Is HDB resale a good investment?

OrangeTee’s Dallas Hassan and Huttons Asia Real Estate Groups’ Lee Sze Teck answer frequently-asked questions on HDB.

Since its establishment in the 1960s, Singapore’s Housing & Development Board (HDB) has aimed to provide citizens with quality and affordable public housing via several housing schemes that allow residents to possess their own flats.

In recent years, buying and selling said flats has become a hot topic amongst Singaporeans. Singapore Business Review spoke with OrangeTee’s Senior Associate District Director, Dallas Hassan and Huttons Asia Real Estate Group’s Senior Director of Research, Lee Sze Teck to discuss HDB resale, CPF, and the buy-and-sell of flats in Singapore.

Can I use all my CPF to buy resale HDB?
According to Dallas, it is a mix of both yes and no. “For older flats, the younger borrower may not be able to use the whole CPF amount to buy resale HDB. There will be limitations on the CPF usage if it is an older flat,” he said. This is backed up by Lee as he notes that it would be dependent on whether the remaining lease could cover the youngest buyer up to the age of 95, capped at the housing loan for the flat.

Is resale HDB a good investment?
Dallas notes that resale HDB is very much a good investment because of the lack of supply, which can drive the price, making it a valuable investment. However, for Lee resale HDB flats should not be viewed as an investment as it should be purely for owner occupation.

What happens to HDB after 99 years?
Both Dallas and Lee answered that after 99 years, HDB will return to the government.

How much do you pay upfront for resale HDB?
As reported by Dallas, $5000 is the maximum deposit to pay upfront for resale HDB. 85% can be covered through a loan while 15% needs to be paid upfront. This has been confirmed by Lee as he mentions “You can borrow up to 85% of the purchase or valuation price whichever is lower if you take a loan from HDB.” If the amount is beyond the valuation, it has to be paid in cash.

How do you calculate the cost of a resale flat?
For the calculation of the resale flat, Lee did not give any information, rather he recommended consulting an HDB resale valuer. Dallas, on the other hand, said that the valuation is an integral part of calculating the cost of a resale flat. He also said that it will depend on the HDB assigned valuer.

How much CPF do I need for resale?
CPF monies can be used for various purposes as stated by Lee. It can be used for down payments and instalments, as well as for stamp duty, legal fees, and other related expenses connected to the purchase. However, Dallas noted that “Given he can take a loan of about 85% based on his income capacity, he needs to standby 15% of the valuation.”

Can I use CPF to buy a house after 55?
Dallas confirmed that a person can use their CPF to buy a house after 55. Lee added that a person can either reserve all of the Ordinary Account savings or part them at a younger age. After the age of 55, they can use it to buy a house.

Which is better, BTO or resale?
“The matter of which is better between BTO and resale depends on whether you need a home urgently or you can afford to wait,” Lee expressed. Dallas notes that if you need a home right away, resale is the better option. If you are okay waiting, then opt for BTO. Lee also added that there are grants for resale flat buyers which can make the price of the resale flat similar to BTO flat. That way, resale flats become more appealing.

How much cheaper is BTO vs resale?
BTO can be cheaper than resale. According to Dallas, if the location is the basis, BTO can be cheaper by 100,000 to 200,000. Lee, in support of this, mentioned that if there will be generous subsidies from the government, it could be cheaper by 15% to 35% of the resale.

How many times can I buy resale HDB?
According to Lee, there is no limit on buying resale HDB. However, it is important to take note that there is a waiting time of five years as of recent times, Dallas added.

Can resale flat be rented out?
The answer is yes. “Once the owners have fulfilled the 5-year minimum occupation period (MOP), the entire resale flat can be fully rented out,” as mentioned by Lee. There should be a physical occupation and ownership of 5 years as per Dallas.

Can I sell my HDB flat back to HDB?
Lee expresses encouragement on selling HDB flat back to the resale market. Dallas added reasons to sell it back to HDB. It could be for financial reasons, if the owner is no longer a Singapore Citizen, or when there are claims of supernatural activity. For the latter reason, HDB will take it at a lesser price.