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Monday, July 29, 2019

My HDB property -- should I have gone for an EC back in the days of 2010?

Years have passed since I collected the keys to my HDB. And having already reached the minimum occupation period along with two more additions to the family, and maybe considering one more, I was looking for a bigger property, specifically an executive condominium since I have a 5-rm HDB already of 110 sqm.

And with the massive increase in private property prices, I can't help but wonder if it would have been a better move back then to squeeze all my savings out for Esparina condo vs my Fernvale flat.

  

So I went to do some mathematical calculations as follows:


Based on what I could afford back then,

Esparina
1000 sqft -- ~$750k or $750 psf
Currently, average is around $1100 psf, so about $350k gain

HDB
I got it at $325k. Plus minor reno around $25k maximum, so $350k.
Currently, average sale is around $560k
So about $210k gain

While the absolute gain is smaller, $210k vs $350k, the percentage gain is higher, 60.9% vs 46.7%

If we then include the interest rate of $400k over the past 6 years, on an average of 2% a year, it would have been at least $50k more in interests, which would bring the $350k gain in Esparina down to $300k, or a 40% gain. However, I did not consider CPF grant from the government, which wasn't a lot back then.

Many things would have been different as well. If I had gone along with the EC, I probably wouldn't be able to clear our car loan fast, wouldn't have dared to step outside of the MNC employment to venture on my own, nor would I have dared to put more cash into the market, which allows me to have a comfortable dividend income at the moment.

Net net, I think the HDB was a slightly better financial move at that point in time, and it allows me to potentially consider an EC next, without needing to sell it first and wait for 30 months.

To me, with the crazy increase in EC prices, I think it would make even better financial sense now for young first timer couples to go for a HDB first while they sort out their finances.

Meanwhile, because of the Piermont Grand EC launch, I also consolidated all our family assets to prep for an potential purchase. Although I did not go for the ballot eventually due to various considerations, it was a good exercise. Apparently, we would be able to afford a maximum of $1.6 mil property if both wife and I showhand all our stocks/bonds/savings/CPF with a $400k loan remaining. This puts our total assets of CPF OA + HDB + investments + cash at near $1.2 mil for the family.

Of the various considerations not to purchase the property, the financial related ones are due to the following:

1) If we get a bigger property, we would move from net inflow of cash from investments to net outflow of cash to investment, mainly property. While the asset base may rise in the future, cash flow is generally affected for the next 8 years at least.

2)  If we get a smaller property, it would be a downgrade. Condo facilities are generally pretty useless to me.

That's all the rant for now.

8 comments:

  1. Perfect sme as mine

    ReplyDelete
  2. I am in agreement. HDB is not an investment but designed as 'roof for everyone' concept. Asset building is the vogue now and Condo seems to be the aspiration of every individual to flaunt that they have 'arrived'! Crazy Singaporeans working hard with no time to LIVE! TRAGIC.

    ReplyDelete
  3. Hello JW, do you have an email for me to send enquiries regarding your blog? Regards, Steve

    ReplyDelete
  4. Hello JW, do you have an email for me to send enquiries regarding your blog? Regards, Steve

    ReplyDelete
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