Should I BUY Condo or HDB – Emphasis on HDB investment

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hdb will not make you money

It can be a case where you had opted for a BTO through the ballot and after years of cumbersome wait, you finally move into your new home. Maybe you are newlyweds, it is obvious that attachment develops with your first home. There comes a time after 4 years of your HDB’s minimum occupation, you might think of upgrading your living standards in the form of moving to a better housing. Generally, people think of renting out their homes for the sake of keeping the property to which they’re attached. But what comes as a fact is that, people often think of selling the property in the light of making profits.

Government is taking every possible measure to ensure the viability of the HBD flats, the government is also doing work to make sure that there is no surge or fall in the average prices of the same. But do you think your HBD flat will enable you to generate the money you desire? Are you willing to sell your property and move on or are you willing to give it on rent to a third person?
In this article, we will talk about whether your property has any viable investment value or not, we will also talk about if your property is proficient enough to help you with money making endeavours?

Read as well: CPF Housing Grant for Resale HDB to be increase for First Time Buyer

Considering the current resale structure of the HDB market is of great importance when it comes to evaluating your HDB selling plans. The government has taken in various measures that depreciated the demand of reselling HDB flats.
1. Mortgage servicing ratio (MSR): In the year 2013, the govt. launched the MSR i.e. Mortgage servicing ratio that put a limit on their mortgage endeavours, only 30% of the gross monthly salary was allowed for the endeavours related to mortgage. An average Singaporean employee earns $4056 monthly, this would point to the sad fact that if you are a couple and you work regularly and that too full time, then you can afford a property till the maximum limit of $485,000. You will face cumbersome challenges if you keep the selling price above the limit.

2. A wait of 3 years for PR: When it comes to permanent residents willing to buying the flats available for resale, well you can’t just simply buy. If you’re having a PR status then you’re required to wait for a minimum of 3 years to be eligible for buying a flat. This was done to make sure that the PR’s aren’t gripping the HDB resale segment of the country. This was also aimed to boost the affordability for the people of Singapore. This made PR’s to go for private properties or opt for renting instead of waiting for long 3 years. In a sad fashion, people with permanent resident status consider the rule as bizarre. As once you’re a Singaporean citizen what’s the point of barring the individual from purchasing an HBD flat?

3. Elimination of Cash over Valuation: Till 2014, the asking price was evaluated on the basis of Cash over Valuation (COV) index. Sellers used to set a higher COV based on the fact what their neighbours are selling, this resulted in a boom in the HDB market. The fair evaluated price was jeopardized to greater heights. In the year 2011, the average COV rested at $36k, after the elimination of the same, there was a booming fall in the COV rates and it was even $0 in some cases.

4. HDB not available for Private property owners: When it comes to generating higher income from your HDB, you often consider going to private property owners as they have a higher disposing income available. Well, in Singapore, private properties owners can’t buy HDB flats at all. If you’re a private owner and you dispose your property within 6 months of buying an HDB flat then it’s okay.

5. Extra Duty of Buyer’s stamp: 2013 came as a sad year for those buyers who were looking forward to buying a second-hand property amidst the Singapore. The government had announced that ABSD i.e. an additional buyer’s stamp duty will be applicable on every second-hand property purchase made by any individual. In other words, in addition to the basic 3% buyer’s stamp duty, an average user will be required to pay an extra 7 percent of the property price on the second purchase. ABSD on first property for a Singaporean citizen rests at nil, while for a permanent resident rest at 5% and for foreigners, ABSD is 15% respectively.

6. SERS- not every flat is eligible: Property can obviously be a preferred asset for the people of Singapore, people might generally think to enjoy a comfortable living after the retirement. Well, the above point indicates an array of cumbersome endeavours that are associated with HDB flats. When the 99-year lease of an HDB flat runs out, the flat is required to be returned back to the government. It is obvious that the prices of the flats might fall when the end of the lease comes near. This, in turn, brings inflation in the HDB price model, generally, this pulls them down.

When it comes to a long-term financial commitment, buying a property can surely fulfil your endeavours. Considering and doing calculations can be of great worth when it comes to determining a viable home buying as well as selling experience. Considering the case that either of the spouses is a Singaporean, the budget will simultaneously reflect the type of residential property you may afford. If both husbands, as well as a wife, are hailing form permanent residential status, then you’ll be required to wait 3 long years for the generation of your PR status. There can be a case if both of the spouse’s combined income is less than $10,000 then the party is also eligible for an HDB flat loan. What comes as a great fact is that the government of Singapore has kept the interest rates for HDB flats at 2.6% annually.

ps: We shall be writing an article about PROS & CONS of owning a Private Condo in Singapore in our next series on Property investment.

Read also: CPF Lease Buyback Scheme Singaporeans must know