HDB flats or private properties?

The answer is simple.

You only have to ask yourself one question: are you buying your home or buying for investment?

HDB flats are for your own stay.

HDB is a home ownership scheme meant for owner-occupation only.

HDB states clearly in their website that “HDB plans and develops public housing towns that provide Singaporeans with quality homes and living environment”.

HDB flats have the following characteristics that make it difficult to be an investment:

1) Buyers have to meet one of the Eligibility Schemes for both new and resale HDB flats.

2) The government decides when you can sell (after satisfying the Minimum Occupation Period) and who you can sell to (buyer to meet Ethnic Integration Policy Singapore PR quota).

3) There are more restrictions on rental. Owners must apply for approval after the Minimum Occupation Period. Anyway, tenants with good budget are not eyeing HDB flats.

4) Unlike private properties, you don’t have much say for your block’s upgrade/en bloc — when is your turn, what to upgrade, how to do it, how much to pay, when it can complete — all not under your control.

5) For non-compliance, HDB authority has the right to confiscate your HDB flat.

Strictly speaking, HDB flats are properties belong to the government. You pay the deposit and monthly installments to be given the right to use the flat, under rules and regulations set by HDB.

And don’t expect the value can jump tenfold like those flats bought by Singaporeans in the 1980s.

Looking at the prices of HDB flats in recent years, honestly, I doubt anyone can make a windfall selling it after the minimum occupation period of 5 years.

The S$30,000 or S$40,000 housing grant or subsidy is not a significant sum. It can easily be wiped out by a drop in COV or value of your flat in the future, especially if you buy it during the good times.

If prices of HDB flats go up, so will the private properties.

Look at people who upgraded from HDB to condo in the mid-90s. They used ‘profit’ from selling their HDB flats to upgrade to condo units.

Instead of an upgrade of their living standard, I see these people getting themselves into a bigger mortgage, acquiring an overvalued purchase with a long time to breakeven!

Private properties are for residence OR for investment.

Private properties differ from HDB flats in terms of quality of building materials and varieties of design, theme, layout, etc.

For condos, their perceived image make them a totally different commodity than HDB flats. Just think branded goods compared with no frills groceries.

A well-maintained private property in a good location bought at a reasonable price can guarantee good rental return and asset appreciation.

Another two-cent advice from my experience: Do separate your residential property with investment properties.

In other words, before you buy a private property, make up your mind whether it’s for own stay or for investment.

Once you stay there (even for a very short period of time), your special sentiment with the unit will make you less rational when making a selling decision.

Once you stay there, whether property prices go up or down has nothing to do with you.

If it goes up, you can’t sell it to make a profit because you still need a place to stay. You don’t want to sell high and buy high, right?

To avoid this situation, wait for the buyers’ market to come. Buy two (or more) small properties and rent out all of them.

Once the market recovers, sell one (or all) to pay off the property you choose to stay. You will be mortgage-free or even sitting on a handsome profit.

That’s what I’ve done. What about you?