For most Singaporeans, upgrading is seen as ‘natural’ if you start earning more or your flat appreciates.
We probably don’t need to go over the reasons why, as there are hundreds of agents waiting to explain to each of you why it’s important to have a retirement asset, have a home wealth progression, etc.
But at the same time, not all upgrade attempts go smoothly, and some people have also shared their regrets:
1. Upgrade just when mortgage lending starts to go haywire
By far the strongest complaints we’ve heard come from those who updated shortly before March of this year. The reason: interest rate hikes.
From the time of the last global financial crisis (2008/9) until around March 2022, home loan rates in Singapore were cheap.
It was not impossible to find rates below two percent; and if we go back to 2011, there was even a time when interest rates tied to the Swap Offer Rate (SOR) were negative.
Then, in a sharp turn, the US Federal Reserve raising interest rates to combat runaway inflation. When October rolled around, fixed-rate loans were around 3.85 percent per year; and, since then, some banks have begun withdrawing their fixed-rate products from the market altogether.
One updater we spoke to, who just wants to be known as Roy, says he’s sorry he didn’t make his update attempt sooner:
“In 2012 my wife pushed me to sell our apartment and move to a larger condominium; at that time, we had just arrived at the MOP (Minimum Occupation Period). I also got the same advice from my brother-in-law, who is actually an agent for the property.
“But I had to admit my own fault because I kept finding reasons to put it off, I was a little lazy about moving and everything. When I finally acted this year, the interest rate is high and the prices are high too.” If I had upgraded in 2012, I would have at least saved eight years of higher interest.”
Another improver, Janice, says she would have waited instead of making her move this year:
“If I can save just five years, I could have bought my current unit without even using a loan; because me and my partner don’t have kids or anything, we’re just buying a very small resale house.
But I was afraid that, due to the increase in prices, it would be worse later, so I took out a loan to buy now. So just my bad luck, the interest rate is now going up so fast. But at least I didn’t take a very big loan.”
(Janice made a large down payment of about 40 percent.)
Besides, we wouldn’t say Janice’s instincts were necessarily wrong: it’s plausible that price increases over the next five years are worse than paying higher interest rates.
2. Let go of the bigger house
P, who sold his HDB duplex to buy a resale Executive Condo, says he’s been feeling buyer’s remorse ever since. He originally lived in Hougang and says he sold his duplex for “around $700,000.”
He says that part of his decision was the shock of hearing the offer. P hadn’t really intended to sell until a real estate agent knocked on his door and said there were interested buyers.
P says he doesn’t really follow the real estate market, so the amount took him by surprise. He decided that since his children had already moved out, he didn’t need such a large space.
“I bought my current house around March of last year, in Tampines Trilliant, because it’s closer to Tampines Central, where my brother lives. But even though my kids moved out, I think we felt the lack of space. There’s no room to store the most of our old furniture, and I feel very closed in even with the windows open.
P says her duplex was over 1,500 square feet, while her current home is only about 870+ square feet.
“Although the facilities are nice, I don’t use them very often. So I think if I had a choice, I would go back to my larger unit, but the real estate agent already warned me, he said this type of apartment HDB, If you sell now, You probably can’t ever be the same again.”
If you’re planning to upgrade, the impact of a smaller footprint may not be immediate. You may not feel tight for one or two visits, but the feeling may wear off after the first few weeks.
It’s best not to assume that just because someone has moved, their spatial needs will be reduced accordingly. According to a real estate agent we spoke with, it’s more about how long you’ve lived in a larger space.
3. Upgrade one larger unit instead of two units
Adrian and his wife opted to upgrade their apartment to a larger 2,000+ square foot unit, but then felt they went overboard with the space.
Adrian says that while the property agent noted that they could “sell one, buy two,” he didn’t agree with the idea because it posed a higher risk. Initially, he did not want him and his wife to have their own mortgages.
In hindsight, however, he feels the risks of buying his biggest unit aren’t significantly lower:
“If any of us lose their income, it’s a big risk, as our current house costs so much more. Looking back, I think we were in love with such a large unit, after almost 12 years of living in a house of four. flat room So we mentally concocted all sorts of justifications for buying the bigger unit.
“But if I could turn back the clock, I think we’d settle for the first unit we picked, which was a more modest three-bedroom, and my wife could buy a new one-bedroom, which could be for my daughter when she gets older, and we could rent it.
Note that neither Adrian nor his wife would have paid the additional buyer’s stamp duty on the purchase of a second unit, as they would each own only one property.
That said, the sell one, buy two approach isn’t ideal for all buyers. To exercise the utmost prudence, choose a property where your monthly loan payments are no more than 30 percent of your monthly income and no more than five times your annual income.
4. Upgrade to a nicer property, but in a less developed neighborhood
M prefers not to mention the property in question, as he does not want to create a negative impact on the project, but regrets that he focused too much on the condominium and too little on the neighborhood.
He said that:
“In my flat, I had things to do at all hours; even at two in the morning, I can go down and have a kopi and a bak chor mee. I can meet my neighbors or my friends there to chat. And I don’t think I’ve ever paid for Grab delivery in my entire life when I could walk to McDonald’s or wherever.
“But at the time I wasn’t happy with how old the flat was, how the neighbor was cluttering the hallway with too many bikes, and all the usual little HDB complaints.
“When I got my condo in 2020 and moved in, I was expecting heaven; and I got it for a while. But after I walked past the nicer view and pool, I realized, oh my gosh, there’s nothing to do here.
“I rush to buy food before 9:00 pm because otherwise all the stores in the mall will close. If I can’t sleep by 2:00 am, spend $20+ to grab a livelier place to to eat.
“I think if I could choose again, I would pay more attention to the neighborhood, less to the facilities.”
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