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HDB or Private Property?

Updated: Mar 10, 2021

Why is it that HDB appreciation can never be comparable to private condominium?

Approximately 75% of Singaporeans stayed in HDB. The government have to keep HDB affordable for the majority. Hence, HDB prices will not increase too fast as compared to private.

In 2013, Mortgage Servicing Ratio (MSR) was introduced. MSR is a limit imposed by the MAS on how much money you can borrow when you take out a loan to buy HDB property or an EC. Under the MSR, a maximum of 30% of your gross monthly income can be used to repay your loan. This has made borrowing harder for many people.

To recap, the 2 debt service calculations are:- (1) Total Debt Servicing Ratio (TDSR) < 60% Total monthly payments on all loan payments including new property loan must not exceed 60% of total gross income (2) Mortgage Service Ratio (MSR) < 30% (applicable to HDB loan only) Total monthly payment on HDB loan must not exceed 30% of total gross income

It is evident that the new debt servicing policy has affected property buyers.

What are some of the financial adjustments made by property buyers/investors?

As a result of the new measures, property buyers who are determined to make their purchase, have instead made adjustments to their financial plans:

•Property buyers lower their budget by going for smaller units;

•There are some who initiated to clear their HDB loan, car loans or other personal bank loans or cancel credit cards before applying for property loan, in order to qualify for higher loan quantum.

•Those who are approved with lower loan amount, choose to top up with more cash/ CPF.

•Some buyers, who have previously considered HDB flat but are affected by MSR guideline, are going for private properties instead. This is illustrated in the following example.


Buying private property allow you to get higher loan amount compared to buying HDB flat. Couple A, planning to buy their first property, is considering whether to buy a resale HDB or private property. The couple is both aged 35 years with combined income of $5,000 per month, which is fixed basis. They do not have other loan commitments. Scenario A: Buying a Resale HDB Flat

  • Based on MSR of 30% of $5,000, the monthly payment on property loan must not exceed $1,500.

  • At interest rate of 3.5% (required by MAS) and over 25 year loan period (maximum allowed for HDB loan), the loan amount is about $300,000.

  • As this is their first property, they would qualify for 80% loan. Based on the loan of $300,000, the value of the property should not be more than $375,000.

Scenario B: Buying a Resale Private Property

  • Based on TDSR of 60% of $5,000, the monthly payment on all loan payment must not exceed $3,000.

  • As the couple does not have any other loan commitment, therefore the $3,000 can be taken as solely for housing loan payment.

  • At interest rate of 3.5% (required by MAS) and over 30 year loan period (maximum allowed), the maximum loan amount is about $660,000.

  • At 80% financing, the value of the property works out to be $825,000.

  • From the above example, it is possible for property buyers to obtain higher housing loan amount when buying a private property compared to buying a HDB flat.

Hence, instead of HDB, buyers might go to private since they are able to get more loan for private instead. This will affect the resale HDB market as buyers who can afford will go to private instead, and buyers who are on a budget will opt for BTO.

Dear HDB owners, how old is your HDB this year?

When your flat has a leasehold of less than 60 years, it may get harder to sell.

CPF usage is restricted and bank loans are tightened for potential buyers. With ample upcoming supply of new BTOs, buyers have more options to get in at a lower entry price. These factors may cause your HDB prices to go down.

As of 2018, about 7 per cent of HDB’s stock of one million flats – or 70,000 flats - are over 40 years old; and their leases will expire in about 50 years. While the lease expiry is still in a distant future for public housing flats, 191 private terrace houses along Lorong 3 Geylang will be returned to the state when their leases expire in 2020. The issue of lease expiry has garnered much attention after the government announced this in June 2017.

This came 3 months after Minister for National Development Lawrence Wong warned owners of older HDB flats not to take it for granted that the government would choose their homes for the Selective En bloc Redevelopment Scheme (SERS), following large sums being forked out for resale flats by some of them on the speculation that they would qualify for SERS. Mr Wong added that only 4% of older flats have in fact been selected for SERS since it started in 1995 and the vast majority of flats will be returned to the state when their leases expire.

Since then, there are still occasional reports of 30-plus-year-old flats in matured estates being sold for around S$1 million. But these are mainly due to special reasons such as the rarity of such units or the buyer being flushed with cash after a successful collective sale of a private property.

By and large, buyers are now more cautious about paying high prices for older flats, and rightly so, as they wise up to the reality that a flat with no more lease is worth absolutely nothing.

Private owners can easily downgrade with a sum of profit for retirement, but can HDB owners do the same?

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