Is your HDB flat an asset or liability?

 

Since time immemorial, HDB flats are already an asset.  It is more than a hearsay, it is the truth and timeworn that when you purchase an HDB flat you are buying an asset and not just merely acquiring a home. But nothing permanent in this world but change, Singaporeans came to realized and questioned the fundamental value of an HDB flat – how infallible they are as an investment or only more of liability? This article will tell all sides of it.

Absolutely, HDB flats were great assets in the past

Easy peasy, when a country’s economy booms it follows that property prices increase rapidly. Try to look around the giant, highly developed neighbouring countries, like South Korea, Hongkong, Japan and Singapore, you’ll discover that these giant neighbours have the most costly properties on earth.

Here’s the truth: Singapore had its glorious and booming and blooming days but a bit unrealistic to consider this to happen in same pacing mode as of that in the past. Come to think of it, we can’t just buy a property then expect it to yield a huge return after selling. This case might be true in the past, like 10 or 20 years ago, nothing is permanent but change, so things are not happening like before.

But HDB still a promise for the future, an asset?

Everyone hates vague and hanging answers but the truth, it ‘s a case by case basis, or simply it depends. For instance, we try to acknowledge the government’s effort on making properties accessible to all Singaporeans in a very affordable price, the real score here is that behind all these, they are just compensating for the catch 22 case via the introduction of the cooling measures to the developments and the public.

Accepted that this cooling facility helps the flats to be more affordable for the residents and that is very clear. But the moment you bought the unit and you turned to be a homeowner on other developments, what happens next?  You wanted to dispose your flat the moment the MOP or MiniOccupationaion Period is up, but expect prices to be damped over similar cooling measures, and worst, you might not be able to get a profit from it.

Being cautious of the accumulated interest when disposing of your flat

One attribute of CFD? Once earning is sufficient then you have the privilege to pay the entire amount over your CPF  without the hassle of pulling any cash from your savings. But some factors people pay less attention,  if you opted to this process, you need to bring back the net cash proceeds straight to your CPF account the moment you sell the unit or flat and this comprises the total amount you pull in order to pay all your loan, on top are the additional accumulated interest.

Let us simplify this using simple mathematical equation; shall we say, your partner was able to settle the whole amount of  $400,000 flat through the money from both your both accounts in CPF.

Your accumulated interest is about 2.5%  from the amount inside your account annually,  so, for instance, you sell the flat after 10 years of buying it, this yields to an interest of $112,033  that you need to pay back to CPF on top of the original amount you withdraw.  So overall it reached to as high as $512,033 and which you need to deposit in your accounts on CPF.

Some Singaporeans would not mind returning a huge extra like $112,033 over your account because you consider it your money and would be able to utilize in the future. There might be truth on it but the sad fact is that hadn’t you used the CPF funding to settle for the flat, the sum total amount money must have been earned is $112,033. But due to pulling off your money, you are compelled to allocate an extra like  $112,033  and that is huge!

Is your HDB flat liability or an asset?

All HDB units have a short span of life in terms of investment. For new flats allocated with 99 years lease is already an argument and for older flats are given only a lease of lower than 50 years.

Clear as a crystal, HDB properties aren’t always an asset.  Whether or not your HDB is an asset or liability, depends on so many factors like the way your flat sells, fast or slow, the market ambience the time when you dispose flat, and the stipulated interest you need to need to return. Thus it is not a smart idea to buy flat just because you have the capacity to or because other friends are doing it. It is not easy to earn a single penny, financials must be well taken care of and the long-term plan must be there before deciding on a flat.

But let us not forget that the significant major role of an HDB flat is to provide homes for Singaporeans with the chance to monetise as the second purpose.