Are HDB Flats Affordable?

[guru]

Hi guys,

I'm sure you know of the CPF requirement that when you use CPF to pay for the instalment, when the house is sold, after deducting bank loans, the total CPF amount being drawn out has to be returned to the CPF account + accrued interests.

1. The compounding effect of this accrued interest will be huge when we are talking about 20,30 yrs down the road;
2. HDB flats have to be selling higher and higher year-on-year to ensure that the people will not be losing out after deducting all these principals +interests;
3. Will HDB breach 1m in future? I think based on CPF policy, we can take for granted that it is a given
4. However, if we are talking about a 20 yr old flat now valued at 600k, in 20 yrs' time, it'll be 40 yrs, with remaining lease of 59 yrs. Will it be able to fetch 1m? If so, will the buyer be able to take up a bank loan?

Will some excel-zai brothers here be able to run out some scenarios for everyone to ponder the million-dollar-flat question?
I think there are really a lot of questions that are unanswered which has influenced my decision to defer that flat purchase...............

[yeokiwi]

Hi guys,

1. The compounding effect of this accrued interest will be huge when we are talking about 20,30 yrs down the road;
2. HDB flats have to be selling higher and higher year-on-year to ensure that the people will not be losing out after deducting all these principals +interests;

Why will you lose out if all the payments come from CPF?
Essentially, you are paying yourself interest.
In the case when you sell away the flat, the likely scenario is that the proceeds will all end up in the CPF account.
If you are lucky, you may get some leftover cash but there is no need to top up the CPF if there is any short fall.

[newborn1000]

hmmmmmmmm........there is uncertainty as to whether the HDB will given you another unit when your 99 lease is up............We are still a v.young nation........

If they dont, then your flat will keep on depreciating, unlikely to reach $1m

However, sometimes, when HDB wants to tear down old flats, they will give you a bigger unit at a nearby location......(So you will actually gain)

Anybody, wants to add on?

[Musicwhiz]

However, sometimes, when HDB wants to tear down old flats, they will give you a bigger unit at a nearby location......(So you will actually gain)

Yes, but I think this means you have to get another loan from them and the flat does not come FOC. My uncle went through this recently in Bedok and he had to pay $X for the new flat - not sure how much it was though.

So it's a case of getting compulsorily acquired and "thrown" to another unit. Not much of a choice, which makes it sian.

[guru]

Can you imagine in 20 yrs' time, how many old flats will be around the island? Will HDB be able to relocate all these flats-leasees which bought at today's market?
What I'm trying to say is that 20 yrs from now, will people who bought these 20 yo flats be able to sell them at a price which they probably won't make a loss?

I'm thus very curious to see how the statement, "HDB is a form of savings" will be able to stand.

[Nick]

Out of curiosity, what will happen when the flat 99 year lease ends ? If the flats are given up freely to the government, wouldn't the price of flat trend downwards when it gets closer to the lease expiry date ? Or perhaps the lease will be extended with minimal cost hmm. But I don't think there is any precedence to use a case study !

[Zelphon]

Out of curiosity, what will happen when the flat 99 year lease ends ? If the flats are given up freely to the government, wouldn't the price of flat trend downwards when it gets closer to the lease expiry date ? Or perhaps the lease will be extended with minimal cost hmm. But I don't think there is any precedence to use a case study !

Yes, it will be taken back by the govt.

I read a news article a long way back about some landed properties selling for very low price cos only left 10 years lease...

Found this blog while trying to find that news article..

http://tiongbahruestate.blogspot.com/200...years.html

[newborn1000]

Well, I guess this further validates my plan to buy the cheapest 3-5 room in BTOs.........(As long as it's far away from rubbish dump =)

No point buying high end 3-5room........when the lease ends, it still becomes 0 =(