Credit: Propnex Research
Younger Singaporeans have gone beyond our parent's belief of holding on to your HDB flat, and then downsizing it for retirement. Increasingly, the millennials are looking towards investment options like index funds, REITS, Crypto, and other options to provide for their retirement.
As their base are covered by other assets, they don't see the need to rely on their flat as a retirement asset. More of them may view their property as just a place to live comfortably, they care about the surrounding, the amenities. The Younger Singaporeans are quite aspirational and some see HDB flats as a "Stop-Gap Housing", they do not see themselves living in a flat for 15 - 30 years; unlikely their parents. Most see themselves moving out after the 5years MOP period and seeking to upgrade. Are you one of them?
While most love to upgrade, they do have their concern, and these pretty much sum up the major concern of upgrading:
But why is it that everyone is still upgrading to private homes? Well, because they know how to leverage on their property to help them grow
Let’s take a look at the HDB price movement chart (Figure 1), over a 10-year period from 2011 to 2021. In 2013, the government introduced a cooling measure that all HDB buyers’ loans will be based on their Mortgage Servicing Ratio (MSR). It has affected HDB prices causing the market to dip for several years and only rebound in 2019. Many question why was this cooling measure introduced? Well, it is to impede the escalating HDB resale prices that will cause the resale HDB market to be out of reach for many young couples; because the intent of public housing is to keep it affordable for Singapore residents.
Figure 1 - HDB Resales Price Index
Even though it took about 8 years for the HDB resale market to hit its previous peak, there were many opportunities that a HDB owner could have taken during that period. For those who has upgraded their property to an Executive Condominium or a private property, they would have made capital gains.
In late 2021, our government introduced another round of cooling measures to slow down the property market. The latest measures seems to have little impact on the HDB market; amidst the government's plan to build more HDB flats and the introduction of the new Prime Location Public Housing for HDBs. Will these eventually cause a slowdown in the HDB market? No one will know for sure, but how much further can the prices of HDB continue moving upwards? Figure 1 clearly shows HDB prices hitting a new peak.
Another example here in Figure 2, comparing the prices of a 5-bedroom flat for Punggol in 2012 & 2019/20 respectively we can see a difference of $200,000. What a painful loss for those who held onto their flats!
On hindsight, for those who exited and purchase a private property e.g. Riversound Residence Condominium in 2012, they would have made an average profit of $300,000
What I am illustrating here is the Right Time to Exit and Enter and a good financial plan. A lot of HDB owners have successfully upgraded their property and without the mortgage prepayment stress.
Let's have have coffee and eat cake while I share with you how you can take advantage of your HDB flat help you have profit.
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