Why HDB Flats May Not Be the Foolproof Assets You Thought They Were


Over the better half of the past decade, Singaporean HDB flat owners have seen their real estate portfolio shoot up consistently as a result of the increasing resale and Cash-over-Valuation rates. Unfortunately, the volatile rollercoaster finally peaked and spiraled downwards rapidly since mid-2013. As a result, the resale value of properties has taken a nasty tumble too. 

These recent developments have put a short and swift end to the popular stereotype that real estate is a bulletproof investment that is destined to rise and never falter. HDB flats have been a government-backed lifeline for average working class Singaporeans who cannot afford the exorbitant living costs that accompany living in the world’s most expensive city.

Many of you may look to the government once again to tilt the scales of financial power in your hands; however, the bitter truth is that this plunge into HDB property value poverty has come about as a direct outcome of government intervention.

Yes, it’s your very own government that put a roadblock in the juggernaut 175% growth rate in HDB property prices over a period that lasted from 1992-2013. If you’re angry and perplexed trying to decode the “how’s” and “why’s” behind this debacle, here are the key policy changes by the government that led to this mess:

  1. Waves of Cooling Measures – Although the initial rounds of cooling measures rolled out by the Singaporean govt. barely made a dent on HDB resale prices, the subsequent reduction in Mortgage Servicing Ratio, loan periods and blocking PRs from buying for three years is what did the real damage.
  2. Extensive Expansion of the HDB Flats Scheme – Thanks to a huge demand for affordable housing, the Singaporean government announced a record 80,000 new HDB flats scheduled for completion over the next 3 years. Hence, the supply-demand curve automatically started its correction course in the aftermath of this announcement and existing HDB flats lost a significant chunk of their resale value.

Thanks to 8 rounds of cooling measures implemented by the government, the latter half of 2013 marked an inauspicious turn for HDB flat resale prices as they dropped by nearly 2%. This downturn is only expected to get worse as these prices are expected to drop by 10% over the next couple of years.

What Does This Mean For Existing HDB Flat Owners In The Long Run?

Although the government’s intentions for rolling out these cooling measures are noble in intent, their efforts in expanding affordable property estates has done some significant collateral damage to the financial portfolios of existing HDB flat owners.

A revelation has been forced upon a market that was completely unprepared to address it. A revelation that HDB flats can no longer be trusted as lifelong assets to adorn your portfolios, and are nothing more than public housing whose value is determined by the government instead of market activity.

HDB flats have lost their credibility as a money-churning asset and Singaporeans now have to come to terms with the fact that they don’t really own the HDB flat, but merely lease it. Hence, the ultimate value of your HDB flat will always end up being worth nothing at the end of your 99-year lease because it will automatically be allotted back to its real owner – the HDB.

As you can see the warning shots have already been fired by the government, now the onus is on Singaporeans to reassess the financial leverage their HDB flat can offer them and accordingly reshape their financial investment strategies.

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