Ep #5 Four Lessons Learnt From Old HDB Flats

Hello, you are watching Property Soul Podcast. And I’m Vina Ip. Recently, there is public concern over what will happen to HDB flats when they grow old. There are 4 important lessons we learned
from the whole thing. Let’s cover them one by one in this podcast. First lesson is HDB flats is for your stay, not for investment. It all started when some people look for older HDB flats, hoping that these flats will be picked for Sers or Selective En bloc Redevelopment Scheme. Just like owners of old condos make a fortune out of successful enbloc sale. You know many Singaporeans they are addicted to speculation, gambling and the feeling of being lucky. But last March, our National Development Minister
Lawrence Wong came out to remind the public that not all HDB flats are eligible for
Sers. Since 1995, only 80 sites or 4 percent of
old HDB flats have been selected for Sers. The rest of them will eventually be returned to the government when their lease expires. His words immediately shattered the dreams of HDB owners waiting for or speculating for Sers. Prices of older flats drop. After buyers find out the age of older flats, they don’t even bother to go for flat viewing. Lesson learned: HDB is a government home ownership scheme meant for owner-occupation only. HDB flat is a home. A home is not for investment or speculation. From now on, be practical when buying your HDB flat Instead of going for SERS, go for SELF (Size, Environment, Location and Familiarity). Look for the right size to accommodate your whole family, the environment conducive for your comfortable living, the location close to your extended family and your workplace, the place where you grow up and where your heart belongs. The second lesson is: The days of making big profits from HDB flats are gone. A first-hand HDB flat is often viewed as citizenship entitlement. You can buy it at a highly subsidized rate from the government. and then resell it many years later
for t a much higher price in the open market, Hopefully an eager buyer willingly give you a generous amount of cash over valuation. Our parents who bought the 1st hand flats from HDB will see the value of their flats jumped almost tenfold. Our media also loves to pick up stories about how individual HDB transactions can cross the one million dollar mark, despite the fact that these are all exceptional cases. But those good old days are gone. The SRX figures shows that as of last month HDB
resale prices have dropped 13.5% since the peak in April 2013. The days when selling HDB flats can make a
generous sum from COV are over. Buyers are underpaying an average of S$1,000
below their flats’ estimated market value. Don’t expect to make much after the MOP
of HDB because of a few reasons. Firstly, Singapore is a developed country and a
mature market. Singapore has long passed the stage
of emerging from a developing to a developed country. Like any mature market, our GDP growth is
a low single digit and our inflation rate is below 1% now. Secondly, new HDB flats are not cheap. Depending on what you bought, DBSS flats can
cost in between $400,000 to $800,000 or even higher. How much more do you think you can sell next time, especially in a soft resale market? Third, there is strong competition from continuous supply of new flats. Just this week HDB is launching new BTO flats
again. Last round only happened in Feb. In just 3 months’ time, HDB is launching
a total of 7,600 new BTO flats. Do you know that, in the last 3 months, we only manage to sell a total of 4,900 flats in the HDB resale market? HDB said they want to keep a steady supply by launching a total of 17,000 new flats this year. Eligible 1st timers can enjoy up to $80,000 housing grants. With better subsidies, shorter waiting time,
and more choices of locations and flat types, eligible buyers no longer have to settle for
resale flats. Lastly, there’s demand for HDB resale flats is shrinking. The number of PRs experienced either a single digit or negative growth, rate which is a far cry from 9.9% annual growth of PR in the year 2000. The third lesson is: HDB is a home. It is unrealistic to find the best time to
sell it. A property agency told HDB owners that the best time (to sell) your flat is after 40 years as depreciation tends to steepen
after that. This is partly because of restrictions using CPF will kick in when the remaining lease of the flat is less than 60 years. I understand property agents like to see more people selling their homes and buying new ones. But if you get your flat when you are 25, by the
time the flat is 40-year-old, you are already 65. Are we asking all retirees to go and sell
their flats that they’ve been staying most of their life? Selling a home is never as straightforward
as selling an investment. If it’s your home, and you’ve been staying
there for many years, it’s hard to move out of your home without being emotional. Unless you are willing to downgrade, it is
naïve to believe that you can profit from the value appreciation of your home. Because you need a place to stay anyway. The last lesson is: You own your flat under HDB. You can’t decide its fate. Last year there’s a letter to ST Forum,
asking the question “Are HDB residents tenants or owners?” HDB replied that Purchasers of HDB flats are
owners of their property. They can sell, rent out, and renovate their
flats, within the HDB guidelines. Although your name is in the title deed, strictly
speaking, HDB flats are properties that ultimately belong to the government. When you buy the HDB flat, you are leasing
it from the government for 99 years. You pay the downpayment and mortgage to be
given the right to use the flat, and your actions are governed by rules and regulations by HDB. Unlike private homes, the government decides
when you can sell and who you can sell to. There are also restrictions on rental. For non-compliance, HDB has the right to confiscate your flat. When your HDB unit gets old, you have 3 options:
sell it, wait for SERS or return the flat to HDB once the lease expires. Private home owners, on the other hand, they take the money from their
pocket to buy their homes and upgrade their projects. Of course they have more control over upgrade
or en bloc matters. Don’t forget that your HDB flats are subsidized
by the government using taxpayers’ money. Think who can ultimately decide on the fate of your old HDB block. Do you realize that you can hardly find another government in this world where the government will build highly subsidized homes for young
couples who just graduated, without having to rent first and save hard for years to buy
their first home? Where the government will let you use your pension including contribution from your employer to settle your housing loan so you don’t
have to use half of your salary to pay rent or mortgage in cash? Where the government will arrange for you
repainting, upgrading and even rehousing for many years to come? Despite all these, do you still think that
you should be complaining about not being able to sell your old HDB flat at market price,
or pass it down to the next generation? That’s all I want to say. Remember to check out my blog and subscribe
to my Youtube channel. Talk to you again soon.

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