Recently there have been some coverage about a rather unique property type built by HDB in the 1950-70s during Singapore’s nation building formative years. The YouTube video was talking about a landed property or terrace house built by HDB which is the largest land owner in Singapore and is known to build subsidized housing for 90% of the population. In the video, you can get a landed HDB property for 1.2M at 2,217 square feet.
Sounds like a good deal yeah, but like how unique the property is, it might not be for everyone due to several factors that I share below.
Factors to consider when getting these type of property
- Leasehold – the full lease is 99 years of which there should be roughly 40 years left. The low lease tenor might be an issue if you are a young couple the land size is great to raise a family but you have to take the risk that you might outlive the lease of the property which is not good.
- Price Depreciation – As we all know valuation for older flats will depreciate as they age especially for lease hold properties. It is said that older HDB flats then to depreciate 3% a year (NUS study 2019), so the 1.2M that you pay up now would most likely become zero if the lease runs up and there is no SERS.
- CPF Usage – There are limitations on CPF usage for properties with older properties with lease lesser than 20 years. This is based on an updated law in 2019, you can use the CPF calculator here to find out how much CPF can be used
- Loan Tenor – For older properties, the number of years one can take a loan on would be shorter due to the remainder of the lease. Typical loan tenor is around 30-35 years.
- Capital Usage – You might need to use more cash capital if you cannot use the full CPF amount which means you lock in cash liquidity in your primary residence.
- Limited Resale Market – Due to the MOP of HDB being 5 years, you would be there for a minimum of 5 years, which reduces the value even further. If you like to resale it in future, the market would definitely be way lesser than what you purchased if you can find a buyer
So if you are young and looking to get your 1st home, personally I wouldn’t recommend it. There would be other properties that can help achieve a good lifestyle while capital appreciation.
Who would typically explore these type of housing? Personal assumption, if I were a retiree with not much years left and would like to have a different kind of standard of living in Singapore or someone with alot of cash to spare like maybe making a killing within the stock market or crypto market and look at this as a depreciating asset like a car instead of an asset like we have been taught since young.
Watch the video here (Its a nicely renovated house)
Photo credits – PropertyGuru & existing listing – https://www.propertyguru.com.sg/listing/hdb-for-sale-48-jalan-bahagia-21819063
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