You're finally upgrading. You've got the keys to your new condo and you're ready to settle in. But there's still one thing lingering in your mind: What should you do with your old HDB flat?

Should you sell it right away? Or maybe it's better to rent it out?

Well, the answer is not so black and white. Because depending on the current market and your property goals, you might prefer one over the other. So which one is for you? Let's break it down.

Why you'd want to sell

For many people, selling is more simple. It's a clean break, so you won't have to think about managing your old flat. But more importantly, you can avoid paying a hefty Additional Buyer's Stamp Duty (ABSD) that applies to your second property.

Current rates are 20% for Singapore Citizens and 30% for Singapore Permanent Residents. But if you sell your HDB flat within six months of the condo purchase, you may be eligible for a remission. You can click here for more details on stamp duties and remissions.

Selling also gives you more flexibility in financing your condo. If you're holding two properties, banks will only let you borrow up to 45% of your condo's value. But if your HDB is sold, you're back to the standard 75% loan-to-value (LTV) limit.

And don't forget about CPF. If you've used your CPF to finance your flat, you'll need to refund not just the principal, but also the accrued interest. So the sooner you sell, the less you have to pay back. But more on that later.

The most intriguing part about selling is probably the cash you'll receive. Whether your HDB is fully paid off or still under mortgage, chances are it has appreciated since you bought it. You can use that capital and put it towards your condo mortgage, emergency fund, or other investments.

Trade offs

While the resale market was hot a few years ago (around 2022), things have started to cool down. Right now, prices are softening due to higher interest rates and tightened loan limits among others. Plus, with the 15-month wait-out rule, the market is kind of subdued.

In Q4 2024, resale HDB price growth rose by 2.6% QoQ. But by the next quarter, it slowed to just 1.6%. This was the slowest it's been since Q42023. And it appears that this trend will continue at this pace throughout the rest of the year.

Then, there's resale levy. If you ever plan to downgrade in the future, specifically for a subsidised HDB flat, you'll have to pay up to $50,000 depending on your flat and ownership type.

Of course, that is not to say that you shouldn't sell your flat solely because of these reasons. If the benefits outweigh the drawbacks, then by all means, go ahead. Just make sure you are well-informed before you make your decision.

Passive income

Once you've fulfilled your Minimum Occupation Period (MOP), HDB allows you to rent out your entire flat after moving to a private property. This makes for a good passive income, which can help cover your new mortgage or even upgrade your lifestyle.

Rental demand is still relatively healthy (despite growth slowing down), especially those in mature estates and central locations. Generally, a gross rental yield of five to seven per cent is expected. Here's how 4- and 5-rooms performed in the past year.

Source: PropNex Investment Suite

Source: PropNex Investment Suite

The catch

Earning passive income is nice and all, but as I've explained before, you'll have to pay ABSD on your condo. So if your new condo cost, let's say, $1.5 million, you're looking at $300,000 to $450,000 in ABSD alone. And for many people, it's just not worth it. Not to mention the lower LTV limit to finance the condo (up to 45% if you're holding both properties).

And what if you struggle to find a decent tenant? Or worse, can't find one at all? You might have to accept lower rent to avoid vacancy. After all, some rental income is better than none.

And if you do get a tenant, there's always the risk they turn out to be difficult, late with payments, or careless with the unit. If anything breaks, guess who will have to take care of the repairs?

One more thing you need to worry about: lease decay, which leads to value depreciation and slower rental demand. Luckily for you, lease decay affects HDB less than private properties. After the 20-year mark, the resale transaction price of HDB only drops by 3%, whereas private leaseholds can drop more than 30%.

But that doesn't mean you're in the clear. Because even if you don't want to sell now, you'll have to eventually. And when that time comes, many upgraders get a rude shock when they find out they have to refund the CPF.

As I've mentioned before, if you've used your CPF savings to pay for your property, you'll need to refund not just the principal amount, but also the accrued interest, which is the amount your CPF would have earned if the money had never left your account. This includes any housing grants you received to help with the purchase and their accrued interest too.

Here's the catch: that accrued interest snowballs over time. The longer you keep your HDB, the more the interest compounds, and the larger the eventual refund becomes. Which means if you decide to hold on to your flat to rent it out, you'll have to pay back even more CPF (with interest) when you eventually sell.

It all boils down to a numbers game. You'll need to calculate to see if the rental income you collect along the way actually outweighs the rising CPF accrued interest you'll have to refund later.

Again, it depends on your current needs and property goals. If you need liquidity, want to avoid ABSD, and prefer more flexibility to finance your new condo, selling your HDB flat might be the better move, especially if your flat has already appreciated significantly. Selling also frees up cash and CPF funds that can help finance your next purchase. Plus, you'll clear your CPF refund right away, instead of letting it snowball the longer you hold on to the flat. It's also less stressful since you won't have to deal with tenants and potential lease decay.

On the other hand, if you've paid off your mortgage and want to have a steady passive income, you might want to rent out your HDB flat. Especially if you have a good location with higher rental demand, and your potential collected rent outweighs the rising CPF accrued interest. This way, at the very least, you'll earn some extra bucks as you're waiting for the right momentum to sell. Of course, you'd have to be financially comfortable enough to manage your two properties. Plus, you have to be ready to find and deal with tenants.

In the end, it really comes down to your finances, goals, and the amount of risk you're comfortable with. There's no one right answer. But keep in mind that you need an exit strategy regardless. Because even if you don't plan to sell now, you'll have to eventually.

If you like the clip above and want to learn more from our dear CEO, come join us at the next Property Wealth System Masterclass. It'll help set you on the right path for your property journey!

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