The Singapore Government have done an amazing job ensuring that all of us have a roof over our heads making public housing affordable for almost everyone. These public housing also known as HDB is heavily subsidised allowing easy access to young married couples and families. I have friends around my age in Hong Kong sharing with me how a huge number of the population rent a place to stay their entire life because housing there is just too expensive.
Not only did the Government make HDB affordable, many who have gotten their HDB through the Build To Order (BTO) scheme would see themselves making a decent amount of profit from the sale of their flats. One very good example would be the HDB cluster in the above picture located at Upper Serangoon View, Hougang Capeview. A 5-Bedroom flat cost about $450,000 when it was launched and was recently sold at $800,000, $40,000 above valuation. No doubt the unit came with an awesome unblocked river view but the flat is still located in District 19.
I have clients and friends telling me their plans of leaving their HDB to the next generation as it is an asset but is it really an asset? Let us take a closer look.
Taking reference from the graph above, the value of the flat depreciates over time. The main issue is the balance tenure of the flat and this applies to all properties with a 99 years leasehold. Financing for older flats are more difficult resulting in a larger cash component when committing. As a result, there will be a drastic drop in the number of buyers who are eligible or willing to pay for the flat. Making it difficult for the next generation to actually cash out on the property. As I have always mentioned, buying is easy but what is the exit strategy?
As the valuation of the property depreciate with the remaining tenure, the eventual value of the flat after 99 years would be $0. Although there were no actual cases recorded just yet, the following articles have proven that we should all be prepared for it.
There is absolutely nothing wrong with living in a HDB unit but the trick is not to stay for too long. Especially so for HDB, we should consider moving once the Minimum Occupation Period (MOP) is up.
If you currently own a property that is above 15 years old and want to know how you can make the most out of it before the value starts to go down, get in touch with me. I will share with you an in depth analysis and the various options that are available for you.
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