Should we buy an old HDB flat?

2:03 PM

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.

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4 apa kata anda?

  1. Thanks sharing good info on hdb flat :)

  2. tq for sharing..done follow your blog sis

  3. Are Malaysians allowed to buy HDB flats? Thanks for sharing. Abam Kie follows your blog. No 744. TQ.


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