18 MARCH, 2019
I am 29 years old, know full well that a Housing and Development Board (HDB) flat will be worth nothing when its 99-year lease expires, and even explored a Big Read surrounding the lease decay issue.
But I got one anyway. And I am not talking about a brand new Build-To-Order (BTO) flat.
Rather, my first home purchase is a S$320,000 three-room flat in Marine Parade that has only 55 years left to its lease.
By the time it turns 99, I will be 84 and my fiancé will be 87 — hopefully with a backup plan to fall back on if any of us two had not kicked the bucket.
The sale was sealed in a whirlwind. We started looking for the flat in December, exercised our option to purchase in January, and completed the resale application a few weeks later. At the end of this month, we will get the keys to our flat.
But don’t get me wrong: The purchase was made not without us mentally preparing ourselves for the burn that would inevitably come as soon as I turn 50 in 21 years’ time.
While we can rejoice in having paid up the mortgage in full by then (we took a 20-year loan), we will also grieve over the plunge to our flat’s value with less than 35 years left to the deed — by this time, banks will be not as willing to extend home loans, making the flat harder for buyers to finance.
Another four years on, my neighbours and we would heave another collective sigh as our flats’ value take another plunge, as Central Provident Fund (CPF) monies can no longer be used to finance the down payment nor service the loan of flats 70 years and older.
Woe is us, and other homeowners who committed to the same decision? That would be missing the forest for the trees.
SHOULDN’T A HOME BE A HOME?
Aside from the fact that the Government will be relaxing its CPF usage rules for the purchase of older flats by May, I could think of many reasons why I would choose an old flat again in a heartbeat.
But the main one is this: I am not buying the flat hoping to sell it for a profit.
It would be a home, not a house. And in it, the lost art of treating a man’s home as his castle shall take precedence over the bottom line.
This ancient virtue, established as common English law in 1628, was first cited to me by property analyst Nicholas Mak who was commenting about the acrimonies that broke out at the height of the collective sale frenzy early last year.
Mr Mak, who is the executive director of asset management firm ZACD Group told me then that the disputes between neighbours in private properties violated the right a man has in possessing his home in peace, without disturbance by hostile claimants.
Indeed, I think a lot more satisfaction could be derived by not treating my home as ephemeral, or a get-rich-quick scheme. Sure, who wouldn’t want money? But no, not at the expense of a home.
With that as the cornerstone, my partner and I went househunting.
We eliminated the BTO option from the onset as it left too many things up to chance, including when we might be shortlisted in the computerised ballot process and the properties of the flats we would be allocated with, down to details like height, view, noise, privacy, and accessibility.
We were not comfortable with buying something we are not sure about.
Five flat viewings in, one breezy top-floor unit with an old-school terrazzo living room floor and beautifully-aged tiles on the kitchen floor stood out as the stuff of our dreams.
It is within walking distance to the East Coast Park, a wet market, and cafes (somehow important for us millennials). By our doorstep, we would have access to the train network, as the future Thomson-East Coast MRT line station, Marine Terrace, is expected to be ready by 2023.
Then, there was the psychological effect of getting a bargain – the flat was S$420,000 when it first hit the market last January and had fallen to S$350,000 when we asked for a viewing. After expressing serious interest, the owner slashed the price by another S$30,000 seeing that we are a young couple.
Forget grants or investment potentials — S$100,000 was a lot more substantial a sum to save, and could be channelled into renovations and furnishings.
According to the property agent handling the sale of my flat, the fall in prices was partly due to an oversupply of older resale flats by about June last year.
It was largely a market reaction to National Development Minister Lawrence Wong’s comments in March 2017 that corrected the misperception that old flats stood a higher chance of a windfall through the Selective En bloc Redevelopment Scheme.
Following the reality check, buyers shunned old flats, and the number of viewers dried up.
The funny thing is, I had long been a sceptic of home ownership as I was adverse to signing away my financial freedom, and morphing into a mortgage-paying machine for 10 to 20 years.
But then, I calculated the amount I would pay if I were to treat my flat as a rental unit. The S$320,000 price tag translates to S$485 a month.
That would barely cover the monthly rent for a room these days.
In the event that we get a second property years down the road, we foresee that it would not require too much of a hard sell to rent the Marine Parade flat out.
Potential rates on SRX and PropertyGuru look promising. Even without the MRT, three-room flats are costing around S$1,800 to S$2,100 a month to rent.
Alternatively, we could also convert part of the unit into a studio space for my partner who works as a visual artist.
Sure, the flat does not check all the boxes of a savvy investment.
And we could now laugh about the possibility of us becoming destitute elderly people with no place to lay our heads at night come 2074 when our flat nears centenarian status.
But for now, with the available choices, these are secondary considerations.
A child is currently not in the picture, so legacy issues aside, the flat is perfect for the both of us. A perfect price in a perfect location.
And more importantly, it comes at a perfect timing to bring us the privacy many young adults still living with their parents here so crave.
Life can’t wait.
ABOUT THE AUTHOR
Wong Pei Ting is a TODAY journalist covering issues relating to housing, crime, and society at large.
[First, congratulations on getting a bargain. Yes, one way of looking at it, is that you are simply renting the flat with a payment of rental upfront.
My only advice would be to reduce the mortgage to 15 or even 10 years, unless finances are tight. Because a long mortgage means you would be paying a lot more interest. But there is always the option of paying off the mortgage early if you saved enough and can do so.
It is also refreshing and smart to look at the flat as a home and not an investment. People who do so, are wrong. When you have ONE flat that you live in, it is not an "investment". That is your home. If prices rise and you can sell your flat at a profit, guess what? You will need a replacement home and prices everywhere will be JUST AS HIGH. So any profit you made, will become someone else's profit.
And yes, a lease-decayed flat is still value for money, especially since prices has fallen because it is less of an investment now. Of course the problem is that most people need to leverage on their CPF balance to swing a flat purchase. But that is also why the prices are lower for these flats. And they still have value. People just cannot afford to pay with cash.
BUT, you get a flat in a matured neighbourhood, with amenities, conveniences, character, and charm,
As for the future, the important thing is that you have a home, independence, and privacy now.
When the lease is less than 20 or 30 years, the world and the situation would be different. Maybe by that time, homes will be so expensive, that lease-decayed flats may be all that some segment of the population can afford.
Or there may be other solutions.
One simple idea is to allow flats with less than 20 years of lease to be AirBnB-ed. This will immediately boost the value of the flat by about 40 - 50%.
Say a 3-rm flat can be rented for about $2000 a month. The rental income/value of a 3-rm flat with 20 years of lease left is still about $480,000. Of course, the Present Value would be a little less than $400k. So that's the approximate value of the flat.
But if you can AirBnB the flat, you can make in 257 days, the annual rent of $24k, or about $36k (or 50% more) in a year through AirBnB-type rental.
And that would raise the value of the flat to almost $600k.
But that's for the future.]
I am 29 years old, know full well that a Housing and Development Board (HDB) flat will be worth nothing when its 99-year lease expires, and even explored a Big Read surrounding the lease decay issue.
But I got one anyway. And I am not talking about a brand new Build-To-Order (BTO) flat.
Rather, my first home purchase is a S$320,000 three-room flat in Marine Parade that has only 55 years left to its lease.
By the time it turns 99, I will be 84 and my fiancé will be 87 — hopefully with a backup plan to fall back on if any of us two had not kicked the bucket.
The sale was sealed in a whirlwind. We started looking for the flat in December, exercised our option to purchase in January, and completed the resale application a few weeks later. At the end of this month, we will get the keys to our flat.
But don’t get me wrong: The purchase was made not without us mentally preparing ourselves for the burn that would inevitably come as soon as I turn 50 in 21 years’ time.
While we can rejoice in having paid up the mortgage in full by then (we took a 20-year loan), we will also grieve over the plunge to our flat’s value with less than 35 years left to the deed — by this time, banks will be not as willing to extend home loans, making the flat harder for buyers to finance.
Another four years on, my neighbours and we would heave another collective sigh as our flats’ value take another plunge, as Central Provident Fund (CPF) monies can no longer be used to finance the down payment nor service the loan of flats 70 years and older.
Woe is us, and other homeowners who committed to the same decision? That would be missing the forest for the trees.
SHOULDN’T A HOME BE A HOME?
Aside from the fact that the Government will be relaxing its CPF usage rules for the purchase of older flats by May, I could think of many reasons why I would choose an old flat again in a heartbeat.
But the main one is this: I am not buying the flat hoping to sell it for a profit.
It would be a home, not a house. And in it, the lost art of treating a man’s home as his castle shall take precedence over the bottom line.
This ancient virtue, established as common English law in 1628, was first cited to me by property analyst Nicholas Mak who was commenting about the acrimonies that broke out at the height of the collective sale frenzy early last year.
Mr Mak, who is the executive director of asset management firm ZACD Group told me then that the disputes between neighbours in private properties violated the right a man has in possessing his home in peace, without disturbance by hostile claimants.
Indeed, I think a lot more satisfaction could be derived by not treating my home as ephemeral, or a get-rich-quick scheme. Sure, who wouldn’t want money? But no, not at the expense of a home.
With that as the cornerstone, my partner and I went househunting.
We eliminated the BTO option from the onset as it left too many things up to chance, including when we might be shortlisted in the computerised ballot process and the properties of the flats we would be allocated with, down to details like height, view, noise, privacy, and accessibility.
We were not comfortable with buying something we are not sure about.
Five flat viewings in, one breezy top-floor unit with an old-school terrazzo living room floor and beautifully-aged tiles on the kitchen floor stood out as the stuff of our dreams.
It is within walking distance to the East Coast Park, a wet market, and cafes (somehow important for us millennials). By our doorstep, we would have access to the train network, as the future Thomson-East Coast MRT line station, Marine Terrace, is expected to be ready by 2023.
Then, there was the psychological effect of getting a bargain – the flat was S$420,000 when it first hit the market last January and had fallen to S$350,000 when we asked for a viewing. After expressing serious interest, the owner slashed the price by another S$30,000 seeing that we are a young couple.
Forget grants or investment potentials — S$100,000 was a lot more substantial a sum to save, and could be channelled into renovations and furnishings.
According to the property agent handling the sale of my flat, the fall in prices was partly due to an oversupply of older resale flats by about June last year.
It was largely a market reaction to National Development Minister Lawrence Wong’s comments in March 2017 that corrected the misperception that old flats stood a higher chance of a windfall through the Selective En bloc Redevelopment Scheme.
Following the reality check, buyers shunned old flats, and the number of viewers dried up.
The funny thing is, I had long been a sceptic of home ownership as I was adverse to signing away my financial freedom, and morphing into a mortgage-paying machine for 10 to 20 years.
But then, I calculated the amount I would pay if I were to treat my flat as a rental unit. The S$320,000 price tag translates to S$485 a month.
That would barely cover the monthly rent for a room these days.
In the event that we get a second property years down the road, we foresee that it would not require too much of a hard sell to rent the Marine Parade flat out.
Potential rates on SRX and PropertyGuru look promising. Even without the MRT, three-room flats are costing around S$1,800 to S$2,100 a month to rent.
Alternatively, we could also convert part of the unit into a studio space for my partner who works as a visual artist.
Sure, the flat does not check all the boxes of a savvy investment.
And we could now laugh about the possibility of us becoming destitute elderly people with no place to lay our heads at night come 2074 when our flat nears centenarian status.
But for now, with the available choices, these are secondary considerations.
A child is currently not in the picture, so legacy issues aside, the flat is perfect for the both of us. A perfect price in a perfect location.
And more importantly, it comes at a perfect timing to bring us the privacy many young adults still living with their parents here so crave.
Life can’t wait.
ABOUT THE AUTHOR
Wong Pei Ting is a TODAY journalist covering issues relating to housing, crime, and society at large.
[First, congratulations on getting a bargain. Yes, one way of looking at it, is that you are simply renting the flat with a payment of rental upfront.
My only advice would be to reduce the mortgage to 15 or even 10 years, unless finances are tight. Because a long mortgage means you would be paying a lot more interest. But there is always the option of paying off the mortgage early if you saved enough and can do so.
It is also refreshing and smart to look at the flat as a home and not an investment. People who do so, are wrong. When you have ONE flat that you live in, it is not an "investment". That is your home. If prices rise and you can sell your flat at a profit, guess what? You will need a replacement home and prices everywhere will be JUST AS HIGH. So any profit you made, will become someone else's profit.
And yes, a lease-decayed flat is still value for money, especially since prices has fallen because it is less of an investment now. Of course the problem is that most people need to leverage on their CPF balance to swing a flat purchase. But that is also why the prices are lower for these flats. And they still have value. People just cannot afford to pay with cash.
BUT, you get a flat in a matured neighbourhood, with amenities, conveniences, character, and charm,
As for the future, the important thing is that you have a home, independence, and privacy now.
When the lease is less than 20 or 30 years, the world and the situation would be different. Maybe by that time, homes will be so expensive, that lease-decayed flats may be all that some segment of the population can afford.
Or there may be other solutions.
One simple idea is to allow flats with less than 20 years of lease to be AirBnB-ed. This will immediately boost the value of the flat by about 40 - 50%.
Say a 3-rm flat can be rented for about $2000 a month. The rental income/value of a 3-rm flat with 20 years of lease left is still about $480,000. Of course, the Present Value would be a little less than $400k. So that's the approximate value of the flat.
But if you can AirBnB the flat, you can make in 257 days, the annual rent of $24k, or about $36k (or 50% more) in a year through AirBnB-type rental.
And that would raise the value of the flat to almost $600k.
But that's for the future.]
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