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Should HDB owners upgrade to private property now?



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Have prices of private properties bottomed out and is it the right time to buy private property now? If so, should you buy freehold or leasehold properties? To answer these questions, it depends on whether you are an upgrader or investor. Recently, I received the following email from a follower and decided to share some of my thoughts.

Hi Gerald,

I am a big fan of your blog. It’s very informative and insightful.

Currently we are staying in fully paid 4room HDB flat. My husband and I have been searching for property to upgrade this year. We are looking for freehold condominium or landed property with SGD2 million budget. Do you think it’s possible? Any good projects to recommend? Appreciate and thankful in advance.

Previously, I have written an article on my thoughts on freehold and leasehold properties in Singapore. Readers should check it out and have the right mindset when buying freehold properties, taking into consideration the rules and government policies for land use in Singapore. Do not assume that you really own the land and house just because it comes with a freehold tag. In a land-scarce nation like Singapore, you never really own a house. The government has various legal provisions to acquire your property for development purposes – regardless its freehold or leasehold.

Landed or non-landed?

The next question is whether SGD2 million is sufficient to purchase a freehold condominium or landed property. In my humble opinion, the budget is definitely impressive. However, if you are looking at new freehold landed property, SGD2 million may not be enough. A comfortable figure should be SGD4 million. But even with SGD4 million, you can probably only afford those projects that fall outside of the central region.

private property

However, with a budget of SGD2.5 million, buyers can look at 99-year old condominium that comes with 1000 sq ft located in the central region. If you don’t mind staying outside the central region, then SGD2 million should be sufficient to land you a 1100 sq ft condominium with 99-year tenure.

Will prices continue to fall in view of the challenging economic condition? Should buyers continue to adopt a wait-and-see approach? Recent data released by URA indicates that property prices may have bottomed out and there could be interesting buying opportunities before the property frenzy returns.

Turning point

Since 2009, the government had implemented a slew of cooling measures targeted at the whole property ecosystem and affected virtually all the stakeholders – buyers, sellers, investors, speculators, developers and even lenders. The cooling measures are aimed at stabilizing the property prices and in a way, they had achieved their policy intentions.

Property Price Index peaked in 2013 and subsequently had a soft landing till 2Q2017. Things started to pick up lately as prices of private residential properties increased by 0.7% in 3rd Quarter 2017, compared with the 0.1% decline in the previous quarter.

As we can see from the graph below, the upturn could be a turning point for the private property market. Although it is too premature to declare that the latest result points to the start of a property bull run, we are unlikely to witness further decline in private property prices.

private property

Predominately, a good measure of the supply and demand can be derived from the take-up rate of new launches. The URA graph above shows that the take-up rate exceeded the launches in 2017. This indicates that the supply is unable to meet demand, thus causing the price index to increase. In fact, the number of launched units unsold was 2223, a decrease of 33% from previous quarter while the number of completed units unsold was 1390, a decrease of 24.6 from previous quarter. The data suggested supply is drying up and with pent-up demand, the price trend will likely to head north.

 private property


private property

New Business hubs

Whether you are buying for investment or upgrade, it is important that the property would appreciate in value over time. In the past, most home buyers would focus on new homes near MRT stations or in mature estates. However, with so many MRT stations being built and the government’s push for decentralization of the central business district, the game has changed.

Buying a private property in the new business hubs offers potential upside in value because of the opportunities for developments in the vicinity. Under the Master Plan, there are four exciting new business hubs – Changi, Jurong Lake District, Paya Lebar and Punggol.

Punggol Commercial Cluster:  I will be biased and first touch on why buyers should go for private property in the Punggol area. This is because I have recently bought a unit in The Terrace at Punggol Waterway. Beside the exemption from resale levy, what attracted me to buy this Executive Condominium was the potential developments. In terms of surrounding amenities, SAFRA Punggol is just a 10-minutes distance from The Terrace EC and the club features a suite of leisure choices, including the first indoor water playground in Singapore, bowling centre, KTV outlet, spa and wellness centre.

A new Regional Sports Centre will be integrated with the Punggol’s waterways and co-located with the SAFRA clubhouse to cater to a wider range of competitive sports and events. Expected to be completed in 2019, the Regional Sports Centre will make this area a very vibrant and lively area. My family had taken a walk along at the Punggol’s waterway and I must say it is indeed a very scenic and beautiful place to build our home. When Deputy Prime Minister Teo Chee Hean announced his vision for Punggol, we had no idea it will be of such mind-blowing project.

Perhaps the best-selling point of The Terrace EC is that it is located very near to the Oasis Terrace, a next generation neighbourhood centre that features childcare centres, the upcoming Punggol Polyclinic, a community plaza as well as retail and dining facilities, all under one roof. Of course, further down the road is the Waterway Point Mall, the main shopping mall of Punggol area.

The unique aspect of Punggol Waterway is that two major developments have been designated – The Creative Cluster and The Learning Cluster. The former will include innovative new industries and the latter will boost tertiary institute. Investors buying a home in Punggol Waterway can look forward to rental opportunities from students and expatriates working in these clusters.

Changi Business Park: With the upcoming mega Changi Airport Terminal 5 and the bustling Changi Business Park, this area looks destined to be one of the most exciting commercial clusters in Singapore. Furthermore, with Singapore University of Technology and Design (SUTD) and Singapore Expo, the east will continue to be bustling with much commercial activities.

Two projects stood out in this area, namely Grandeur Park Residences and Bedok Residences. Grandeur Park is located near top schools like Anglican High School and Temasek Junior College. Tanah Merah is just a stone throw away and Bedok food centre is 5 minute drive.

But if given a choice, I prefer Bedok Residences because it is the first integrated development in the east. The project is built above two levels of shopping space and the Bedok Bus Interchange. The famous Bedok food centre and town centre is just beside the residence. Furthermore, Bedok MRT station is just across the road. In terms of amenities, Bedok Residences is an exciting hub for shopping and dining.

Paya Lebar: As part of government’s Master Plan to decentralize the city central district, Paya Lebar has been earmarked for massive makeover since 2008. The new SingPost Centre, dubbed as one-stop lifestyle destination, has been launched on 9 October 2017 after two years of development. Paya Lebar Square and OneKM are the other major shopping malls in the area. And then there is the Paya Lebar Central, a mixed-use development, under construction.

The nearby Singapore Sports Hub offers space for outdoor activities and bring extra vibrancy to Paya Lebar. Paya Lebar MRT station is a major interchange of both the East-West line and the Circle Line. Thus, buying a project in this area would be a strategic choice. Urban Oasis, located very near Aljunied MRT station, could be an interesting choice because the condominium is also located near the Paya Lebar sub-regional centre.

Jurong Lake District: With more than a million residents living in the western region of Singapore, the Jurong Lake District (JLD) is poised to be the largest regional centre outside of the central district even before the announcement of government’s decision to locate the Singapore-Kuala Lumpur High-Speed Rail (HSR) terminus at Jurong East. With the high-speed rail, JLD look set to become a massive hub that allows cross-border business travels and commercial activities.

If I were to buy a project in Jurong Lake, then the most logically choice should be one that is located in the Jurong Gateway, possibly J Gateway because it is located near the Jurong East MRT station and has various malls like Westgate, JCube and IMM.

In conclusion

Property is a big-ticket item. It is important to discuss with your spouse and think through the strategy to adopt before making the commitment to buy. There are various factors to consider and one should not base their decision merely on the potential for capital appreciation alone. For example, some people may want to look for projects which are near top schools or near their workplaces. The above examples of looking for projects in regional business hub are just a sharing of my property strategy.

Most importantly, review your finance when purchasing a private property. Make sure that you would not have difficulty in servicing the home loan. In the next few articles, I will examine the market for home loans in Singapore. Stay tune and enjoy the ride.

Read my other articles on property:

  1. The Dark Side of Loan-to-Value (LTV) ratio
  2. Freehold or Leasehold property?
  3. Negative HDB sales
  4. Wealth destruction from CPF Accrued Interest
  5. Devastating HDB Loan and CPF Accrued Interest
  6. CPF’s Home Protection Scheme (HPS)
  7. The Dark Side of CPF Housing Withdrawal Limit

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Updated: November 12, 2017 — 1:30 pm

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