The Unequal Playing Field : Why the HDB vs. Private Property Gap Matters Now More Than Ever

The Great Divide: The Widening Gap Between HDB and Private Housing

For many Singaporeans, owning a home is a key aspiration. The Housing Development Board (HDB) has long provided affordable housing, with about 80% of the population living in HDB flats. However, a significant number of HDB owners dream of upgrading to private housing. Unfortunately, the gap between public and private housing is widening, making this dream harder to achieve.

The Rising Cost of Private Homes

One of the main reasons HDB owners feel priced out of the private market is the significant increase in private property prices. Since 2017, private residential home prices have risen by approximately 51%. This substantial increase makes it challenging for HDB owners, who may not have seen similar appreciation in their HDB flats, to afford private housing. New private residential project launches are also increasingly unaffordable. In a PropNex survey of 1,250 HDB owners, 26% found new launches extremely unaffordable, and 42% found them unaffordable.

Budget Constraints

Many HDB owners simply do not have the budget to afford private housing. The PropNex survey indicated that 62% of HDB owners have a housing budget of less than $1 million.

In contrast, the average price of new non-landed private units in the Outside Central Region (OCR) was around $1.9 million in the first half of 2024, while resale units averaged about $1.5 million.

The Risks of Waiting

Given these trends, HDB owners who aspire to move to private housing one day are advised to make the transition as soon as they can afford it. The longer they wait, the wider the price gap becomes, and the more difficult it will be to make the transition.

Additionally, waiting may mean they would have to fork out more cash when they eventually make the move. If they delay the transition too long, HDB owners may also have to settle for a smaller unit than they initially planned.

The Impact of Ageing Leases

The diminishing value of HDB flats due to ageing leases is a significant concern for homeowners. Many older Singaporeans hope to leave their flats as inheritance or cash in on them for retirement, but the declining value of HDB flats with ageing leases may hinder these plans.

Restrictions on Central Provident Fund (CPF) usage and HDB loans make it harder to finance the purchase of older flats. Once a flat has 20 years or less of lease left, buyers may be unable to get financing from CPF, HDB, or private banks, requiring them to pay with cash.

As a property ages, the pool of potential buyers typically shrinks, making it more challenging to sell and less likely to fetch a strong price in the future.

Adding to the uncertainty, there is no guarantee that older HDB flats will be selected for the Selective En bloc Redevelopment Scheme (SERS). National Development Minister Lawrence Wong cautioned homebuyers against assuming their HDBs will be chosen for SERS. He also stated that HDB flats will be returned to HDB at the end of their leases. This means that homeowners cannot rely on SERS as a means to offset the impact of ageing leases.

The diminishing value will also impact retirement plans that rely on selling the flat or passing it as an inheritance. Although the government has offered schemes to help retirees unlock the value of their homes, these have not been popular.

Conclusion

The dream of upgrading to a private home is becoming more challenging for many HDB owners in Singapore due to rising private property prices and budget constraints.

The PropNex survey highlights that high home prices are the main hurdles preventing most HDB homeowners from upgrading to the private housing market.

If you aspire to move to private housing, it is best to do so as soon as you can afford it. Waiting could mean missing out on opportunities and potentially facing a more difficult transition in the future.

The widening gap between HDB and private housing is a trend that HDB owners should carefully consider when planning their long-term housing goals.

Widening Price Gap Between HDB (Resale) and Condo (Resale)

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