The acronym “HDB” can deliver a range of emotions for any Singaporean looking to get their hands on the local housing ladder.
That’s because the process to get one is lengthy and then questions later pop up on what to do when upgrading to a condo.
All this means that figuring out the exact impact of it on our long-term wealth can be as complex as getting to grips with quantum physics (i.e., not easy).
So, if we want to build wealth, is upgrading from an HDB to a condo a “must have” or simply just noise?
We turned to the web’s favourite place for diverse and unfiltered opinions—Reddit—to see what the community had to say on this timeless question.
1. Invest it and let markets work
Reddit user firepathlion had some useful advice for this question. The short answer? No, it’s necessary to build wealth.
Why? Well, there are other vehicles to invest in that don’t require you dropping a massive amount of money (obvi!) on a down payment.
That comes with the attached caveat—you aren’t going to stick it in a savings account that’s earning virtually nothing in interest. If you do that over the long term, then buying a property is probably the better option.
However, firepathlion goes on to suggest that if you “invested it, you can also build wealth” but “the key is can you invest in a disciplined manner for the long term?”
I believe that to be true and a very valid point. I mean, look at the history of global stock markets. We know that—on average—the data say that your money will compound at 9-10% annually over the long term if you’re invested in global stocks.
That is very dependent on you “buying the market” and not punting/speculating on individual stocks though!
So, investing in a broadly-diversified, low-cost ETF will likely allow you to build wealth at a faster clip over the long term than upgrading that HDB to a condo.
My rating: ★★★★★
2. Think about cash flow
Another Reddit user brought up 2 very valid points that we don’t really think about when we romanticise the idea of buying property.
Whenever we think of property, it’s a big deal but we also get excited. It gets those endorphins racing because we can finally pick our own colours for the walls and get the right lighting (without having to put together a pitch deck for our parents on the benefits in the process)!
Yet we also forget all the fine details, financially, involved in buying a property. It’s a big purchase and most of us will have to take on a mortgage. That means debt and repayments.
At the end of the day, that’s not going to do anything positive for our cash flow. That’s the amount coming in and going out every month. An extra mortgage means we are going to have a lot, lot more going out each month.
Secondly, I agree with the Reddit user that liquidity isn’t going to be great because if you want to realise the value of that condo at quick notice, you can’t exactly just sell the kitchen for some spare cash and keep the rest of the flat. You need to draw up contracts, find a buyer and then sell the whole unit to someone.
That process will take months which isn’t ideal when maybe we need to have cash at short notice for an expense that we didn’t foresee.
My rating: ★★★★
3. Make memories and save moving
There’s always an intangible emotional dimension to the first home we purchase (my preciousssssss) and this applies to our BTO as well.
Making the most of those memories is a great point that NatAnirac highlights in their response. Also, let’s be real: moving is a real drag.
This person totally gets that. Having peace of mind and not having to freak out about a huge move into a new flat and all those associated costs involved(have you seen what moving companies charge these days?!) is something that we can’t put a monetary value on.
As the saying goes “money can’t buy happiness”. That may be a cliché but it’s certainly applicable to making memories in your BTO and not having to stress out about moving and taking on another mortgage.
My rating: ★★★
4. Buying another property is investing with leverage
User uhcnim makes a solid point about considering staying put in an HDB and not moving into a resale HDB and purchasing a condo, which was the original poster was asking about.
Separating your primary residence from investing makes sense to me, as you really purchase a home with the intention of living in it and having a roof under your head. In other words, I don’t think the monetary potential should be the primary reason to purchase the home you live in.
As for investing in property, uhcnim makes a great point about agents wanting to gain from selling individuals 2 properties.
Remember that property agents make money off commissions,so when putting down a big sum for a property it’s also worth thinking about how much goes to agents in fees.
Finally, a lot of us don’t consider the method we have to take on property when we invest into it. The response raises a super valid point; property is quite a unique form of investing because you’re actually taking on a significant amount of debt to be able to afford it.
That’s something you wouldn’t be able to do if you invested into, say fixed deposits or T-bills. So, taking on leverage gives you more options when investing into property versus other assets like stocks, bonds or cash-like products.
Does that make property worth investing into? I guess it depends on your goals. For me, if you have a property that you live in and are happy with, then the answer is “no” because purchasing an additional property is purely an investment decision.
Instead, I think taking a long-term view of stock markets and placing your investment dollars there will yield better returns—as historical data have shown to be the case.
My rating: ★★★★