Have a question about Singapore property? Ask Mr. Propwise (AMP)!

Dear Mr. Propwise,

I would like to seek your views on one of my property investment decisions. Some experts think private properties are better investments than HDB flats. I currently own a HDB flat (for own stay) and a private property. I have the intention to purchase another private property in the near future (depending on where the market is heading) for own stay, but have not decided whether to sell the HDB flat or to rent it out for rental income.

Although the COVs of flats are coming down, the prices should still be increasing moderately in the short to medium term due to demand and in terms of rental yield, it is higher than private properties.

The 3rd round of the government measures also now make it impossible for investors with existing private properties to buy HDB flats without disposing their properties, hence HDB flats are “assets” that not everyone can buy.

Or do you think is it a better option to sell my flat to realise the profits and invest the money into better private properties (as Kelvin Fong advocates in Secrets of Singapore Property Gurus)?

Thanks,

C.H.

Hi C.H.,

The answer to your question really depends on each individual’s circumstances but let me share some thoughts with you:

– Are you more in the income generating stage of investing or the capital appreciation stage of investing? For example, those looking to retire soon may want to acquire a portfolio of high yield properties to generate income. For those just starting out I think it makes sense to cash out and try and compound the capital appreciation (similar to what Kelvin suggests).

– Another key thing to think about is financing. If you are thinking of buying another property, depending on your job and debt service ratio etc, banks may be reluctant to finance a third property. If that is the case, selling off your HDB flat might then make it possible to invest in another private property, which will make sense if you think it has more upside.

– As for the restrictions on private property owners to buy HDB flats, that means that demand is reduced as the pool of potential buyers is smaller. As you mentioned, that will impact the COV and future price appreciation. Also, this restriction is not likely to be lifted anytime soon by the government. If you sell it now, you will not be able to buy back an HDB flat. So if the potential yield is very high (say >6%), I might consider keeping it (but contingent on the two points above).

Hope this is useful!

To wisdom and beyond,

Mr. Propwise