Buyers in tizzy over possible EC tweaks

[yjcai]

I advise you to think carefully on the 269k BTO and compare it with the current resale prices and put much thought into the appreciation of HDB from today's prices. Do not forget BTO is much smaller and resale flats are much bigger. If the BTO you mentioned appreciates between 350k to 500k, what happen to the resale prices? then condo prices?

For the EC you mentioned, yes it is valid as it depends on risk on entry. You are assuming it appreciates 44% after 10 years upon privatization. It depends on the demand and affordability of OCR condos during then as well. The rising prices and demand could be accredited to the ability to subletting HDB and low interest rates.

I dislike the part where more people say HDB should be a home more than asset as it directly means our old folks do not have ability to unlock value in their HDB home when they are old. Then again it is agenda based. If it is more home, people can get cheaper homes and granted entry to second/third investment homes quicker provided there is no 10 years mop and just 5 years mop. At the same time, people can sublet their homes for the investment property. My opinion is more home than asset will push private property prices higher.

Let's consider the following:

- HDB BTO first time purchase for the Mar 13 launch in Compassvale Cape.
- 4-rm after grant price of $269k (http://esales.hdb.gov.sg/hdbvsf/eampu03p...page_1829/$file/about0.htm)
- Takes a 20 year 80% HDB loan at 2.6% interest

After 10 years, assume the HDB is worth between $350k-$500k. Total interest paid would be about $45k. Profit is between $36k-$186k.

- EC first time purchase for Waterbay EC
- According to this website (http://sengkangec.com/waterbay-price/), 4-rm starts at $823k. Assume a grant of $30k for after grant price of $793k
- Takes a 20 year 80% private loan at 1.25%, 1.75%, 2.5% thereafter

After 10 years, the total interest paid is about $110k. The valuation of the EC increases as it is rezoned to private condo (+20%?), and the market moves up another 20%, profit = $823k x 1.2 x 1.2 - $110k - $793k = $282.12k

If the market is flat, profit = $823k x 1.2 - $110k - $793k = $84,600.

If the market drops by 20%, profit = $823k x 1.2 x 0.8 - $110k - $793k = - $112.92k

I'm not calculating the IRR and some of the figures here are plucked from the sky. But it seems to me that buying a BTO is still better than buying an EC given the risk and rewards and not to mention the opportunity cost of investing the money elsewhere. Are people simply jealous that EC buyers are making more money in a rapidly rising market? Is it fair to assume that just because you bought an EC, you will definitely make a lot of money? To me, their bigger profits is simply the result of a bigger bet in a rising market. Fair and square.

However, I'll be very happy if more people throw their money at ECs if Mr Khaw changes the policy. Then maybe I can find a nice HDB at a better price..

Hope to hear your comments.