Do you think that owning or buying your first Housing Development Board (HDB) flat will bring you profits when you decide to sell it?
The answer – no. Not at all.
Rather than see it as a feasible investment, it would be better to see it as just a place to stay, and your own personal residence.
The hard truth is that it is incredibly hard to make money on a HDB flat – until you decide to sell it.
If you look at the BTO flat prices right now especially in prime estates like Bidadari, the prices differ by $100,000 accordingly to the number of rooms.
Compared to estates like Sembawang or Punggol, it is much more expensive.
If you decide to purchase a 5-room flat in Bidadari, the government grants to you will drop significantly, contributing to the expense, and this loss could reach up to $40,000 in grants.
Sell Old Flat, Buy New Flat
Also, when you decide to sell your flat, you might have the idea of buying the next flat. There is a misconception that purchasing another BTO flat instead will allow you to make money.
When you sell your first subsidised HDB flat and purchase a second subsidised HDB flat, you would need to pay a resale levy. The amount to be paid would depend on the size of your first subsidised HDB flat.
|First Subsidised Flat Types||Resale Levy|
Do not forget that the resale levy is much higher as compared to flats with lesser rooms: whether you are upgrading or downgrading, it still applies.
However, if you decide to purchase a resale flat, an EC that was launched before 9 December 2013, or private property, the resale levy will not apply to you.
99-Year HDB Leasehold Depreciates to Zero
Next, it is widely known that the leasehold of a HDB flat is for only 99 years, so by the end of that tenure, your flat’s asset value will depreciate to zero.
Likewise, the lesser the lease that remains, the more difficult it is for you to sell it to potential buyers.
The moment a HDB flat turns 40 years old, certain restrictions will kick in that can severely diminish the attractiveness of the flat to potential buyers.
The value of a 99-year flat will depreciate to zero at the end of the leasehold.
This has been confirmed by the Minister of National Development himself – HDB flats will be surrendered at zero value at end of 99 years.
When you purchase a HDB flat, whatever money used to do so is tied up within the house and the CPF used.
Trying to get any money out from a HDB flat is nearly impossible as refinancing is impossible.
Refinancing a private property is possible on the other hand – allowing you to take out the profits gained in the property.
The limitation of a HDB flat is you cannot mortgage or cash out your flat, simply because in the bank’s eyes, it is not considered an asset.
However, for a private property, you can cash out of it through ways such as a term loan or an equity loan.
This cash could be used for other means, such as for opening a business or for financing any investments.
Hence, it is advised for you to just treat the HDB flat that you have as a home for yourself, and even better, purchase a small flat instead for your first home so that you are not too burdened by the HDB housing loan and rising CPF accrued interest.