Rent vs Buy HDB flat

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revhappy
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Rent vs Buy HDB flat

Post by revhappy » Thu, 25 Mar 2010 8:29 am

Hi All,

I am planning to stay here for may be the next 10 years. I was wondering whether it would be better for me to buy an HDB apartment. (If and When I get PR, that is)

I had a look at HDB's website to understand what the additional costs would apart from the sale value of the flat. As far as I can see the only costs are:
1)Agent Fee
2)Legal Fees
3)Stamp Duty(3% ?)
4)Property tax(to be paid annually)

The total cost for all the above items shouldnt exceed 5% of the flat value. Correct?

So I was wondering which one would make more sense financially,
a)Renting a flat for 1500/- PM
b)Buying a flat for 300K. I am considering of making a downpayment of about 100k and taking a 20 year loan for the remaining amount.

One thing is that I wont be able to sell it or lease it for 3 years.
Also, if I buy a flat that is say 30 years old with 99 years lease period. After 10 years will it be worth atleast what I pay today?

Thanks in advance,
Revhappy

Singapore Property Search

 

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sundaymorningstaple
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Post by sundaymorningstaple » Thu, 25 Mar 2010 9:17 am

If you buy a flat that is already 30 years old, and you want to sell it in, say, 10 years, unless there is a property boom at that time, the odds of getting out of it, what you put into it may be slim. A lot of things come into play here though when looking at HDB flats.

It is obviously in a mature estate if it's 30 years old. This usually means good amenities in the vicinity with good transportation links as well. PLUS!

If it's already 30 years old, then the estate most likely has already had lift upgrading and possible estate upgrading as well. This one is a double edged sword. So PLUS and MINUS

Currently HDB prices are still on the high side - good for owners like me. :) MINUS

Of course there is the 3 year rule before you can use it as investment property - PLUS or MINUS depending on how you look at it.

The double edged sword one........

If the estate is already 30 years old AND has had already had lift upgrading AND estate upgrading then I doubt very seriously that you will get what you paid for the unit as it will only have less than 60 years left on the lease. You will be hard pressed to sell a flat that old on the open market for a profit or even. However, if you buy BEFORE the LUP or MUP programmes then your odds of making a few bob are good. However, be advised, as PR's you will have to pay a much higher "Cost" for the lift upgrading than citizens do (probably in the neighbourhood of 6K). If there is a future MRT station slated to be built in the near future then that will also help boost the resale value of the property.

Basically, that is what I did though. I bought a resale flat for 333K (spot on valuation - no COV) when the market crashed after the '97-98 Asian financial meltdown. I bought right as the market bottomed out in Jan '09 and put probably around 20% down in cash plus the various subsidies that were available to me at that time and mortgaged the rest through HDB on a 14 year mortgage that was only a couple of hundred less per month than my current rental payments at that time. This did not help cash flow but I figured, based on when I bought, that I would get "at least" what I had into it (including interest paid) when I sold and could even make a dollar or two if I was lucky. Basically, it allows me to save an additional amount equal to my former rental or basically my housing costs are nil here. (3 more years & it's mine!) ;) Of course saying it's mine is a misnomer anyway as you are only leasing it!
SOME PEOPLE TRY TO TURN BACK THEIR ODOMETERS. NOT ME. I WANT PEOPLE TO KNOW WHY I LOOK THIS WAY. I'VE TRAVELED A LONG WAY, AND SOME OF THE ROADS WEREN'T PAVED. ~ Will Rogers

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Post by therat » Thu, 25 Mar 2010 10:07 am

For PR, they are not paying much more higher. They are paying FULL.

Eg. Lift upgrading, door to door unit.
Citizen pay est 2k plus
PR est 20k plus

But if the unit is lift level then you don't need to pay the lift upgrading cost.


If the flat is 30 yrs old, 10 yrs later. Will be 40 yrs old.
The chance of getting SERS increase too.

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Post by revhappy » Thu, 25 Mar 2010 11:08 am

Thanks a lot, SMS. And Congrats!!! Your's is a plan that has worked well.
I will probably scout for newer properties may be about 10 years old but not sure if I will be able to get it for 300K and how far out they are going to be.

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Re: Rent vs Buy HDB flat

Post by Saint » Thu, 25 Mar 2010 1:46 pm

revhappy wrote:Hi All,

I am planning to stay here for may be the next 10 years. I was wondering whether it would be better for me to buy an HDB apartment. (If and When I get PR, that is)
That's kind of contradicting isn't it............ oh I see :roll:

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Post by sundaymorningstaple » Thu, 25 Mar 2010 1:55 pm

Here I was, trying to be a nice guy this morning by not bringing that up. :lol:
SOME PEOPLE TRY TO TURN BACK THEIR ODOMETERS. NOT ME. I WANT PEOPLE TO KNOW WHY I LOOK THIS WAY. I'VE TRAVELED A LONG WAY, AND SOME OF THE ROADS WEREN'T PAVED. ~ Will Rogers

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Re: property advice.

Post by nakatago » Thu, 25 Mar 2010 11:52 pm

I know of someone...The agent helps her to make a profit.
My friend tells me this is suspicious. Spider-sense tingling.
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Post by revhappy » Sat, 10 Apr 2010 2:19 pm

I did some more research and calculations and have come to the conclusion that if the tenure of stay is 3 years or more it is better to buy than to rent!

Consider a 3 room HDB appartment in Tampines that was constructed 25 years ago. It costs about 250K $ and rents are 1500$

The rental yield in Singapore is 5% whereas mortgage rate is only 1.4% for the first 2 years and then max it goes to 3-4%. The additional costs while buying is about 3.5% and 3% while selling.

So even if the appartment value doesnt appreciate you break even after about 3 years.

So it seems to be a no brainer that buying is always better here if you have visibility of beyond 3 years and are able to cough up the 20% downpayment+COV

Does anybody disagree with the above? The cases when buying can be a wrong decision are:
1) Rental yield falls below the mortage rate. Has that ever happened in Singapore?

2) The inflow of foreigners reduces drastically hence bringing rentals down.

3) Appartment value depreciates more than 10% over a period of 10 years.

Welcome your suggestions!

God I cant wait untill I get my PR :D

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Post by sundaymorningstaple » Sat, 10 Apr 2010 8:22 pm

revhappy wrote:I did some more research and calculations and have come to the conclusion that if the tenure of stay is 3 years or more it is better to buy than to rent!

Consider a 3 room HDB appartment in Tampines that was constructed 25 years ago. It costs about 250K $ and rents are 1500$ At the moment.

The rental yield in Singapore is 5% whereas mortgage rate is only 1.4% for the first 2 years and then max it goes to 3-4%. The additional costs while buying is about 3.5% and 3% while selling. Bet you the 3-4% is not ironclad guaranteed.

So even if the appartment value doesnt appreciate you break even after about 3 years.

So it seems to be a no brainer that buying is always better here if you have visibility of beyond 3 years and are able to cough up the 20% downpayment+COV

Does anybody disagree with the above? The cases when buying can be a wrong decision are:
1) Rental yield falls below the mortage rate. Has that ever happened in Singapore? Yes, quite often over the last 4 recessions. Of course that is also depending on the length of the mortgage you are taking up.

2) The inflow of foreigners reduces drastically hence bringing rentals down. That is already happening.

3) Appartment value depreciates more than 10% over a period of 10 years.

Welcome your suggestions!

God I cant wait untill I get my PR :D
Better more like you CAN get your PR. Not until - there's no guarantees any longer. :wink:
SOME PEOPLE TRY TO TURN BACK THEIR ODOMETERS. NOT ME. I WANT PEOPLE TO KNOW WHY I LOOK THIS WAY. I'VE TRAVELED A LONG WAY, AND SOME OF THE ROADS WEREN'T PAVED. ~ Will Rogers

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Post by revhappy » Mon, 12 Apr 2010 9:34 pm

Thanks SMS,

I had a look at historical SIBOR rate.

http://www.salary.sg/2009/historical-sibor-see-graph/

During previous property booms it had spiked up to 8-9%! albeit for very brief periods. Mostly it has hovered around 3-4% mark. During the 2006-07 peak it has surprizingly not crossed 3.5%.

So I think the current rate of 0.6%(is it?) seems to be artificial and not sustainable. I think in the long run 3-4% seems to more normal and if the market heats up really bad it might go beyond it.

So the difference b/w rental yield and mortage rate may not be much in the long run! So I am slightly less bullish now regarding the property buy.

Regarding PR yeah I fully agree, its going to be really tough getting it.I will apply for it none the less after completing one year. If I dont get it, I wont have to make the tough decision (Or rather cannot :) )

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To decide whether to buy or rent an apartment in Singapore

Post by akkudoo » Thu, 10 Feb 2011 3:08 pm

Hi,

You may use the below calculator to decide whether its worth to continue renting here or worth to buy a house. I found it useful.

http://singapore-property-calculator.exofire.net

Cheers!

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