5 Reasons You Should Cash Out Your HDB

Do you have financial goals like paying off debt or saving for your next home? Are you ready for a change and want to live near the city centre? Do you want a bigger space with more bedrooms for your growing family? Or, are you looking for an investment property with higher rental yields?

If you are considering selling your HDB flat to achieve these goals, there are some things you might want to consider. The reasons for wanting to do so might be similar… Read on!

Parting shot with my favourite mosaic wall

Reason #1 – Stagnant Property Price

If you noticed that the resale prices at your housing estate has remained stagnant for years, it’s high time to consider selling it. This is especially true for HDB flats which are 10 years or older.

As more new flats are built and hitting their minimum occupancy period yearly, there’s no lack of choices for house hunters. Assuming all factors are similar (price quantum, location, amenities), would you buy a newly MOP flat or a 10-year-old flat? I think the choice is obvious.

The Government has a vision to make Singapore a country of house owners. In order to fulfil that vision, prices of resale HDBs must be kept affordable. Prices are kept at bay largely through COV (cash over valuation). This is the amount which you need to pay in cash if the purchase price is more than valuation.

Reason #2 – Lease Decay

Like many private residential properties, HDB flats are also sold on 99 years leasehold. This means at the end of the lease tenure, the land which the property is built will be returned the land owner.

Based on Bala’s Table which was originally adopted by Singapore’s land office during the colonial times, it suggests that land value depreciates as the lease becomes lesser. Additional factors like physical deterioration and outdated designs also add to lease decay woes.

In general circumstances, property prices will hit a plateau and go downhill as the lease decreases. Therefore it is worthwhile to examine the past transactions and be mindful on how lease decay affects your property value.

Reason #3 – Right Sizing

Having a new family member? Or are your children moving out to start their own family? In order to “right size” your living space, you can consider upgrading to a larger house or downsizing to a smaller apartment. Either way, you can potentially unlock cash from the property you’ve been financing all these years.

For example, a family of four is currently staying in 4 room HDB (~ 93 sqm). If they were to upgrade to a condo, they can opt for a 3 bedder condo which can be around 936 sqft (~87 sqm). Not too much of a space compromise in this scenario. In fact, this seems like an ideal move from the current accommodation.

As I see it, a family of 4 cannot benefit from luxury with the budget of a HDB 5 room flat. Unless they are willing to sacrifice and settle with less, even then the living space in a 3 bedder will feel too cramped and not ideal for their lifestyle. In this case, I would recommend them to stay put and not compromise on their lifestyle.

Reason #4 – Switch to Better Asset Class

As discussed in my earlier posts, there are various benefits on holding a private property. Firstly there’s better leverage on your loan quantum as compared to HDBs (TDSR versus MSR).

You can also choose to “cash out” without selling at some point after chalking up a substantial amount of principal paid. However do practice due diligence with your banker before deciding on any financial leveraging.

Reason #5 – Upgrading of Lifestyle

Are you looking for an exclusive lifestyle? Private and secure environment for your family. Exclusive access to dedicated facilities. Take a dip in the pool or host your family and friends at the clubhouse. Wouldn’t it be nice to pamper yourself after working so hard all your life?

If affordability isn’t an issue, I encourage you to explore swooping your HDB for private property. Scrutinize the reasons which can potentially improve the lifestyle of your family. At its core, it’s all about having more options and making what you have matter more.

Till Next Time

If you find yourself resonating with any of these reasons, do consider exploring further in your next property move. If you require more clarity on your next step, feel free to chat with me and I’ll be happy to contribute.

Your Friendly Property Consultant,

Wanni 😉

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