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Will Our HDB Flat Still Be An Asset in the Future?

Will Our HDB Flat Still Be An Asset In The Future
  • October 19, 2020
  • Property

As a HDB owner, it is absolutely vital that you recognize how the HDB market has been performing over the past few years and where it's headed in the future.

Most of us would have heard of how a HDB flat bought decades ago have seen its prices increased tremendously, netting the owners profits of a few hundred thousand dollars.

As such, many of us are under the impression that the value of our HDB flat will only continue to appreciate in the next few decades, thus allowing us to make a handsome profit from our property. 

But is that really true?

HDB an Appreciating Asset

In the above article, our Minister, Mr Khaw Boon Wan explains why that might no longer be possible for the current generation of HDB owners.

He said: "That's why you heard of, say your grandparents buying a flat, maybe in Woodlands for S$30,000, S$35,000, (that's) very cheap right? But right now, they can sell for at least S$250,000."

However, the current generation of Singaporeans would not be able to enjoy such a "huge increase" as economic growth rates are now trending between 2 and 3 percent, said Mr. Khaw, a Sembawang GRC MP and grassroots adviser. 

That is the critical difference between (your parents' and grandparents' generation) of living, growing up in a third world, transforming to the first world, and yours, born into already a first world, almost first world economy

While HDB Flats are appreciating assets, Mr Khaw said that they will depreciate in value towards the end of their 99-lease. 

"But at what point will it begin to depreciate and hit zero at year 99, we don't know because there are no market statistic for it," he added.


A few key takeaways:

1. The 10 times increase in price was possible in the past as Singapore was transforming from a third world country into a first world. Given that Singapore is already a first world country today, we need to understand that the prices have somewhat reached its peak and will not allow us to enjoy the huge price increase that past generations had.

2. While HDB flats are deemed as appreciating assets, they do depreciate as the remaining lease gets lesser and lesser.

3. As Singapore is still young (54 years old this year), we have yet to see the lease of a HDB flat being reduced to 0. Hence, there is no market statistics to show when the depreciation actually starts. But this does not mean that it will not happen. It is only a matter of time.

In fact, in today's market, we are already starting to see older HDB flats being harder to sell off in the market today.

In the article below, it talks about Mrs Dong, an owner of a spacious HDB flat in a prime location, who tried to put her flat up for sale but received extremely poor responses.

Old HDB Flats


You see, it's very hard to please each and every citizen.

If HDB prices were to increase, younger buyers would be complaining that prices are no longer affordable.

If prices don't increase, existing HDB owners would be complaining about how their HDB flats are not appreciating assets.

At the end of the day, we need to accept that the main mission of the Housing & Development Board (HDB) is to provide affordable homes.

The HDB was set up to ensure that each and every Singaporean would have a roof over their head. That is actually one of the reasons why we have the lowest number of homeless compared to the rest of the World.

Affordable Housing

But just how committed are they to ensure that HDB prices remain affordable? 

In 2013, there were concerns over growing Cash-Over-Valuations (COVs) level pushing resale prices beyond the reach of many Singaporeans. 

COVs Pushing Prices

Just a year later, the Government stepped in to control the HDB resale market by getting rid of COVs from the public housing market sales process for good.

Removing COV

Since the removal of the COVs, the HDB market has been on a downtrend.

HDB Price Trend

In order to overcome the CPF Accrued Interest, the HDB Resale Price Index needs to be positive (green instead of red) with at least a 2.5% growth each year.

However, this has not been so for the past couple of years.

HDB Resale Price Index

Let's take a look at how bad the HDB market have been hit.

3 Room HDB Flat Price Depreciation

4 Room HDB Flat Price Depreciation

5 Room HDB Flat Price Depreciation

Executive Maisonette HDB Flat Price Depreciation

Leverage On Your HDB


Is the downtrend going to continue? Or can we expect the HDB resale market to rebound? 

Why Your HDB is not going to make you any money

The most crucial reason why the HDB resale market is going to have difficulties picking up is non-other than the influx of BTO flats.

Between 2011 to 2014, more than 97,400 have been introduced.

Giving it 3 years to build the flats, and an additional 5 years to fulfil their Minimum Occupation Period, from 2019 onwards, we are going to see more and more BTO flats entering the HDB resale market!

When supply outweighs demand, prices WILL start to drop drastically.

Just in 2019 alone, the government has already made plans to introduce 14,500 units.

Total BTOs Launching in 2019

To add on, when you put your HDB up for sale in the resale market, you will be directly competing against BTO flats.

Put yourself in the shoes of your future buyers. Would you prefer going for BTO flats with improved layouts, subsidized pricing, and fresh 99 years lease, or would you prefer going for older resale HDB flats?

In fact, more than 80% of first-time homebuyers today are already choosing BTO flats over Resale flats.

In May 2019, the government revised the HDB housing loans and CPF usage as an attempt to move older HDB flats in the resale market off the shelf.

But do you know that these policies are indirectly turning the remaining 20% of first-time homebuyers towards BTO flats or newer resale flats?

New HDB rules

Younger Buyers Likely to be more prudent

Take some time to read the article below that's written by a young Singaporean who is sharing his opinions on why he will never go for a Resale HDB flat.

Why I Dont Want An Old Resale Flat


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What do you think? Will our HDB flats still be a profitable asset in the future?

Suggested Post: What Is The CPF Accrued Interest And How It Affects You...

Leverage On Your HDB

REACHED YOUR 5-YEAR MINIMUM OCCUPATION PERIOD FOR YOUR HDB FLAT BUT WONDER WHAT YOUR NEXT MOVE SHOULD BE?

It may be time to review your property and consider if it’s better to continue holding on to your HDB flat, move to a bigger unit, or upgrade to a private property…

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TERRENCE TANG
TERRENCE TANG

As a Property Restructuring Consultant with PropNex's Powerful Negotiators Group, Terrence assist Property Owners in the planning, strategizing, and the restructuring of their Property Portfolio.

Having been brought up in a family where both parents were involved in the Real Estate Industry, He developed a keen passion for the Real Estate Market from a very young age.

Terrence make it his life mission to educate property owners on how to safeguard their assets by equipping them with Real Estate Knowledge and Market Insights.

Instead of the usual Buying, Selling, and Renting, he serve a very niche group of clients - Ordinary Singaporeans who wants to ensure that they are making the right move in the property market.

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