Sep 1, 2018

Cory Diary : HDB Logics

Once I did a rough compounded computation of my parent HDB apartment if they were to sell it after interests payment. That's 5% compounded over 30 years excluding the saving from the occupancy. So to cut it short, HDB Singaporeans benefits significantly from it from financial standpoint. One of the best investment vehicle nation wide. Nevertheless is a social policy and there are restrictions. Regardless, the net benefit is much more else 80% would not have stayed in it. I have hear many opinions so far and Cory today is trying to decipher them.

1. What's the alternative ?
Most people have not much choice. HDB is affordable. Environment good. Personally HDB is an excellent choice and not out of no choice. I said that because this is from an angle that HDB is not an entitlement which Singaporeans think it has to be. In the real world, public housing is not given for most couples. In many countries they could only rent, buy expensive condo/apartments or cheaper old housing in the outskirts which are out of the way or of poor environment. In Taipei as I know, is the weak, disabled and real poor that has opportunity to rent public housing for a period only, and after that they are thrown back for another draw. You can't even own them.

2. Extended Lease ?
When we buy HDB, the contract clearly stated 99 years lease. Unlike Condo, HDB owner do not own the land underneath. So technically, we can't enblock and therefore works within the stricter guideline of HDB. The much more expensive Condo is on 99 years mainly as well. It would not make sense that Condo which is priced much higher are on same terms. The new HDB VERS scheme at 70 gives resident a choice to get out of it. But what is key is that people will start to put a more reasonable value on re-sale flat. It would have been better I feel if they could restrict aged HDB from young couple owning them. 

3. Legacy
HDB is a social housing program. That's mean we need to ensure continue supply of land and housing. If there is residue value after the owner pass on, good ! Else the property should return to the state for recycle. The last thing we want is for the rich children to hang on to it detrimental to the poor as the rich (sorry. I am not against rich. I hope to see more deserving ones) are in much better position to benefits from it. By having it recycled, we re-distribute the land with new housing as a baseline for everyone and that's mean our future generations to come. 99 year lease is a very long time. Most would have change for another apartment anyway. My parents switched to their 3rd HDB apartment in the past 40 years. New apartment every time as is cheaper.

4. Ownership
Should one own them ? Personally every young couple should. I would go for the biggest new apartment available if I could afford. But if we are still confuse whether is good for them, you have a choice. There is no regulatory requirement to own one. Sorry being sarcastic on this one but the alternative could be the worst financial decision to make not to buy one meant for masses. And the last thing to do is to influence our friends and relatives not to have one. Of-course those in ivory tower, you can afford to skip this section.

5. Can't Sell
Some mentioned higher HDB re-sale price will not help much as the replacement flat for similar conditions will be smaller in size. That's true but I can accept it for newer flat. I could have the options to downgrade to smaller apartment, rent out the apartment or room and help my expenses. Those who do well could also sell/rent it and stay in their Condo and that would be ideal for me. I know some will do it reverse and it works for them.

6. Future is not given
Some say we will not see similar gains from HDB in the future. I would say what's our alternatives and is it still attractive? And again I have a choice. Cannot predict the future but I have a stake to make it better. And hopefully logic minds prevail to keep the game going.


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