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Your HDB Flat Is Not Really An Investment

Better to consider it as a home instead.

The article was first published on SG Young Investment

It is very hard to make money on your HDB flat. By this, I’m saying about the first HDB flat you buy. Many people treat the home they are staying in as an investment where they are willing to put in money and pay a lot for the mortgage every month.

Is it really worth it to buy the largest HDB flat and think we could make money from this in the future? Let me show you why your HDB flat is not really an investment.

Why Buying The Largest HDB Flat May Not Make Sense?

More expensive and lesser grants

Your first home is for you to stay. Spending more money to pay for housing loans means you will have lesser for retirement or for your expenses.

The recent BTO launch at Bidadari (Toa Payoh) attracted quite a lot of attention. The location is good and so is the price higher. Let’s take a look at the prices of the different flat sizes at Bidadari for the recent launch:

  • 3 Room – $297,000 – $385,000
  • 4 Room – $433,000 – $550,000
  • 5 Room – $544,000 – $625,000

As we can see, the prices are definitely higher than areas like Punggol. If we buy the largest HDB which is the 5 room flat, as compared to the 4 room, we need to fork out an additional $100K for it. Furthermore, there are lesser grants for 5 room flats as compared to 4 room flats. I’ll write more about the grants in another article coming up next. In general, we could lose out up to $40,000 in grants if we buy the biggest HDB flat.

The monthly instalment for a $450,000, 4 room flat and a $550,000, 5 room flat will be as below:

4 Room Flat: $1838/Month
5 Room Flat: $2246/Month

The above scenario is assuming a 90% loan and 25 years loan tenure at 2.6% interest from HDB loan. As we can see, buying a 5 room flat will set us back with $408 lesser a month. This will add up to $122,400 in total for 25 years.

Higher resale levy

I think a lot of couples buy the largest HDB flat because they think they can make more money from it when they sell it and buy another BTO. This may be true in the past but its not true currently. For a 5 room HDB flat, if you sell it either to upgrade or downgrade, the resale levy imposed is higher than that of a 3 room or 4 room flat.

Here’s the resale levy payable:

First Subsidised Flat Type Resale Levy Amount
2-room $15,000
3-room $30,000
4-room $40,000
5-room $45,000
Executive $50,000

A resale levy is payable on these conditions as quoted from HDB website:

  • You sell your subsidised flat after meeting the Minimum Occupation Period (MOP), and then buy a second subsidised flat from HDB or take over ownership of a subsidised HDB flat
  • You sell your subsidised flat after meeting the MOP, and then buy an EC from a developer where the land sale was launched on or after 9 December 2013, including those where tenders were not closed, i.e. Westwood Avenue, Canberra Drive and Anchorvale Crescent

You need not pay a resale levy if you are buying any of these:

  • Design, Build and Sell Scheme (DBSS) flat from a developer
  • EC from a developer; where the land sale was launched before 9 December 2013
  • HDB resale flat
  • Private residential property


Why A HDB Flat Is Not Really An Investment?

HDB is a leasehold property for only 99 years

All of us know that HDB has a lease of 99 years. What are the implications of this? It is confirmed by the minister of national development during a 2014 parliament seating that at the end of 99 years, HDB’s asset value will depreciate to zero.
In fact, we don’t really have to wait until the end of 99 years to feel the impact of it. By the time your HDB is left with 60 years or less, the banks will limit the loan tenure which one can borrow if they purchase that flat. This means, if you want to sell your HDB flat with 60 years or less lease, you will have some problems as your potential buyers may not be able to qualify for the bank loan. With additional cooling measures such as the TDSR, MSR, it makes it even harder to get the loan.

Your money is stuck in the HDB

All the money you pay for your HDB is stuck there until you sell it. If you sell it, you still have to buy another house to stay in and you need to pay a resale levy if you buy another subsidised flat. There is little chance where you will be able to get any extra cash out if you sell your HDB.

If you had instead bought a smaller flat to stay in, the extra cash or CPF you have would earn interest which will compound over the years. CPF gives interest as high as 5% while your cash can generate investment returns if you invest it.
It is better to buy a smaller flat if you’re planning to stay in it and save up more for another investment property later.

You cannot cash out of your HDB flat but you can for private property

There is no way for you to cash out of your HDB or mortgage it for any other purposes. The banks do not recognise it as an asset. For a private property, you can take an equity loan or term loan and use the cash for other uses. This is also called cashing out of your property.

Let’s compare between a $600,000 HDB and a $600,000 private condominium. For the private condo, you can take an equity loan of about 70-80% of the property value minus the outstanding mortgage you have and any CPF utilised. For the $600,000 condominium, you can cash out about $480,000 at an interest of the current property loan packages available which is less than 2%. This is the lowest you can get as compared to other loans such as car loans, business loans or personal loans. You can use this cash to start a business or even use it for investment. You cannot do this for a HDB flat at all. For a $600,000 HDB, your money is stuck inside without you being able to cash out.

*If you’re planning to cash out of your private property, you can email me at [email protected] for a complimentary consultation. I would be able to advise you on the best rates and process your application for you. 


The primarily purpose of HDB is to provide affordable housing to Singaporeans so that each of us have a roof over our heads. Treating HDB as an investment and wanting to make money from it may not be the wisest choice as the government will do all they can to limit speculation in the subsidized public housing market. This is to ensure public housing remains affordable for the majority of Singaporeans who want to own their own homes and start a family.

Buying a smaller flat for your first home will make owning a house a more fuss free experience so that we will have more money in the future should we want to have another investment property or use the extra money for other investment purposes.

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