So, on the day I published my post on HDB flats, there was also this which I completely missed. TODAY, the free local newspaper published a really good article on HDB flats with some statistics and opinions solicited from some experts.


TODAY, 2 Jun 2018. Not a pretty headline.

From the headline, it’s pretty obvious that the newspaper is trying to help convince the general public that the official government stance of not helping existing owners cash out is not going to change soon.

What’s interesting to me is the anecdotal evidence that resale prices of older flats have dropped quite a fair bit.

Similarly, Mr Calvin Loh, 38, a hardware goods showroom manager, said he is also getting anxious about the value of his Commonwealth Close flat, which has 47 years of lease left.

He noted how a former neighbour sold his three-room unit for S$400,000 four years ago, but a similar unit in the same block changed hands for just S$280,000 a few months ago.

It’s also interesting that quite a few of those interviewed are owners that are relatively young. Two of the other owners of old HDB flats mentioned in the article was a 34-year-old guy and a couple in their 30s. The guy inherited the flat from his mother while the couple bought the flat.

I don’t really have anything much else to add except that I think the group that should be really worried would be those that bought an old flat with a mortgage that’s near the maximum allowable limit. In other words, those people that bought an expensive, old flat with a mortgage that’s around 25-30 years, and costs them practically all of their CPF contributions.

If you have an older flat that’s going to depreciate in value, there’s not going to be much equity you can extract from the flat even if you were to use HDB’s lease buyback scheme. Selling it on the resale market would be a problem because of the restrictions on the use of CPF or getting a bank loan.

If you’ve been servicing the mortgage using practically all of your CPF contributions, there’s not going to be much in there at the end of your working life. You can’t let compounding do its magic if there’s nothing to compound in the first place. Plus if you only finish paying off your mortgage at 55 or 60, how many years of working life do you have left?

These people are going to end up with a home that has little value and nothing much in their CPF or bank account.