There are plenty
of options available when it comes to acquiring your first property. For
starters, a potential buyer could go for a new BTO unit or try their luck in
the market for a reasonably priced old HDB flat in the market. Each option has
advantages and disadvantages; therefore, a potential buyer would need to
consider them before making any decision for the future. Below are the few key
indications to consider when buying an old HDB Flat.
The debate over National Development Minister
Lawrence Wong's comments about the Housing Board's 99-year leases was
necessary, but should not become alarmist. Mr Wong’s comment was accurate on
both counts. First, when he issued a warning on his blog that people shouldn't
be buying very old Housing
Board resale HDB
flats in hopes that they would get “SERS”. That's the Selective En bloc
Redevelopment Scheme (“SERS”), in which the Government picks HDB flats it wants
to acquire for redevelopment. It gives HDB flat owners market-rate
compensation, and replacement units at discounted prices. Most Singaporeans see
“SERS” as akin to winning the lottery as the compensations are fairly generous
for those who purchased their HDB flats previously. In addition, they get
brand-new HDB flats with a fresh 99-year lease at a discounted rate. Mr Wong's
stark reminder to HDB flat buyers not to expect every block to get “SERS” was
necessary, given that only 4 per cent of flats have been picked for “SERS”.
With such a low odd to be picked, the potential buyers should be realistic
about their chances before attempting such a purchase.
In the recent
years, young buyers are willing to pay high prices for ageing HDB resale flats.
So paternalistic has the Singapore Government been, that agents and home-owners
blithely assume the state will bail out HDB flat-owners and offer “SERS”, or
some other scheme that will leave them with generous payouts as the lease nears
its 99-year expiry date. Generous government payouts may have held true in the
1990s, but has changed as we approach 2020. A tighter fiscal position, an ageing population, a tighter immigration
policy, and sheer political uncertainty mean we can't assume that HDB flat
prices will defy logic and remain high as the flats age into their third,
fourth, fifth decades and beyond. Mr Wong did a public service with his candid
and necessary reminder. He wasn't the first to warn against over-exuberance in
HDB purchasers. Back in 2013, then-National Development Minister Khaw Boon
warned: "Looking ahead, as we may no longer get the same kind of returns
from reselling an HDB flat as in the past, how will its role as an asset be
affected?"
The fundamentals
of HDB flats have not changed. They remain highly attractive buys for young
couples, as subsidized flats that now draw an increasing array of generous
housing grants, check here out for the list of housing grants. There
is a minimum occupancy of 5 years at the old HDB flats. After that minimum
occupancy, you should then do your calculations to consider your options. If
you want to cash out at the optimal time, the best time would be under 20 years
old at current market’s rate. If you want to stay on, current data suggests you
might as well keep it for 20 to 40 years. That's because flat prices seem to be
fairly similar in that age range, according to SRX Property's analysis of HDB
resale transactions in at least three estates last year.
However, a sharp
fall in value will kick in when an HDB flat crosses 64 years of age, when the
lease remaining is less than 35 years. Bank loan restrictions kick in then.
When the flats hit 69 years, you can't even use Central Provident Fund savings
to finance the mortgages.
What should you
look for if you intend to buy a resale old HDB flat? For starters, you should
look for an HDB flat that is under 20 years old. If current trends remain,
prices should remain stable, even after 10 years down the road. You should not
look for anything between 30 to 40 years old if you wanted to resell it for
some profit a decade later. In addition, you should consider to buy an old HDB
flat if you intend to rent it out eventually. HDB flat yields remain attractive
as their purchase price is low relative to private condos'. The array of
amenities and access to public transport also prop up rents. From an individual
flat-buyer's point of view, the common-sense approach therefore is to continue
to buy an HDB flat, subsidized preferably if you qualify for one. However, if
you are in the resale market, a newer flat under 20 years old provides better
chances of reselling it a decade later for some gain. Finally, get an old
resale flat only if you intend to live in it long-term, or want to rent it out.
Do not expect to be compensated for a fading lease.