I[ small change]
September S, 2010 thesundaytimes I
Bear in mind the high opportunity cost each time
Don't sell that HDB flat
lriMarCll, the time bar was raised to three years. Take, for example, the life cyete of an upwardly mo.
you move house due to the five-year lock-in rule.
So don't move house if you are currently an HDB
home owner and have plans to invest in a private
property in the near future.
As far as poSSible-I know this can be hard - avoid
flats that may be picked for the Government's Selec
tive En Bloc Redevelopment Scheme because the re
It's now five, effective from last Monday. This change bile couple.
placement flat that you get in exchange will lock you
With new rules, it has has no ~mp(lct on f1rst~t1mc huyt:rs who r('n~'lvl: a hUllS· A well-trodden path for them would be to buy a in on a fresh five-year term.
In8 suhshly ns Itll'Y have Iwell rt''1"lr''d nil along to or Also, you should not sell yow HDB flat if you cur
become something that c"py their flnt for (IV<' y,·ars.
subsidised new flat and then upgrade to a bigger re
sale flat, before moving on to owning a private home. rently own a private property as well, unless you in
lI"t It has n big Imparl on u['sm,k" and downgrad tend to say goodbye to public housing ownership for
sometimes money can't buy ers.
This three-step upgrading plan can be realised
through a combination of rising home equity, .jn good.
The extended minimum occUpation period will creased savings and improved earning power as their Once you sell your HDB flat, you are allowed to
take away much Of the speculative activity, effectively careers progress. buy another one only if you are prepared to give up
removing a layer of demand from the market. Prior to March, it could have been achieved in six private property ownership for five years - a pretty
Another source of demand - that from private years - by living five years in the first flat and putting drastic outcome.
property owners - has also been filtered out. up another year in the second flat. Under the circumstances, it's better to rent out
In the past, one In 10 resale flat buyers also owns Now, they will have to wait at least 10 years if they your HDB flat than to sell it, even if you were to re
private property. This is not an Insignificant number, take this path. Perhaps even longer, if the HDB mar ceive an enlidng offer.
given that such buyers tend to gravitate towards the ket grows slUggishly as ·a result of too many owner After all, rental return from an HOB flat is general.
Dennis Chan more affluent segment of the HDB market. They pre Ship restrictions. ly superior to what private residem;es can achieve.
Deputy Money Editor fer flats in popular estates like Bishan, Marine Parade, It gets more complicated if they want to buy an un ;Nhether for your own stay or rental income, one
Central and Queenstown, where prices and rentals completed property as they will not be able to exe- • should not give up owning an HDB flat as It keeps its
The anti-speculation measures to cool the property are among the highest on the island. cute a sell-and-buy deal back to back that will allow value better than a ieasehold private apartment or
market, particularly with regard to public housing, Without the support of cash,rich private property them to take an 80 per cent loan on their new home. condo.
have turned some conventional wisdom about buy owners, the days of a buyer paying an astronomIcal Buying a condo during its. launch, for instance, The bottom line is: Do not sell that l'rized HDB
ing a Housing Board flat on its head. sum over and above a flat's valuatiOn are over. will mean stumping up more cash upfront as banks flat. Thanks to the new rules, it has become some
A few months ago, I wrote a column encouraging The slackening demand should lead to a modera can lend up to only 70 per cent. thing that money can't buy, if you are a private prop
first-time buyers to be less choosy and to go ahead tion In resaJefiat prices. They could even fall If buyers Therefore, if you buy from the resale market, make erty owner and intend to remain one.
and get that new flat directly from the HDB; never are spooked badly. sure you choose yow flat wisely since it is a place that Either that or hope for a reversal of this rule in the
mind if it is located in far-flung estates like Sengkang However, it's not all a one-way street on the de you will have to be content with for the long haul. future.
and PunggoJ. mand side. If prlc~ were to fall to a: level affordable to. That means keeping the flat beyond the minimum oc
Now I'm not so sure. a first-time buyer, new demand may form as people. cupation period. dennlsOsph.com.sg
Changes in the rules on public housing last week who were previously put off by the high prices start to
mean that it is imperative for buyers to take extra care shop around again.
in selecting their flats, as there are longer-term impli This takes me back to my earlier point: Is It still
cations to their choice than was the case previously. worthwhile for a first-time buyer to buy a new.flat?
Before I go on, let's recap the key changes in order For the majority, the answer is "yes" as the incen
to understand how far-reaching the impact they may tives for first-time buyers remain attractive. Flat selec
have on HDB prices as well as on the psychology of tion priority given to first-time buyers, a generous
home buyers and home owners. loan quantum of up to 90 per cent, flat prices signlfi.
The new restrictions are: cantly below the market level, fresh 99-year leases,
• Private property owners who buy an HDB flat must and zero cash premium over valuation are some of
dispose of their private home within six months of the advantages of buying new flats.
bUying the flat. But for a small group of first-timers, it may be bet:
• If you are an HDB flat owner, you must have lived
ter to consider buying resale instead of new flats, If
in your flat for at least five years before you can buy a prices faU to affordable levels.
private property. The extension of the minimum occupation period
• You must live in yow HDB flat for five years before and the broadening of Its use to encompass private
you can sell it, regardless of whether you bought di property purchases mean that settling for a
rectly from the HDB or in the open market. The less-than.ldeal home could cramp future housing and
lock-in is known as the minimum occupation period. investment options.
• Buyers with outstanding loans must put down
30 per cent of home valuation, of which 10 per cent
must be in cash.
So what are the implications?
First off, the mobility of HDB hom,' owners has
been curtailed sharply.
Consider the situation al the start uf the year. If ST PHOTO: SAMUEl HE
yOll had bought a non-subsidised resale flat and did For the majority ot first-time buyers, the Incentives on otter still make It worthwhile to buy a new HOB flat. But tor
not take a loan from the HDB, you could sell it after upgraden, downgrade.. and private home aspirants, the new flve.year minimum OCcupftlon period Is a dampener.