From 10 March 2014, the Housing Development Board only accepts valuation requests from resale flat buyers or their property agents after granting the Option to Purchase by the sellers.
The Revised HDB Resale Procedure is believed to encourage buyers and sellers to focus their price discussions on the recent sales transactions, rather than the Cash Over Valuation (COV) that sellers expect buyers to pay on top of the flat’s value.
Since when have HDB flats become a goldmine?
Back in 1996, 2007 and 2010-2013, the media liked to pick up stories of HDB sales transactions that came with very high COVs, sometimes up to $100,000 to $150,000. There were also reports that mentioned extreme cases with the transaction prices of HDB flats crossing the one million dollar mark.
These might be exceptional incidents but were often considered by reporters as ‘newsworthy’ stories to cover in the paper. Nonetheless, the stories raise the hope of HDB owners to secure a high COV when it is their turn to sell their flat. Sometimes, the HDB flat becomes the dream a Singaporean to buy a first-hand flat from the government at a subsidized rate, resell it at a high price after staying there for years, and get a windfall of high COV from the buyer.
To an ordinary family, a few hundred thousands of profit and tens of thousands from COV is a considerable amount that can take years to save. Above all, to realize another dream of upgrading the family’s home to a condominium, the amount will come in handy for the downpayment.
The end of the Singapore dream to profit from HDB?
People who think that they can make some cash out of their HDB flat have probably forgotten one important thing: HDB is a government home ownership scheme to meet the housing need of Singaporeans. It is never meant to be sold as an asset for investment or for speculation. There is definitely no guarantee that owners can ‘make a profit’ when they sell it one day.
Over the last few decades, the housing market has benefited from the rapid growth of Singapore’s economy. Prices of private properties have increased by leaps and bounds. The costs of HDB flats have followed suit.
However, Singapore has long passed the stage of growing from a developing to a developed country. It is therefore unrealistic for anyone to expect the value of properties to jump tenfold like those flats bought by Singaporeans decades ago.
Looking at the selling prices of first-hand or resale HDB flats in recent years, it is doubtful anyone can make a windfall selling it after the minimum occupation period of five years.
In fact, the median COV for HDB flats is reaching zero in February this year – the lowest in the last eight years. Twelve HDB towns report zero or even negative median COV, especially in non-mature estates like Sengkang.
Above all, there is a perpetual supply of new flats from the government over the next few years. Just within these two years in 2014 and 2015, there are already a total of 55,000 new flats built by the Housing Development Board getting ready for occupation. And don’t forget that the government can jerk up the supply by adding new plans, building new flats, rebuilding old blocks any place any time.
In last year’s National Day speech, our Prime Minister has promised to keep the HDB flats ‘affordable’ for future flat buyers. Later that month, the government announced that there is now a 3-year waiting period for newly-converted Singapore PRs to buy HDB resale flats.
I just have one question on my mind: Do we have enough potential buyers for all the resale HDB flats in the market?
What about private properties?
Even if you are staying in private properties, it is also not that easy to profit from selling your home.
In a booming market, assuming that you manage to sell your home at a good price, you may still end up spending all the profit on your next home that is most likely bought at a high price in a seller’s market. Worse still, while waiting to buy your next home, prices are climbing so fast that the profit from your old home may prove to be insufficient to buy the next one.
If you don’t want to ‘sell high, buy high’, unless you are willing to downgrade, it is naïve to believe that you can profit from the value appreciation of your home.
Selling your home is different from selling an investment
Once you stay in a property, whether its value goes up or down has little to do with you now. Remember your total net worth is calculated by your assets minus your debts, but excluding your own residence. It is because you need a roof over your head under all circumstances.
If it is your home, it is inevitable that you will be emotional about it, especially if you have been staying there for many years. Because it is your residence and you need to find a new shelter after the sale. Because you are used to your home and whatever profit won’t make you part with it. Because few people can easily move out of their home without being sentimental.
Selling a home is never as straightforward as selling an investment. So always make it a point to separate your home from an investment.
Hi,
I am highly impressed with the blog. Have started to read what I think are very sensible articles.
Do contact me for sharing of thoughts. I have only one property (family residence) but looking ahead to the next market upturn perhaps in 2016. So, getting views about the market is important for my research.
Congrats and keep writing.
Best Regards
Eddie Leong
Dear Eddie, thank you very much for your words of encouragement.
I agree with you that we may need to wait for 2, 3 years or even longer before entering the property market again. And this allows sufficient time in between to do more research before making the right move.
I will drop you a separate message for exchange of thoughts.
The government is able to use cooling measures to regulate the housing market. If they over regulate or negatively influence the market(over supply for instance) and homes become less or impossible to liquidate because it is unprofitable to do so, it will impact the entire economy and lead to drastic economic and social consequences.
The political party may not return to power if that happens.
Thanks for sharing your thoughts.
The main purpose of introducing the cooling measures is to avoid the property market from being overheated. If the property market bubble pops, it will have a negative impact on the economy. This is what the government doesn’t want to see because it has a stake in both a sustainable property boom and a thriving economy.
Also, a government’s role in housing is to take care of the housing need of its citizens so that even the underprivileged have a roof over their head. However, it is never the government’s responsibility to ensure that property owners can sell their flats any time without making a loss. Afterall, any buying and selling of properties in the open market is subjected to market dynamics which will definitely involve unknown risk.
i’m still waiting to get my first home. The wait is insanely long. buying a home (not for investment) is also quite tough. Afraid of making mistake, afraid of being the last one holding the knife, etc etc, has prevented me to do the first dive. At first, it was all this determination to get a place, and after the long wait, I’m immune to all the hypes and set it not to a high priority. Wonder if this is a mistake?
ps: is your book ready?
I only know which location I want to live in, and getting ready the cash. That’s about it.. I’m sure it is too little preparation. I really need some help in this haha. I’m going to order your book! Thanks so much for writing!:-)
Nice to hear from you!
So, have you taken your time to study the market and do your own research? How prepared are you to dive in if something unexpected happens tomorrow and the property market clashes?
P.S. My publisher has taken longer than expected to release the book. But it should be on its way. We will start the pre-order soon. Watch this space!
I was Googling for info on “negotiating singapore condo launch price” and chanced upon ur factual, easy to read blogs. Just wish to share that I have bookmarked the URL and will be following your blog. Thank you for blogging.
So… being a small player, can I actually negotiate condo launch price through property agent at current slowing market or it’s take it or leave it whatever the developers offered?
Hi PS.
I had brought 4 properties for my own and 2 for my brothers/sisters.
I enjoyed your posts and your writing style.
Hope to read your books soon.
Hi Chia,
I’m a ppty agent (sometime manning the showflats too).
Definitely you could negotiate for launch price with developers.
Increasingly, developers are pushing out something called *starbuy which has slightly more discount than other units.
Good for you! Hope you like reading my new book too.
Hi Chia, welcome to my blog!
As a buyer of a new launch project, to the developer, you are only one out of hundreds of buyers in this project. Your bargaining power is not high, unless you are buying in bulk.
Although the list price of every unit has been marked up significantly, the sales rep may only be willing to give you a very negligible discount. Most likely he/she will just round up the figure for you.
The property agents are taking a percentage of the selling price as their commission, i.e. the higher the selling price the higher their commission. It is thus not in their best interest to give you a good discount.
Hi there. Nice blog. i am looking to buy an investment property. Read article on Draycott 8 bought at 7M in 2009 and sold at 5M yesterday at JLL auction. Market is real bad. Been looking at the market for a while now. Wait and wait and then suddenly TDSR which is a killer. Been to a no of sales launches and re-sale market open houses. Would like to keep in touch for great ideas on property hunting.
Best regards
Isabel
The issue is that, when the market is good, the media loves to cover stories about how ordinary people manage to make money in properties. But people who lose big tend to keep to themselves. In this market, buyers who have the patience to wait will find value-for-money buys.
Sign up for the Meet the Blogger Session on April 27 and we can talk further.
Hi Property Soul
Does it still make sense to hold on to 1HDB and 1Condo for future investment, considering there is no ABSD incurred.
If yes, which one may hold a higher rental yield?
Thanks
Whether your investment makes sense or not depends on the ROI of your property, what you buy and at what price.
HDB is not a goldmine and will never be. HDB will only be an asset during old age, retirement. LKY says never to sell your HDB. He could be wrong but he is seldom wrong, right? Keep your HDB for old age. If you sell now, make sure you got enough for old age. That’s why our government is so afraid that they have too much liability to take care of old ppl in 20 years time. They keep your CPF put up minimum limit. If you don’t die and no money, gov use your money (plus some of theirs but you must have money first) to take care of you. But if you have HDB, rental will give you some income and a roof over your head and a place to sleep. Sell and lease back? Gov will decide how much you can do with it. So with a HDB you will never go wrong.
I wish to invest on a two room condo being launched price 660k do u think I can make a profit if I intend to sell it in 4 years time my agent says yes but I have a doubt pl give me ur advice
No one can tell whether you can make a profit or not because no one can really tell what will happen in 4 years’ time, in fact, not even in 4 months. If you can pay the majority of the property price with your spare cash, you can go ahead. Then you don’t have to worry about interest rate hike, soft rental market, etc. And you won’t be holding a negative equity (when your outstanding loan is more than the value of your property) if prices drop more than 20 percent in the future.