More holding on to their HDB flats

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#21
Here are some data which I think reflects some underlying trends in the HDB resale market.

This series is the total number of HDB flats approved for sub-letting at the end of the particular quarter. By definition the flat must at least fulfill MOP, and the owners are theoretically able to upgrade to private property in this period

4Q2007 17,400
4Q2008 22,200
4Q2009 24,300
4Q2010 35,000
4Q2011 40,000
4Q2012 43,508

The numbers have been going up every year. There are a few things happening here
- older couples move in with children and sub-let their own flats
- increased emigration where families leave and sub-let their vacant flats
- HDB owners move to private properties and did not sell, instead letting out their existing flats

The last point may provide some hints on how durable the cashflows underpinning some of the private property leverage out there.

Resale transactions are less predictable, but the number suggests that it is indeed running below historical levels, more so when you adjust for the larger housing stock today. While the high BTO supply is certainly one of the main reasons for the decline, when viewed together with the rental statistics, there appears to be another trend at play.

Instead of the flats hitting the market as resale, people choose to retain their HDBs upon upgrading to private property. With cheap interest rates, you can carry a 1.5 to 2 mil loan with susbstantial support from the rentals of the HDB unit, instead of selling it to extract capital and reduce overall leverage.

Total resale transactions per year
2007 29,436
2008 28,419
2009 37,205
2010 32,257
2011 24,633
2012 25,094

Bottom line is I think there is a substantial number of households in Singapore doing this "carry trade" now, which will last until
1) immigration slows down by a lot
2) new private housing supply hitting the market (late 2013 onwards)
3) interest rates rise

If all 3 takes place at the same time, HDB prices might come under pressure to decline quickly if these owners are forced to deleverage, even if the local economy remains ok.
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#22
(19-02-2013, 02:12 PM)etan Wrote: I would do the same as you if I can get hold of a flat, afterall, just need a 2x6 to sleep on...hahaha!
But I guess no chance lah unless hdb reversed policy (when they realised they have overbuilt).

(19-02-2013, 01:04 PM)Share Investor Wrote: Currently I have a HDB and a condo. If I need to sell one, I will sell the condo. Having the HDB is like having an insurance. Big Grin

Like LKY said before, if you have a HDB, hold on to it! If something goes wrong, still will have a roof over the head.
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#23
Rental yield from hdb flats had never been so good until the last 2 yrs or so.
4 rm flat can command - abt 2.5k pm upwards
5 rm flat - as high as 3.8k

For simple calculation, 2.5kx12mths=30kx40yrs=1.2mil.
Not forgetting the owner has stayed in the flat for say 10 yrs free.
So 99yrs - 10 - 40 = still got bal. 49 yrs lease.
Bal 49 yrs - lease back to govt. for some living expenses
Sounds so good and easy, right?
Provided the economy stay so good for the next 40 yrs!
If this is not good enough, skarly at the end of the 50 yrs, the block kenna SERS, then U have a brand new flat again...
So you see, hdb flat can be such a cash cow! Provided we can find alternative accommodation somewhere during the renting out period.
Ok, just some random thoughts only...dun be serious!

Rental collected is in cash, whereas housing loan is paid for mostly by cpf.

It's not surprising if the cash collected is to help offset the 2nd property loan.

(19-02-2013, 02:41 PM)thefarside Wrote: Instead of the flats hitting the market as resale, people choose to retain their HDBs upon upgrading to private property. With cheap interest rates, you can carry a 1.5 to 2 mil loan with susbstantial support from the rentals of the HDB unit, instead of selling it to extract capital and reduce overall leverage.
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#24
(19-02-2013, 04:24 PM)etan Wrote: Rental collected is in cash, whereas housing loan is paid for mostly by cpf.

Perhaps the next measure should restrict CPF usage to a certain percentage of property loan monthly installments. Like 60% CPF, 40% cash.
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#25
Your suggestion does not seem impossible! Esp with today's gahmen.
There is already this Loan to Valuation thingy in place.
What's next?
Refer to this for more info:
http://www.housingloansingapore.com/loan...-explained

(19-02-2013, 04:39 PM)smallcaps Wrote:
(19-02-2013, 04:24 PM)etan Wrote: Rental collected is in cash, whereas housing loan is paid for mostly by cpf.

Perhaps the next measure should restrict CPF usage to a certain percentage of property loan monthly installments. Like 60% CPF, 40% cash.
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#26
(19-02-2013, 04:52 PM)etan Wrote: Your suggestion does not seem impossible! Esp with today's gahmen.
There is already this Loan to Valuation thingy in place.
What's next?
Refer to this for more info:
http://www.housingloansingapore.com/loan...-explained

(19-02-2013, 04:39 PM)smallcaps Wrote:
(19-02-2013, 04:24 PM)etan Wrote: Rental collected is in cash, whereas housing loan is paid for mostly by cpf.

Perhaps the next measure should restrict CPF usage to a certain percentage of property loan monthly installments. Like 60% CPF, 40% cash.

Or maybe allow dividends and profits from stock bought with CPF to be returned as CASH instead of back to CPF, so that it's on par with property.
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#27
(19-02-2013, 05:08 PM)smallcaps Wrote: Or maybe allow dividends and profits from stock bought with CPF to be returned as CASH instead of back to CPF, so that it's on par with property.

Great suggestion! maybe a better way to cool property by diverting attention to stock! Big Grin
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