I did a FB Live recently on this topic:
I have seen many couples facing this issue:
- Unable to ballot for a BTO flat despite many attempts
- Looking to purchase a resale flat instead
- Looking to purchase a resale condo instead of a brand new launch condo as unable to wait
Now before you make your choice, let’s explore the timeline AFTER you entered the property market.
There is a critical point after you purchased your property where your property purchase will start to go against you.
What happens after this critical point is that you are unable to:
1. Upgrade to a bigger flat. New flats might be too expensive. Older resale flats will be cheaper. But likely your funds will be stuck there for the rest of your life.
The next buyer for your bigger flat will not want to pay as much as you did due to the shorter lease.
2. Upgrade to a private property. This is because your flat’s depreciation starts to happen.
3. Downgrade to a smaller HDB flat. Selling it results in no cash proceeds as your funds are refunded back to your CPF accounts.
The Fate of Some 15-20 Year Old HDB Flats
In my FB video, I highlighted the valuation of some flats in Singapore.
For this block, the lease started in 2001.
So now in 2018 – the flat’s age is about 17 years old.
The highest peak prices was in 2013-2014 – where the transactions crossed $400K. During that period, the flat’s age was about 12 years old.
As it began to cross more than 15 years old, the transacted price began to drop.
Right now, the prices are even back to 2010 prices.
For those who bought in 2013 – now will be after the MOP period – your flat is now eligible for sale.
But it is unlikely for you to sell at close to your purchase price of $400K – the transacted prices right now is $340K.
There is no gain for you to leverage on for your next property purchase.
My Own Personal Transaction
My very first property was a BTO flat which I bought in 2006. The lease began in 2008.
I sold in 2018 at a price of $470K.
Selling a flat that was less than 10 years old was easier – it was a younger, newer flat with a lease of at least 89 years.
My own gain was about $310K – which made it very easy for me to upgrade and buy a private property for my family’s next home.
I was lucky in the sense was what I bought was a BTO flat and I was the first owner.
I bought it before it was completed and sold it when the flat was about 9-10 years old in 2018.
That’s why your first property is critical – if it is able to give you your first capital gains – it creates a path for your future properties.
Appreciation of 5-Year Old Private Properties
Below I share with you the various transactions at Kingsford Waterbay.
It was launched in 2015 and hit its TOP date in Dec 2018.
The gain over a period of 4 years is more than $200K.
Compared to my HDB gain of $310K over a period of more than 8 years.
With private property, the gains are higher due to its higher price.
However, not all private properties will appreciate this way – it is highly dependent on what the property is.
Critical First Property & Your Critical Age
Previously I wrote an article about Why 35 Years Old Is A Critical Age – it affects your bank loan and loan tenure tremendously.
Here I also like to highlight the advantage of having the correct first property.
If Kingsford Waterbay had been your *first* property as well – it could also have accelerated your first pot of capital gains.
I have encountered cases where clients totally forego the chance to own HDB and go direct to private property as:
- their income could cover the loan
- the initial downpayment is not an issue
- have personally seen the accelerated gains when compared to HDB
In the meantime, they actually rented a property to stay while waiting for their property to finish construction.
These people are very clear on their plans and future goals.
I go into much greater detail with more examples in my 18-min FB Live Video: https://www.facebook.com/HDBUpgradingStrategist/videos/1943831955739360?sfns=mo
Keen to explore on your own possibilities?
As I mentioned earlier, if your HDB flat has already hit MOP – it is best to take action earlier, rather than later.
Delay further and your HDB flat might turn “against” you – and that would not be helpful to your future financial plans.
I invite you to contact me for no obligation consultation to check on what options are available to you.