According to the latest 2019 statistics, 78.6% of Singapore’s population live in HDB flats and the other 21.4% live in private properties. This is a considerable increase from 2009, when 83.6% of Singapore’s population lived in HDB flats and only 16.4% lived in private properties.
There are a number of reasons why more Singaporeans are choosing to upgrade to private properties. One reason is that private properties tend to appreciate in value more than HDB flats. Another reason is that private properties offer more space and amenities than HDB flats.
If you are considering upgrading to a private property, there are a few things you need to keep in mind. First, you need to make sure that you can afford the monthly mortgage payments. Second, you need to make sure that you have enough savings for the down payment and other associated costs. Finally, you need to make sure that you are comfortable with the level of risk involved in owning a private property.
If you are able to meet all of these requirements, then upgrading to a private property can be a great way to reinvent your family’s future. Private properties offer a number of advantages over HDB flats, including:
- More space
- More amenities
- Greater potential for capital appreciation
If you are looking for a way to improve your family’s quality of life, then upgrading to a private property may be the right decision for you.
What is an HDB BTO flat?
A HDB BTO flat is a Build-To-Order flat that is built by the Housing and Development Board (HDB). BTO flats are offered to Singaporeans who are looking to buy their first home. BTO flats are typically offered in a range of sizes and locations.
How are some Singaporeans able to upgrade from HDB to Condo upon the sale of their HDB flats?
There are a number of ways that Singaporeans are able to upgrade from HDB to Condo upon the sale of their HDB flats. One way is to use the proceeds from the sale of their HDB flat as a down payment on a Condo. Another way is to use the CPF housing grants that are available to first-time homebuyers.
Is your HDB flat an appreciating or depreciating asset?
The value of an HDB flat can appreciate or depreciate over time. The factors that affect the value of an HDB flat include:
- The location of the flat
- The size of the flat
- The condition of the flat
- The demand for HDB flats in the area
Why doesn’t HDB flats appreciate as much as private properties?
There are a number of reasons why HDB flats don’t appreciate as much as private properties, here are some of the following reasons:
- Leasehold: HDB flats are leasehold properties, which means that they have a limited lifespan. The lease on an HDB flat is typically 99 years, after which the flat will revert back to the government. This means that the value of an HDB flat will eventually decrease as the lease runs down.
- Maintenance: HDB flats are typically not as well-maintained as private properties. This is because HDB flats are owned by the government and are not subject to the same level of scrutiny as private properties. As a result, HDB flats may not appreciate in value as much as private properties, which are typically better maintained.
In addition to these factors, the government also regulates HDB prices in a number of ways to ensure that they remain affordable. These include:
- HDB valuation: When a buyer has been granted an OTP (Option to Purchase) by the seller of the flat, the next step is to submit a Request for Value. In granting the OTP, the seller agrees to the valuation of the flat, if required by HDB.
Both the HDB and bank loans amount are based on HDB valuation. If there is a difference between the agreed price and the HDB valuation, the buyer will have to pay COV (Cash Over Valuation).
The COV cannot be obtained from the loan amount and it has to be paid in cash only.
- 30% MSR (Mortgage Servicing Ratio): MSR is a ruling imposed by MAS for housing loan when you want to purchase an HDB flat or EC (Executive Condominium).
MSR is capped at 30% which means that not more than 30% of your gross monthly income can be used to pay for your housing loan.
Whereas the TDSR (Total Debt Servicing Ratio) rule is used for the purchase of private property. The TDSR ratio is 60% of your gross monthly income instead of just 30% for MSR.
- Supply-side and demand-side policies: In a free-market economy, price increases or decreases based on the law of supply and demand.
However, HDB prices are regulated by the Government to ensure that it remains affordable.
On the supply side, the Government provides subsidies via the concessionary pricing scheme for new BTO flats. The level of subsidies is pegged to the flat type and monthly income.
Since 2011, the Government moved another significant step to stabilize new BTO prices by delinking them from resale flat prices.
HDB then sets new flat prices based on a cost-plus basis.
This approach allows HDB to better protect BTO flat buyers against price spillovers from the resale markets and their volatilities.
By doing so, HDB can keep BTO flat prices affordable.
As a result, BTO prices will generally be a benchmark to the resale prices within the area.
Overall, there are a number of factors that contribute to the lower appreciation of HDB flats compared to private properties. These factors are largely due to government policies that are designed to ensure that HDB flats remain affordable for the majority of Singaporeans.
What is the opportunity cost of not upgrading early when you can?
The property market is cyclical, meaning that property prices follow a long cycle pattern of ups and downs. If you look at this chart, you can see that the private residential property prices in Singapore have been increasing steadily in the long run.
In 2019, Singapore residents real income growth is 2.2 per cent. Assuming that the real income growth stays at 2.2 per cent for the next 10 years, this would mean that private residential property prices will increase 22 per cent by 2030.
If you could upgrade now but you didn’t and the above becomes a reality, you would have lost the opportunity to upgrade at a lower quantum and lower capital outlay.
The quantum is the amount of money you need to pay for a property, and the capital outlay is the amount of money you need to pay upfront. If you upgrade later, you will need to pay more for the property, and you will also need to pay more in terms of capital outlay.
In addition to the financial costs, there are also other costs associated with not upgrading early. If you wait too long to upgrade, you may find that the property you want is no longer available, or that the prices have increased so much that you can no longer afford it.
If you are considering upgrading, it is important to weigh the pros and cons carefully. The opportunity cost of not upgrading early can be significant, so it is important to make sure that you are making the right decision for your financial future.
When is the best time to sell your flat?
There is no one-size-fits-all answer to this question, as the best time to sell your flat will depend on a number of factors, including the location of your flat, the condition of your flat, and the current state of the property market. However, there are a few general factors that you should consider when making your decision.
Supply and demand: The number of flats for sale in a particular area will have a big impact on the price that you can sell your flat for. If there are a lot of flats for sale, then prices will tend to be lower. On the other hand, if there are not many flats for sale, then prices will tend to be higher.
CPF accrued interest: If you have used your CPF savings to pay for your flat, then you will need to pay back the accrued interest when you sell it. The accrued interest is the interest that you would have earned on your CPF savings if you had not used them to pay for your flat. The amount of accrued interest that you will need to pay back will depend on how much you used your CPF savings and for how long.
New factor: Buyers tend to prefer newer flats, so if you are selling your flat shortly after MOP, you will be able to command a higher price. This is because buyers will be willing to pay a premium for a flat that is in good condition and has a newer facade.
Decaying lease: The lease on your flat will start to decay as soon as you move in. This means that the value of your flat will decrease over time. If you are planning to sell your flat in the future, you may want to consider selling it before the lease starts to decay too much.
Based on these factors, it is generally considered to be the best time to sell your flat upon reaching MOP. This is because there will be more buyers in the market, you will not have to pay back as much accrued interest, and you will be able to sell your flat for a higher price. However, it is important to weigh all of the factors involved before making a decision about when to sell your flat.
Here are some additional tips for selling your flat:
- Get your flat ready for sale: Make sure that your flat is clean, tidy, and well-maintained. Buyers will be more likely to make an offer if your flat looks good.
- Price your flat competitively: Do your research to find out what similar flats in your area are selling for. You don’t want to price your flat too high, as this will deter buyers.
- Market your flat effectively: Use a variety of marketing channels to reach potential buyers, such as online listings, property agents, and word-of-mouth.
By following these tips, you can increase your chances of selling your flat quickly and for a good price.
Is retirement planning through property possible?
Retirement planning through property is possible, but it is important to do your research and make sure that you are comfortable with the level of risk involved. One way to retire through property is to buy a rental property and use the rental income to supplement your retirement income. Another way to retire through property is to downsize to a smaller home and use the proceeds from the sale of your larger home to fund your retirement.
Conclusion
An HDB BTO flat can be a great way to start your family’s future. However, it is important to weigh the pros and cons of owning an HDB flat before you make a decision. If you are considering upgrading to a private property, there are a number of factors that you need to keep in mind. By doing your research and planning ahead, you can make sure that you make the best decision for your family.