My Next House Must Definitely Be A Bigger HDB Flat – Upgrading Made Simple

My Next House Must Definitely Be A Bigger HDB Flat


Being a property agent for the past 8 years, I have always noticed this trend.

Majority of Singaporeans tend to upgrade from a 4-room flat to an Executive Apartment or Executive Mansionette. That is their definition of upgrading after a few years.

The main reason is simple – they start to have more children or have an older parent joining them. Space and size is the main consideration.

After selling the flat, they use the proceeds to pay off the loan. They will use their CPF to pay off the monthly loan.

Below is the common stages of life the younger generation of Singaporeans goes through:

Between age 25 – 35: Almost 90% to 99% of Singaporeans will opt for HDB BTO / HDB Resale as their first matrimonial home. This is understandable due to their young age and income.

They are very likely to empty their CPF accounts to pay for their first HDB flat. At the same time, they will also take a 2.6% HDB loan that they will pay monthly through their CPF accounts.

This is the stage when young couples are first getting started on their careers. So affordable HDB monthly instalments are necessary.

During Age 35 and above: When you start to grow older, you start to approach a critical stage in your life. Your next choice for a property will become very important.

As buying a Singapore property is one of the largest purchases in your life, the next property will likely to determine your future Assets and wealth.

This next property choice will determine the future of your assets, wealth and potential retirement plans. Hence careful planning is very important.


Case Study:
A family of 4 with a combined income of $8k and above decides to move on to their next property.

The Most Common Choice: Purchasing a larger HDB flat. 
At the average age of 35 years old, the couple makes a decision to purchase a bigger HDB flat. This purchase will likely last them for the next 30 years.

There will be also be resale levy applicable if they are buying directly from HDB. For a 4-room flat upgrading to a 5-room flat, there is a $40,000 resale levy.

However, if they choose to buy from the open market, there will be no resale levy. 

At the average age of 35 years old, the couple makes a decision to purchase a bigger HDB flat with a remaining lease of 85 years.

This purchase will likely last them for the next 30 years cause they are comfortable with the space & affordability. It is likely they will stay there with no other further future property plans.

How will this affect the family?

Years LaterHusband & Wife Average AgeRemaining LeaseCPF Used + Accrued InterestCPF Accrued Interest

After 30 years, at the age of 65, they will be holding a property with a remaining lease of 55 years.  

As long as the HDB flat is being paid via CPF, accrued interest will continue to build up. You are basically borrowing from your CPF at a rate of 2.5% per annum for as long as you hold on to the property.

If the HDB flat were to be sold at the age of 65, it needs to be sold at $839K in order to make cash from it (break even). This price is highly unlikely to happen in Singapore’s property market.

At the same time, the total of CPF plus accrued interest is $839,027. This is the biggest opportunity cost – the amount of CPF that could have accrued in your Ordinary Account.

Now going back to the present – the question to ask: Will the HDB flat that you are planning to purchase be worth this amount?

You are actually paying for interest for both sides – first to HDB and then to CPF.

  • The first interest is based on the 2.6% HDB loan you received.
  • The 2nd interest is based on the 2.5% CPF accrued interest – which will only be payable upon the sale of the flat.

You will notice there will be limited asset growth for a few reasons. Do take note that the remaining lease of the HDB flat will be a strong factor in the attractiveness of the flat.

Due to this 2 critical factors, there is a limited asset growth.

Of course, there is never a right or wrong decision to purchase another HDB as your next housing because there are indeed many factors including income, family needs and current financial standing.

However before making of the biggest FINANCIAL decision in your life, you should explore and consider other options as well.

Negative Cash Sale Situation

What if the actual selling price actually is about $500K ? — for a flat with 55 years left in the lease.

This results in a negative cash sale situation. There is actually a loss of $339K – which you could have earned if not for the accrued CPF interest scenario.

35 Years old is a Crucial Age

At 35 years old, you are at your prime earning age. This is a crucial juncture that can determine your future retirement plans. For example, mortgage loans are alot easier to get at 35 years old as compared to when you are 45 years old.

You can also get a longer mortgage period, hereby paying smaller monthly affordable instalments.

What would be your plans when your income starts to slow down?

What would be your plans when your remaining HDB lease is only left with 40 years? A 40-year old HDB flat is hit with many restrictions that can affect the future selling price. 

When you hit retirement age, the only way to cash out on your CPF funds that are locked in your HDB flat is to sell it. But you must remember these 2 factors in play:

  • Old age of flat with limited years left in lease – making it less attractive as compared to newer flats
  • The accrued CPF interest payable (or your opportunity cost in making a guaranteed 2.5% in your CPF OA)

There is such a thing called optimism bias. Optimism bias is a cognitive bias that causes a person to believe that they are less at risk of experiencing a negative event compared to others. 

If you would like to understand more on what you can do and other options available, please contact me. I have assisted many clients to get clarity on what they can do next.

Make an appointment with me today and let me
guide you towards achieving your dreams.