Is it a good time to buy HDB resale flat?

Should you wait for resale prices to drop before you buy HDB resale flat?

HDB resale prices rose for the 13th straight month, climbing 0.5 per cent in July compared with June, raising questions if it is a good time to buy HDB resale flat.

Mr Paul Ho, chief officer at iCompareLoan, said: “There is some price resistance from buyers which us why the pace of price gains have slowed for two consecutive months.”

“But with several BTO flats being delayed due to various reasons, for those who need a house immediately, it may be a good time to buy HDB resale flat,” he added.

These are some of the things you need to consider before you buy HDB resale flat.

1. Most HDB resale flats no longer have any Cash Over Valuation

According to the Ministry of National Development, a third of buyers of HDB resale flats paid cash over valuation (COV) this year, up from one in five last year.

COV refers to the price of an HDB flat above its assessed value. This amount must be paid in cash, and cannot be covered by the home loan. If the last time you purchased a HDB resale flat (or looked at its price) was before March 2014, you might be interested to know the rules have changed. Buyers are now required to negotiate the total price of the flat, before the actual valuation. This means that COV is no longer an expected norm, which accounts for the significant increase in affordability (in previous years, such as in 2011, where COVs hit sky high figures that often exceeded $35,000).

It is this change in March 2014 that really drove down the COV, and made HDB resale flats more affordable.

2. The government enhanced several grants for HDB resale flats and it has made HDB resale flats very attractive

The Government enhanced the Proximity Housing Grant (PHG) to allow more Singaporeans to live closer to (or live with) our parents “for mutual care and support”. The biggest change comes for those married couples who want to live with your parents. Instead of the previous PHG of $20,000, you will receive $30,000 if you buy a resale HDB flat to live with your parents. If you are single and wish to buy a HDB resale flat to live with your parents, you will also receive another $5,000 in PHG.

What about those who want to live near your parents? Under PHG, you will continue to receive $20,000 and $10,000 respectively for couples and singles. However, the qualifying definition of proximity has been redefined. Instead of 2km or within the same town/estate, the proximity definition has been simplified to just 4km from your parents’ public flat or private property.

Grants have also been increased in recent for first-time buyers of HDB resale flats. The grant for four-room or smaller resale flats is now $50,000, and the grant for five-room or larger resale flats is now $40,000. Previously, the grant for resale flats was just $30,000.

In addition with the other CPF housing grants, the total potential subsidy for a HDB resale flat is now $110,000. If your main aim is to live in a mature area, and you want a condo, you might want to consider HDB resale instead:

The increased grants and low price points make resale flats – particularly those in mature districts – highly desirable right now; the rising sales volumes were predictable in that sense.

3. It’s not just good news for buyers; many sellers are standing on huge gains, even with the falling prices

ERA said in 2015 that HDB resale flat prices rose a staggering 104 per cent between 2005 and 2015. Comparatively, this time around, HDB resale prices have only risen slightly since the peak in 2013. As such, now might be an ideal time for many of them to upgrade or buy HDB resale flat. And when it is time to sell your resale flat, you will find it easier to do so given the strong interest and subsidies for resale flats.

But be mindful that a HDB flat is not for everyone as the regulation keeps changing.

The question you have to ask yourself is, “Are you buying to invest or to stay in?”

If you are buying to invest, then you need to study the cash flow, rental, vacancy rate, Masterplan, future development and so on. And of course, you also want it to be in an area that appreciates over time.

If you are buying to stay, then you should instead not ask us if this is the right time to buy a property.

The answer is, “Anytime is a good time to buy, it depends on what price.” and also answer the questions below truthfully, you will know if now is the best time to buy or not.

Questions you should ask yourself if you are buying a property in Singapore to stay in: –

• Can I afford the property?
• Can I raise the down-payment amount?
• Is my CPF sufficient to cushion the monthly installment?
• Am I renting or staying with parents?
• Am I moving house to stay near my work place?
• Am I moving house to stay near my parents?
• Am I moving house to stay near my child’s school?
• Is this a convenient place for the whole family?
• Can I wait to buy a property?
• Is my job and income stable? Should I buy a smaller one instead of a bigger one?
• Will my wife/girl friend husband/boy friend leave me if we do not have a place?
• Do we need a place to start a family?
• Are the kids outgrowing their space?
• How much is it costing me to rent a place now?
• How much rental can I save if I buy my own place?
• Am I staying with the parents or in-laws? If yes, is it bearable? (If staying with your parents or your in-laws is painful, how much rental are you willing to “pay” to move out?
• When do I need to move in order to qualify for 1km for the schools admission?

Stop being greedy and do stop asking, “Is this the right time to buy?” or “When would be the lowest price?” or “Will this area appreciate in value?”.

Answer the above questions truthfully and you will have an answer.

If you are satisfied with your own answer, all you need to do is to buy a place that you like at a valuation that is reasonable. Just check with a mortgage broker who can help you assess the property valuation with a bank.

But if you’re not using an HDB loan, don’t forget to factor in rising interest rates

Gone are the days of cheap interest rates, which partly fueled the property market in 2008/9. Most SIBOR based interest rates are now around two per cent per annum and climbing, as American normalises and imposes rate hikes (these eventually cause interest rate to rise in Singapore as well).

Fortunately, there are a range of other options – such as Fixed Deposit Home Rates (FHR), which are detached from SIBOR, SORA or SOR rates. Speak to a good mortgage broker, and they will help you keep your home affordable in the long run. For those who are yet unfamiliar, read more about what is a Mortgage Broker.