Recently, I have been asked by many friends and clients whether Singaporeans should keep their older HDB flats have made it to the newspapers. However, one major question remains – how do you know whether you should keep your HDB resale flat?
For your ease, I have summed up 4 key points that you should consider before you make a decision!
1) Your balanced lease is affecting your future selling price.
Most common buyers often mention that they are unable to fully utilize the CPF for purchasing older resale HDB flats. This is simply because these flats do not tend to have resale values in the future and the buyers are unwilling to spend large sums of money for this purpose.
Subsequently, sellers can only sell their flats at extremely low prices if only the HDB flats get older and older as the pool of buyers lessen and it becomes very difficult to sell them off.
My advice to all the homeowners will be to sell the flat while it still has some value. Then proceed to purchase a new flat or perhaps upgrade to a condominium with a longer lease. This will allow you to “re re-value your current property”.
2) There is no such thing as a guaranteed selective en bloc redevelopment scheme.
The Singaporean government has made another announcement that is worth bringing to your attention. Simply put, the government has stated that, not every old HDB flat with leases less than 60 years will be considered an en bloc.
If you do some research online, you would find many articles that will tell you how to determine whether a flat is a “potential” en bloc. However, nobody can accurately point out or guarantee whether a certain block of flats will be selected for the en bloc scheme or not. It is ultimately a gamble, solely dependent on luck.
3) If you are still holding the older HDB flat, you will have to continue paying CPF accrued interest
An example of this point is actually from one of my most recent cases. Sadly, this is a point that is not understood or even known by the majority of homeowners.
Consider this, 25 years ago, Mr. X bought a resale HDB flat for $290,000. But now, the flat is worth $490,000. He has made a profit of $200,000. Unfortunately, Mr. X cannot access this cash.
Mr. X will have to pay the interest on his CPF using that very cash. But the interest rate is set at about 2.5% per year (compound interest) which is greater than most bank rates!
Hence, the longer you own the HDB resale flat, the less likely you are to be able to access that cash. In the end, if you do decide to sell the flat, the cash-at-hand may be drastically affected.
4) If you plan to purchase a 2nd property, it will affect the Additional Buyer Stamp Duty (ABSD)
I advise my clients to sell their old HDB resale flats and purchase a longer leased property. Alternatively, they could also upgrade to 2 private properties (having shared with them details about Property Wealth Planning) where spouses will each hold one property separately.
By holding the existing old HDB flat and purchasing another private property, a 20% ABSD will be imposed for the 2nd property.
I have assisted many of my clients throughout their selling processes, having helped them with the planning, upgrading, budgeting, maximizing the investment return and letting them know where to invest. I sincerely hope the points stated above aid you in making a wise decision.
If you have any queries, do not hesitate to drop a message! I will gladly share more on Property Wealth Planning with you!