by cash? In this way, contributions to our CPF OA and SA will grow.
      08 Nov 2018
  • Yixiong Chang
    Yixiong Chang
    Level 5. Genius
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    Answered on 07 Nov 2018

    Option 1 might not be feasible. You can only buy a resale HDB, but that you'll have to sell your condo within 6months. To buy a new HDB (or executive condo) you'll need a waiting period of 30months after selling your private property before able to buy. Even after that your income levels are too high.

    I might want to ask what would be your goal here?

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    • Yixiong Chang
      I feel there isnt a very strong need for you to rightsize at this point of time. Will moving to a different place affect negativing for yourself(travel to work) and your child (travel to study)? It can be disruptive for your child at this time. If you expect property prices to rise over the next decade or so (which your option2 is suggesting), u can hold on to your current condo till then to downsize. Your child could be near wanting to marry and moved out to his own unit. By then u will be at a better position to 'downsize', even better since u want to retire by then, u will have a greater cash pool (by selling your condo), or renting it out.
      08 Nov 2018
    • Yixiong Chang
      Have u ever considered topping up CPF special account? Actually I would You will earned a guaranteed rate of 4%. Risk-free, regardless of market conditions. In additional u will receive tax relief for the topped up amount. Eg, your taxable income is $40k, for every dollar u earn above 40k is taxed at 7%. Therefore, if u topped up $1000 into your special account, u get $1000 tax relief, u saved 7% of $1000 = $70 tax money. Effectively have gotten 7% return on your money, in additional u will earn 4%% interest yearly guaranteed. I believe your income could be >$80k, which puts u in the 11.5% bracket, which means greater tax savings. But the tax relief is capped at $7k a year only. After that u might want to consider SRS for tax relief. Do u intend to use your OA to pay for housing? Otherwise u can transfer part of them to SA for higher interest.
      08 Nov 2018