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Personal finance blogger explains why financially literate people don’t worry about 99-year HDB leases

By August 5, 2020Current, Featured

TL;DR – And he did it in under 100 words and with just one image.

Personal finance blogger CW8888 explained why the 99-year HDB lease does not worry those who are financially literate.

And quite amazingly, he did it with a blogpost that is under 100 words (89, to be exact) and with just one image. Here!

Why does the 99 year lease not worry those who are financially literate?

As of today search online!

Case study of buying 4 Rm HDB with less than 63 yrs lease before expiring worthless.

    1. Resale 4 Rm HDB flat built at 1984 at $498K
    2. Saving on annual rental or upfront rental at $26K
    3. No of years to fully recover your initial capital of $498K from rental savings is 19 years
    4. Free home stay UP to 44 years or smaller residual investment gains after XX years down the road if you want to run road to Thailand or Vietnam!

Anyway I got curious and decided to check out more examples in three other neighbourhoods.

I’d included 3-room and 4-room resale flats, and years of completion ranged from as early as 1973 to 2007.

For ease of comparison, I’d largely followed CW8888’s “format” to show you the key stats. Note that this simplified calculation doesn’t take into consideration things like mortgage loan interest, adjustments to rental over time, etc.

4-room flat @ Tanglin Halt Road, Completion year 2007

  1. Resale 4-Rm HDB flat, $745,000
  2. Completed in 2007, remaining tenure 86 years
  3. Monthly rental per month $2,500 or $30,000 per year
  4. No. of years to recover value of $745,000 from rental savings is 25 years
  5. Free home stay UP to 61 years, or you may enjoy smaller residual investment gains after XX years down the road if you want to run road to Thailand or Vietnam!

4-room flat @ Marine Parade, Completion year 1975

  1. Resale 4-Rm HDB flat, $480,000
  2. Completed in 1975, remaining tenure 54 years
  3. Monthly rental per month $2,300 or $27,600 per year
  4. No. of years to recover value of $480,000 from rental savings is 17 years
  5. Free home stay UP to 37 years, or you may enjoy smaller residual investment gains after XX years down the road if you want to run road to Thailand or Vietnam!

3-room flat @ Toa Payoh, Completion year 1973

  1. Resale 3-Rm HDB flat, $245,000
  2. Completed in 1973, remaining tenure 52 years
  3. Monthly rental per month $1,800 or $21,600 per year
  4. No. of years to recover value of $245,000 from rental savings is 11 years
  5. Free home stay UP to 41 years, or you may enjoy smaller residual investment gains after XX years down the road if you want to run road to Thailand or Vietnam!

Go on, try work on your own sums and see what you end up with!

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Meanwhile, I’ll just leave you with a comment on CW8888’s blogpost from someone who goes by the name, Hyom. It looks like he’s also an occasional personal finance blogger.

I see no reason to be worried or unhappy about HDB leasehold.

Firstly, it’s a good financial deal. Your post already says it all.

Secondly, a deal is a deal. It’s leasehold. Value drops to zero at end of lease.

Thirdly, HDBs are designed to be cheap. That’s why it’s leasehold. Trying to tinker with the terms and conditions may result in more expensive public housing for next generation. Creating problems for the children means creating problems for parents.

Fourthly, buyer has 99 years to prepare. No uncertainty. So, no excuse to be caught unprepared.

Right.

 

 

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Gabrielle Teo

Author Gabrielle Teo

I read lots, and I also spend an indecent amount of time trying to get my mostly unpopular opinions published. Oh, I argue a lot with fellow Singaporeans who complain incessantly about Singapore too.

More posts by Gabrielle Teo

Join the discussion One Comment

  • Sinkie says:

    In case readers aren’t aware, a common rule-of-thumb is that a property is considered affordable if its price is 15X or less of its annual rent.

    It’s considered extremely expensive if the price is over 20X of its annual rent.

    So in the above examples, most resale HDB are meh in terms of whether they’re good deals. Only the old 3-rm in Kim Keat Ave is arguably “cheap”, probably due to both age as well as relatively small size.

    Hence for those who qualify, BTOs are no-brainer affordable (as long as not those central locations like Dawson or Old Airport Rd).

    Another thing which is unique in Singapore & seldom mentioned, is that we are probably the ONLY developed country that allows (and actually encourages) people to use their state-mandated retirement savings to buy residential property. Which totally skews the equation to buy instead of rent (which is out-of-pocket cash only).

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