We live in a Singapore that is very different from our parents’ and grandparents’ time.
Our grandparents would be able to purchase a $40K 4-room HDB flat back in the 1970s.
Our parents would be able to purchase a $400K landed property back in the 1990s.
Right now, if we were to reflect back on those times – we can only say “so cheap!”
But reminiscing on the past too much is also not too helpful – we also need to ask ourselves “What can we do now?”
Consider the facts about your HDB flat
I have clients whose parents lived in flats that have gained more than 10 times from its original purchase price.
You might hear of those cases where the flat was bought at $40,000 and was sold for between $200K-$300K.
But right now, most HDB owners would be very lucky if their property appreciated by more than 20%.
In fact in 2019, we are seeing a decline in HDB resale transactions as well as prices.
Consider everything you hold to be the truth right now.
How much of it is set in stone as hard facts and how much of it is your belief system?
As a young 30-year old millennial who puts her money to work, I have to be careful in evaluating both my upsides and downsides in any investment.
When your money is on the line – your thinking process becomes simplified – because you focus your attention on what truly matters.
Below are the new property investment principles that I hold on to – that helps me thrive in a world of ever-constant change.
Principle #1: HDB is Not an Investment Tool
If you were to visit the HDB website, you will find out that its mission is “to provide affordable homes of quality and value.”
An undeniable fact is HDB flats are a form of public housing. Being public housing – it will often be highly regulated and restricted.
The prices of HDB flats will not be subject to the whims of full market forces and as such – it should never be considered as an investment tool.
About 30-40 years ago, the prices of HDB flats were extremely low. It was the norm to see prices of flats appreciate by 3-4 times. That was a 300% to 400% increase.
However, the prices of flats purchased about 10 years ago only appreciated by 10%-20%.
But you will see a totally different story if you had bought a private property instead. In my article – “Lessons from the 10-year Challenge” – I shared about my client who made 70% gains in just 1 year.
I still recommend HDB flats as a first property choice for young Singaporean couples whose combined income falls below the income ceiling of $12,000.
In the past, if your income was above the ceiling, the alternative choice was to purchase a HDB flat in the resale market.
However for those whose income exceeds $12,000, you should seriously consider buying a private property instead.
Principle #2: Private property can be both a Home AND an Investment
HDB flats are public housing and they are restricted by various regulations (as it should). Some restrictions include:
- Ethnic Quotas
- 5-years Minimum Occupation Period
- Cash-out refinancing is not allowed
- Can only be sold to Singaporeans or PRs
Because of these restrictions, there is a tendency to view your HDB flat as simply a home – a place to stay.
However, with private properties – there are much lesser restrictions.
As an agent, I can confirm that the paperwork of a private transaction is much lesser when compared to a HDB transaction.
At the same time, exiting from a private property is much easier as there is a greater pool of buyers available – you can sell to anyone.
As such, it is possible to view your private property as both a Home AND an Investment.
With Private Properties – Your Pool of Buyers Are Much Larger
Singapore properties are made up of:
- 79.2% HDB and
- 20.8% are private properties including condominiums, apartments and landed properties
Out of the 20.8%, 15.6% are non-landed private properties. This means foreigners can only buy within the 15.6%.
Economists will tell you that limited supply indicates potential capital appreciation on price.
A private residential property has the following features:
- Not subjected to ethnic quotas
- Could be sold to a foreigner which means a larger pool of buyers
- No MOP but there is a Seller Stamp Duty applicable if sold within 3 years
- Cash-out refinancing is possible with certain bank loans
For me, as I do not have a life partner – I didn’t have a choice of buying a HDB flat.
As a single person, you can only a buy a HDB resale flat when you are 35 years old and above.
Since my only option is a private property, it is important for me to ensure that my million dollar investment… is going to be a profitable investment.
To me, money in the bank is not working to its best potential. I let my monies work hard for me by putting it in appreciable assets.
Furthermore, if I really would like to stay comfortably in a HDB eventually when I am older – after I turn 35 years old – I can easily sell my private properties and buy a resale HDB then.
At least this way, I would have made some money and stay in a HDB that I like.
Principle #3: See the End in Mind
This is not so much a principle but one of Stephen Covey’s 7 Habits of Highly Effective People.
For every single property investment, you will need to formulate your exit strategy.
Assuming our strong productive earning years are between the ages of 20-65 years old, then between 65-85 years old is the period when we have no income?
(The average life expectancy in Singapore is about 85 years old)
This is where we need to understand the importance of wealth accumulation and putting our monies to work as early as possible.
Our retirement years – between the ages of 65-85 years old – that is the phase of wealth distribution – or better known as retirement.
So what steps can we take – to work towards a brighter future for our retirement days?
- Have you thought what happens between 65-85 years old when you have retired?
- Do you have a passive source of income to fund your lifestyle needs and expenses?
- If you only thought of investing at the age of retirement, would you still be eligible for mortgage?
- Do you think it will be too late to think of buying another property when you are near retirement age?
Due to many possible scenarios that are very likely to occur, we need to plan early.
The golden retirement years of between 65-90 years old should be the phase of retirement when you enjoy and reap what you have sowed earlier; not the phase when we start planning!
Future Trends To Consider
One of the most highly-subscribed and highly sought-after BTO launch was at Bidadari.
The typical price of a 4-room BTO HDB flat in Bidadari was about $510,000. And this was about 2 years ago!
In my opinion, I think that it is possible that the Potong Pasir and Woodleigh regions might be matching the prices in Bishan.
There are 2 new condo launches in that area which are:
- Woodleigh Residences – selling at $2000 PSF
- Parc Colonial – selling at $1900 PSF
Both of these new launches are located just beside Woodleigh MRT.
It is interesting to take note that for 5-room BTO flats in Bidadari – it can go upwards to $600K.
This makes some Bidadari flats to cost almost equivalent to an Executive Condo – but not as conveniently located.
An Increasingly Common Dilemma
I noticed that increasingly there are more younger buyers contemplating between resale HDB in City fringe and ECs in the less central regions.
Let’s look at one case study that I found online.
Take note it was published back in 2016. Her dilemma is becoming more common.
If I was her agent, my first question to her will be finding out her motivations.
Is she going after:
- Capital appreciation
- Planning to stay there for a long time?
If her goal is to stay there and she has no plans to move out, she choose the property that she is most comfortable with.
This means – capital appreciation is not a priority for her.
If she plans to stay there for awhile, then there will be no need to extract out the capital appreciation.
Again, I like to emphasise that her dilemma is a subjective issue and can only be clarified by understanding the couple’s true motivations.
As an agent, it is never about what we want – but really more on about what our clients want.
For me, I merely present the context and the bigger picture to consider.
For future public housing trends, I have analyzed in the context of the BTO Bidadari launches.
At the same time, we shouldn’t ignore reports like those below by DBS – where they make this prediction that prices of private homes can hit $2900 PSF on average – by 2030.
Will it happen? I am not sure.
But one thing I am sure about is this – private property prices will continue to climb upwards.
There are a lot of people who say that the property market is a rich person’s game.
And I do agree to an extent.
But I also have met many young clients who questioned themselves:
“Will I still be able to afford it if I choose to buy later?”
That is the danger of procrastination and the impact of inflation.
How do YOU feel about the property market? What do you think property prices will be in 2030?
I am open to having conversations to figure out what we – the younger generation of Singaporeans want.
If you are keen to explore more with me over a cup of coffee – do drop me a message.