In this guide, we will explore the HDB resale levy, covering everything you need to know, from its purpose to the specifics of payment methods and exemptions.
What Is the HDB Resale Levy And How Will It Affect You?
The HDB resale levy is a policy enforced by Singapore’s Housing and Development Board (HDB) on flat owners who wish to purchase a second subsidised flat. It ensures that the housing subsidy is used fairly, as it requires flat owners to pay back a portion of the subsidy received on their first HDB flat before obtaining further assistance. This policy affects the amount you will receive if you intend to upgrade or downsize to another HDB flat or if you sell and buy a new flat.
Why Do They Impose a Resale Levy?
The resale levy aims to create a fair housing system by ensuring financial assistance is available to more Singaporeans. By imposing a fixed sum, the government can sustain subsidies for future buyers of HDB flats and executive condominiums.
This requirement is key for a sustainable housing market, helping reduce demand while promoting responsible financial planning among homeowners.
Do I Need To Pay a Resale Levy for Resale?
If you plan to buy another subsidised flat, either a new unit from the HDB or a resale flat with subsidies, you must pay a resale levy. However, there are a few exceptions, particularly for senior citizens.
Seniors Purchasing 2-Room Flexi Flats
The resale levy is often waived for seniors buying 2-room Flexi flats with a shorter lease. This enables senior citizens to downsize more efficiently while retaining more flat sale proceeds for retirement.
How Much Is the HDB Resale Levy?
The resale levy amount varies based on the type of subsidised flat originally purchased and whether it was sold before 3 March 2006.
| First Subsidised Housing Type |
Resale Levy Amount (Based on the resale price of the sold flat, or 90% of its market valuation, whichever was higher) |
|
| Households | Recipient of CPF Housing Grant (Singles) | |
| 2-room flat | 15% (10%) | 7.5% (5%) |
| 3-room flat | 20% | 10% |
| 4-room flat | 22.5% | 11.25% |
| 5-room and Executive flat | 25% | 12.50% |
This only applies to 2-room flat sellers who buy a larger flat type.
For flats sold on or after 3 March 2006, the resale levy is a fixed amount based on the type of subsidised flat initially purchased.
| First Subsidised Housing Type | Resale Levy Amount | |
| Households | Recipient of CPF Housing Grant (Singles) | |
| 2-room/ 2-room Flexi flat | S$15,000 | S$7,500 |
| 3-room flat | S$30,000 | S$15,000 |
| 4-room flat | S$40,000 | S$20,000 |
| 5-room flat | S$45,000 | S$22,500 |
| 3Gen flat | $45,000 | N/A |
| Executive Flat | S$50,000 | S$25,000 |
| Executive Condominium | S$55,000 | N/A |
How To Avoid Resale Levy – Is This Possible?
The HDB resale levy applies when a buyer purchases a second subsidised flat from the Housing and Development Board (HDB) after selling their first. The levy is designed to ensure fair distribution of housing subsidies. However, it’s only natural to wonder whether there are ways to avoid or minimise it.
Here’s a quick guide to help determine whether you may be affected by the resale levy and your potential options for avoiding it.
| Your Situation | Is the Resale Levy Applicable? |
Explanation
|
| You own an HDB flat bought with a subsidy and plan to buy a second subsidised HDB flat. | Yes | As a returning buyer of a second subsidised flat, you’ll need to pay the resale levy. |
| You plan to buy an Executive Condominium (EC) directly from a developer. | Yes | A resale levy is payable if you have previously received an HDB subsidy and are buying a subsidised EC. |
| You are purchasing a private property after selling your first subsidised HDB flat. | No | The resale levy applies only to HDB residents returning to the market for another subsidised property, not to private property buyers. |
| You are a first-time HDB buyer. | No | Only second-time buyers of subsidised HDB flats need to pay the resale levy. |
| You plan to buy a resale HDB flat (not a subsidised new flat). | No | The resale levy is waived if you buy a resale HDB flat without a subsidy. |
| You wait five years and do not apply for a new subsidised flat after selling the first. | No | You can buy a resale flat or private property to avoid the levy. |
How to Avoid the Resale Levy
If you wish to avoid the resale levy, consider the following options:
- Buy a Resale Flat Without Grants: Purchasing a resale flat on the open market without any grants or subsidies exempts you from the levy.
- Buy Private Residential Property: If you are open to non-HDB housing, private properties do not incur the HDB resale levy.
These options allow you to transition without paying the resale levy, provided you do not re-enter the subsidised HDB market.
How Do You Pay Your HDB Resale Levy?
Paying the HDB resale levy varies depending on factors such as your mortgage loan type and the date of sale of your flat. Here’s a breakdown of how each factor affects the payment process:
According to Mortgage Loan Type
If you took an HDB loan for your current flat, the resale levy can generally be deducted directly from your sale proceeds, reducing the need for additional cash outflow. However, suppose your flat was financed through a bank loan.
In that case, separate arrangements are necessary to pay the levy, which may involve using your CPF savings or cash, as bank loans do not allow automatic levy deductions. You can just log in to your CPF account to check and manage your available funds.
According to Flat Sale Date
The date of your flat’s sale is also a determining factor for how the resale levy is calculated and paid. Whether your sale occurred before or after 3 March 2006 will influence the levy amount and payment method.
- Before 3 March 2006: If you sold your flat before this date, the resale levy is calculated as a percentage of the resale price or 90% of the market valuation, whichever is higher. This means the levy amount will vary depending on the flat’s sale value, which could lead to higher or lower payments based on market conditions at the time of sale.
- On or After 3 March 2006: The resale levy is a fixed sum for flats sold on or after 3 March 2006, which provides greater certainty and predictability for flat owners. This flat-rate approach was introduced to simplify the resale levy and offer clarity and consistency in planning for future housing purchases.
The resale process starts when you register your Intent to Sell on the HDB portal, which streamlines your sale and levy payment process. Additionally, if you plan to enhance your new property, you might consider a renovation loan to finance upgrades or improvements, helping to transform your new home to suit your needs.
What Happens to Your CPF Account?
When you sell your HDB flat, the CPF housing grant and any accrued interest must be refunded to your CPF account. This ensures that your CPF funds can continue growing for future use, whether for retirement or future housing purposes. The net sales proceeds are calculated after the resale levy deduction and are available for reinvestment in another property or retained for other needs.
Can You Purchase Another Resale Flat With the Proceeds From Your First Flat?
You can use your flat sale proceeds from your first flat to purchase another resale flat. However, if you intend to buy another subsidised flat, the HDB resale levy will apply, which could reduce the funds available for your new property purchase. This is essential to consider if you plan to upgrade or relocate.
Case Study About HDB Resale Levy
Consider a situation where a young couple initially purchased a 3-room subsidised flat. After several years, they decide to upgrade to a 5-room HDB flat. Due to the subsidies received on their first flat, they must now pay a resale levy of S$30,000. This resale levy is deducted from their flat’s sale proceeds, resulting in lower net sales proceeds than if they hadn’t benefitted from subsidies.
This couple’s experience is common in Singapore and illustrates why understanding the HDB resale levy is vital. It ensures the proper allocation of resources and equitable access to Singapore’s housing market.
Conclusion
The HDB resale levy is a policy by the Housing and Development Board to promote a fair housing subsidy system. By ensuring that flat owners returning to the market for a second subsidised flat contribute through a resale levy, Singapore maintains a balance of resources in the housing market.
Knowing how the HDB resale levy applies to your purchase, from the resale levy payable amount to payment methods based on the mortgage loan type, can help you make informed decisions as you plan your housing journey. Visit the OMY official website for more insights and practical tips on navigating HDB policies to stay informed and empowered in Singapore’s housing market.
