Buy HDB, Executive Condominium Or Private?
What properties are worth buying? Public housing? Private housing? Or a semi-public housing? Generally speaking, public housing is cheaper than private housing and semi-public housing is in between. However, if you look at the specific properties, you can find a Tanjong Pagar HDB flat that costs more than a Chinatown private property, and the HDB flat is smaller than the private property.
I bought my first property during the GFC, I wanted to buy a private but bought a HDB flat after considering lifestyle reasons. I have since sold the HDB and bought private. With the benefit of hindsight, it would have been more financially rewarding if I had purchased private instead of a HDB flat.
If you are looking for monetary incentives, buying a HDB flat allows you to get various “grants”, “rebates” or “GST vouchers”, especially if you stay in a smaller unit. I remember getting quite a bit of those. But do note that resale grant is given into your CPF OA before it goes to the seller, so this grant attracts accrued interest over time. I watched it compound year on year and kept wondering why the grant was not given to the seller directly instead. It seems like a grant with some strings attached. The advantage of owning a HDB flat is that when prices fall, your HDB flat price will not fall as much as other properties. During the first 5 years of Minimum Occupation Period (MOP), you will not be able to cut loss or take profits. The loan tenure is generally fixed, cannot be extended and there is no equity loans. You are not able to rent out the whole unit during the MOP.
The common sales pitch is that you are buying a Lexus at Corolla price. However, as an interior designer, I have seen many ECs and many private properties. My opinion is that you get what you pay for. You are buying a property that looks cheaper and is cheaper than private property. There is also a 5 year MOP, just like a HDB flat, with all the MOP strings attached, no selling and no rental of whole unit. After 10 years, it is eligible to be sold to foreigners. With all the strings attached, is it worth it to buy an EC? Personally, I think the opportunity cost is too high.
Price volatility is the highest amongst the 3 types so it can be very good or very bad. Just try not to buy at all time high and you should be alright. I have known cases where people buy just before the en bloc announcement and they don’t even move in to stay. They just leave it vacant and collect the proceeds. There are also people who spend $100,000 to $200,000 on renovations only to be informed of the en bloc happening soon. So en bloc can be good or bad depending on your situation. Of the 3 property types, this is the only one which you can buy with ongoing tenancy and can be rented out immediately.
The property market is considered to be cyclical with bull and bear periods so the choice of buying should be considered together with the market cycle. It would be best to buy a private at the low bear and sell the private at the high bull, for maximum profits. This is similar to owning equities. The equivalent of bonds will be the HDB flat, with lesser volatility.
Most savvy stock investors do not recommend timing the stock market. Neither do I suggest timing the property market. Just buy the right property at the right price when you are ready.