A Client’s Journey

A Client’s Journey

Michael and his wife Michelle are both 35 years old and they have completed the MOP in their HDB flat in Geylang Serai. It was Nov 2018 and they were wondering if it was a good time to upgrade to another property, or should they just stay put. They were considering between a HDB in a better location, an EC or a private condo. They heard from their friends that ECs are a good buy. Don’t you agree?

They got my contact through a friend whom I have assisted to buy another property. My client had told them earlier that I had very interesting perspectives to offer, so they wanted to hear my views.

Decision Making Using Actual Numbers

I met up with Michael and Michelle at their place, which was a well maintained, 7-year-old 4-Room flat. Even though they had a 2-year-old daughter, they kept the place very neat and tidy, unlike mine which is cluttered with children’s toys. We sat down at their dining table, and they shared with me that they felt a bit lost, because they felt uncertain about the property market after the cooling measures introduced last year. They heard many different views from different people and wanted more concrete information before making a decision. I understood their concerns – with so much information out there, they wanted something which they can act on.

To address their doubts, I shared with them some of my research which were obtained from the latest HDB annual report and URA statistics:

Supply of HDB Flats

Source: HDB Annual Report 2017/2018

Supply of Private Residential Properties and ECs

Source: URA 1st Quarter Statistics 2019

The charts above are just the supply side of the equation. To assess the potential for capital appreciation for both HDB and private properties, I’ve compared the supply against the demand for each type of property (I will share the demand data upon request). With so much supply in the market today, do you think there is sufficient demand?

After reviewing the data, Michael and Michelle realised that the number of HDBs to be built over the next few years will be far more than the population growth. If HDB prices were to fall, would ECs fare better? If EC prices were to fall faster than HDB prices, perhaps they should wait a few years before upgrading.

MAS Regulations Makes ECs Less Affordable

It appeared to be a simple decision. But nowadays, there are many changes in housing regulations. We went through the criteria of buying an EC step-by-step to make sure that they do not overlook important considerations that they were not even aware of. By doing so, we uncovered the following:

  1. There aren’t many available choices for ECs in the current market and in the foreseeable future;
  2. 2 upcoming ECs to be launched are
  3. Based on their combined salary of $8,000, they could only take a maximum loan of $534k* to buy a HDB/EC (compared to $1.07m* for private condo) due to MSR restrictions.
  4. A 3 bedroom EC would easily cost $1m in today’s market. Based on their max loan of $534k, they would need to fork out the remaining $466k in cash/CPF, which is a hefty sum!
  5. To buy an EC, they will need to pay $40k resale levy in cash to HDB!

*Note:  Max loan is based on MSR and TDSR. there are many factors that affect the max loan and everybody’s situation is different. Contact me for a personalised estimate for yourself and/or your spouse. 

Should they Buy Private Condos Instead?

As Michael and Michelle were not prepared to fork out a huge amount of cash/CPF to buy an EC, they turned their attention to private condos instead. Together, we addressed a few of their burning questions:

  1. Where are condo prices headed after the cooling measures?
  2. Should they buy freehold, leasehold, new launch or resale?
  3. Which area has the best pricing upside?

Capital appreciation is a major consideration. They had other priorities to balance as well, such as unit size, proximity to schools, financial stress, etc. Eventually, they accepted my recommendation and I sold their unit within 1 month with $19k COV using a unique marketing approach. Why do you think Michael and Michelle sold their HDB first before buying their next property? Guess what did they buy eventually? 

There is no one-size-fits-all solution for everybody. Your situation and risk appetite are likely to differ from that of Michael and Michelle. For example, if you are young and would like to make it easier for yourself to upgrade to a better property in future, capital appreciation would likely be your top priority. If you are approaching retirement, and would like to unlock more retirement funds, it might be a good idea instead to buy a low cost HDB in a mature estate, where amenities are more accessible.

Protect Your Interests

Can you imagine what would happen if Michael and Michelle did not make an informed decision? They could have waited a long time for a preferred EC to be launched for nothing, only to realise about the loan restrictions much later. Meanwhile, they would have missed out on other opportunities. Or worse still, they might have placed the 5% deposit for an EC, only to realise later that they need to pay $466k in cash/CPF, which they do not have! Imagine yourself incurring a huge loss of the deposit which might be equivalent to a few months’ of your salary!

Let me protect your interest and help you navigate today’s complicated real estate environment so that you don’t make any mistakes which will take years to unwind


Learn Something New

Would it be ok to learn something new and let your money work for you? If yes, let’s have a chat! 

* indicates required field