Why I bought a condo instead of a HDB flat at 35

my terrible experience helping my dad sell off his resale flat convinced me not to follow in his footsteps.

For years, I was undecided if I should buy a resale HDB flat or a condo apartment. So, I waited and waited till the year I turned 35.

However, back in 2010, my dad received $1million when his private condo underwent an enbloc sale. Against my advice, he paid over $400,000 in cash for his 4-roomed HDB flat. He also purchased a retirement house in Kulai, Johor. (He was a Malaysian and still has relatives there. He now lives there after he sold his 4-roomed flat.)

In 2018, I helped him to sell his resale flat and was shocked that he lost almost $70,000 – and that does not even include his renovation costs! He wasn’t the only one whose HDB flat made a loss. I’m currently staying with my brother and sister-in-law in their resale Executive Apartment (EA). We thought about pooling our funds to buy a terrace house together, so we looked into his flat’s valuation. They’d lose about $20,000!

These experiences made me realise that just like buying a car, a resale flat will also depreciate so it is not really a sound investment.

Why not buy a brand new BTO flat then?

A BTO flat would have been good but it takes time to build. As a single, I can only ballot for a BTO when I turn 35. By the time I wait for it to be built and meet the Minimum Occupation Period (MOP) of 5 years before I can finally sell it off, it’d be at least 8 years later and I’d be in my 40’s.

So, I decided that I’d buy a private condo instead of a BTO flat, as I believe I’d make a better profit when I sell it.

Brand new VS resale condo

In May 2020, I bought a 2-bedder, 753sqft at Florence Residences in Kovan which will be ready in 2022/2023. My favourite thing about my unit is its enclosed kitchen, which is hard to find in a 2-bedder these days. I cook a lot to eat healthily and I enjoy hosting friends at home. Its North-South facing means it’s breezy and doesn’t have afternoon sun. I also enjoy an unblocked view. The best part of the facilities is its huge pool. I’m a diver so I like spending time in the water.

I’m okay with waiting one or two years for a brand new condo because I believe it has better potential for capital gains. But I also admit that I’m too lazy to renovate a resale condo! My classmate bought a resale unit at Kovan Regency within the same month. Similar size, both 99-year leasehold projects and we paid about the same. Hers is on level 3 or 4, while mine is on level 17, the second highest level. She just finished renovating her unit and has moved in. She spent quite a bomb so she ended up paying way more than me. But should we both sell our homes a few years later, the valuation for my unit will probably be higher since it’s newer.

At my age, I don’t want to take 8 long years to cash in on a property investment.

Leasehold VS Freehold

My original plan was to get a freehold condo. However, my agent friend gave me a new perspective when he asked me how long I intended to stay in my first home. As this is my stepping stone to a better 2^nd home, he advised that a 99-year property will be a better choice because it gets me more bang for my buck with more space.

I was considering between Tedge, a freehold 42-unit boutique mixed development with basic facilities, and Florence Residences, which has full condo facilities. Both units are the same size and within my budget. I ultimately chose Florence Residences as my 4 other siblings are staying in Hougang and I want to live near them.

More importantly, the future development plans around Florence Residences beats Tedge’s. When the new Cross Island Line MRT interchange is completed at Hougang MRT station, my condo will be just 4-5min walk to a new MRT entrance. I’ve learned from property seminars that the value of properties around interchanges will increase. Plus, with the Government’s plans to develop Defu industry park nearby, there is also a catchment of expat tenants. The rentability potential at Florence Residences is very good. Finally, when I analysed the resale value of small boutique freehold developments and 99-year leasehold developments in good location, the returns for 99-year projects is better.

Invest early = make a profit earlier

Besides my friend at Kovan Regency, another also bought a resale condo during the COVID-19 period. We’re all single and all said the same thing: this home is not for long. We’ll sell and use the profit for our next home. If we’d planned earlier, we should have purchased 2 years ago. Back then, there was no restriction on the re-issue of the Option To Purchase (OTP) private properties; but now, it expires 3 weeks after it’s signed. Had we taken advantage of it back then, we could have made a profit already! (NOTE: Previously, to close a sale, many developers offered investors the chance to lock in their unit at an agreed price, but re-issued multiple rounds of OTP until the investors were ready to exercise the OTP. However, the Singapore Government implemented new rules to ban this practice which kicked in on 28 Sep 2020, to encourage financial prudence among investors.)

Advice for first-time buyers

Start with a condo if you can afford it, as the profits can help you pay for your next home and maybe even cover it all. I’d spotted a property in Telok Kurau for my dad back in 2010. He could have afforded that and still buy his terrace house in Malaysia but he didn’t listen to me. I recently showed him my calculations. He’d have made a profit instead of suffering his $70,000 loss from his resale HDB flat!

Next: A freehold unit, buying a 2^nd property, or even (gasp!) buying a resale HDB flat! And a retirement home in The Philippines!

Because I travel 60% of the year for work and previously lived in America and Indonesia for a year each, my original plan was to buy a foreign property for investment and retirement but my family and friends persuaded me to invest in my own home in Singapore first. I’m still planning to buy a foreign property for retirement in future, in the Philippines. I love the sun, sand, and sea! I’ve done my research and the returns are currently one of the highest in the world. At least I know there’s a cheaper place for retirement. My CPF money is not enough to retire comfortably in Singapore!

But in the short-term future, I may cash in on my condo after 2029, after the MRT interchange is ready, and buy a freehold unit as my permanent home. Or, I may invest in a second property to collect passive rental income. Or, I may sell and buy a bigger resale HDB flat as my permanent home! Yes, I don’t mind an older flat as long as it’s near amenities, the location is good and I have enough space. If I get an Executive Apartment or an Executive Maisonette, I can rent out my extra bedrooms for passive income, if needed.

The big difference in getting a resale flat now VS in future is this:

Buying a condo now gives me the chance to make the profits that a resale flat won’t.

If I’m lucky, it may even cover the entire cost of my future home, be it another condo or a HDB flat!