By guest contributor 2ycapital

My first foray into the property market was via the most common route – the HDB flat. There weren’t any HDB grants during my time and we couldn’t afford one near our parents as we had only started working. We couldn’t afford an Executive Condominium either, as my starting pay was only $1,850 per month. At the time, we had only three choices: Woodlands, Jurong or Sengkang. We selected Woodlands, the “cheapest” location in the north zone as Sengkang was much more expensive.

The problem with picking Woodlands was that it was very far from our parents’ place and once the baby came, we had to move closer to them. In the end, we hardly stayed in the flat. The problem was that under HDB rules, we could buy any property within five years and could not lease out our flat either. The rules were extremely strict. In the end, we kept it empty for almost five years. And to top up our stupidity, we spent $40,000 on renovations.


The graph above shows you the points where we bought and sold our flat. We bought exactly at the peak and sold at the bottom. What perfect timing! We bought the HDB executive flat for $380,000, and adding on the $40,000 we spent on renovations, it cost us a total of $420,000. We hardly stayed there. You can see the market was in the doldrums from 2001 to 2005.

Lesson 1 – Buy a property only if you intend to stay in it or to rent it out

We couldn’t stay in it due to the baby and we couldn’t rent it out due to the rules. It was basically a white elephant. We could have secretly rented it out but it was illegal to do so. Having said that, if you own an HDB flat today and are eligible to rent it out, my advice is that you keep the goose that lays the golden egg, unless the offer is too compelling and you have better use for the proceeds. The yield from an HDB flat is one of the highest you can find.

Lesson 2 – Don’t buy a property that comes with so many restrictions

The second lesson I learnt was that I should buy a property with fewer restrictions. I could not buy another property or sell my flat within five years. The restrictions were imposed to ensure that I did not abuse the “market subsidy” I supposedly received when I bought the HDB executive flat.

Lesson 3 – Don’t be greedy when buying an HDB flat

It is funny to see people’s reactions when I tell them I lost money from buying an HDB flat. Most do not believe it. I was greedy and I thought to myself, “HDB sure can make money if you buy directly from them.” I could not have been more wrong. I bought the biggest flat available to me instead of the four or five room flats, and the executive flat received the lowest “market subsidy” from the government.

After five years, I decided to sell my flat at a loss and move on, but there were many unsold units at my block even after five years. At the time when I was selling my flat, the HDB was selling the unsold units in my block for between $220 thousand to $280 thousand. It took me more than 10 months to finally find a buyer, who was a PR family that offered me $295 thousand for my HDB executive flat.

The real joke was HDB writing a letter to me wanting an explanation why I sold my flat for $295 thousand when the valuation was $340 thousand. I replied that I would love to sell it to them for $340 thousand if they were willing to buy it. (As a side note, my brother-in-law bought a four room flat in Sengkang and after five years, sold it for a good profit.)

Lesson 4 – Cut your losses and move on

By 2005, I had lost enough money from the stock market to know how to cut loss and learn about market cycles. I wanted to free up my CPF to buy properties at better locations and catch the next property cycle. The fact that I didn’t even stay there and couldn’t rent it out provided the catalyst for me to do something about it.

As you can see, my first foray into the property market was a painful one. I lost at least $100 thousand including the cost of renovations. It was painful lesson which I will never forget, but I will treat the $100 thousand as an expensive school fee. There are no better schools to teach you about reality.

By guest contributor 2ycapital, a CFA and CPA who blogs about his Singapore property experiences at 2Y Real Estate Fund.

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