Sunday, April 11, 2010

HDB flat a valuable asset ?

There has been alot of discussion recently about HDB being 'affortable' and it being a 'valuable asset' and even a 'profitable investment'.

Mr Leong Sze Hian has written extensively about it and he has given convincing facts that with the steep increase in price in recent years it is not affortable to the common mass anymore.

Thus, I will share my personal experience on whether it is a 'valuable asset' or even 'profitble investment' to the average citizen like myself who purchased a HDB flat mainly to stay in it with my family.

I got my 4 room flat in 1984, the selling price was about $67K. I took $48K in loan from HDB and the interest rate that time was 6.25%. Repayment period was 20 years. In total I paid $23K in interest which amounted to a whooping 47% of my loan. So in reality my flat cost me $90K.

The myth the government is trying to have us lap up is that we will make a 'hugh' profit selling our flat. Now, we are only average citizen who just want a stable home, so presuming I downgrade to a 3 room flat, the difference between 4 and 3 room flat now is about $100K.

Since I paid $90K for my flat, effectively I only make a profit of $10K over 26 years (2010-1984) of 'asset investment'. So my average return per year is only $384 ($10K divide by 26 years). Surely this is very poor return, even without taking into account the yearly inflation. And in order to have $10K of return after 26 years, I have to downgrade.

If HDB flat is such a 'valuable investment' and 'profitble' as the government would have us believe, should not I be upgrading instead ? I would have been better off if I have bought a private property instead years ago and not a HDB flat.

There are many ways to look at statistics. We have been presented with a rosy picture all the time, but reality speaks otherwise.

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