Abbreviations:
- HDB = government housing developed by the Housing Development Board
- PR = permanent resident
As the saying goes, the grass is always greener on the other side. Many of my foreign colleagues lament that they are unable to get a HDB (only applicable for Singapore citizens and permanent residents) while the Singaporean citizen/PR will want to live in private housing at the very first opportunity, some even at their first job after graduating from college. Back to the question, why HDB or why not?
Simple reason is cost.
HDBs are typically lower in cost versus private property at the same area. Of course, there are million-dollar HDBs located at popular area such as Tanjong Pagar, Holland Road, Queenstown, etc. However, if you really compare both types of housing at the same area, HDBs are way cheaper. For instance, a 5-room HDB (approx. 112 sqm) at Holland Village area cost about $1.3 to 1.5M versus $2M for a 2-bedroom 75sqm private apartment.
The next best thing: grants for resale flats. If the monthly household income does not exceed $14K, it is possible to get the grants up to $80K (for 2–4-room flat) and $50K for 5-room or larger flats. No grants for private housing.
Next is loans: for private housing, you can only borrow up to a max of 75% and 5% must be in cash. Take the previous example, that is $100K cash upfront and loan is for $1.5M - you still have to come up with the $400K (later). For HDB, you can borrow up to 90% assuming you are taking the loan from HDB and $0 cash down payment (upfront cost is from CPF). Assuming you (and your partner) have worked a few years, that should be enough to get the HDB with “no money down”.
Thirdly, option fees: option fees for HDB BTOs are a flat amount of $2K regardless. For private properties, it is 1% for the option fee. Oh yes, for HDB, the $2K will be refunded to your CPF once you exercise your option for your HDB flat.
Another thing: interest rate. When I got my 2nd HDB about 5 years ago, I was ridiculed by many for taking the loan from HDB of 2.6% when the bank interest rate was 1.3%. Well, bank packages always (yes, always) revert to floating (fluctuating) interest rates after three to five years. Currently, the bank rate is 3.6 to 4.6%. HDB rate today is still maintained at 2.6% but not sure for how much longer…hopefully until I finish paying the loan.
Most, if not all, private housing comes with gym + swimming pool + carpark. These are part of the monthly cost, no matter if used or not. Err…most of my friends in private housing say they use the pool and gym probably 1–2x per month. Some even commented they cannot recall the last time they use the condo gym or pool. If you are a frequent user, then go private.
The only 2 good things about private versus HDB: resale and leasehold.
For HDB, you have to stay for 5 years (minimum occupation
period) before you can sell or rent. No restrictions for private housing - you
just have to pay the Seller’s Stamp Duty (as much as 12% if sold in the 1st year).
HDB are all 99-year leasehold whereas for private, there are some which comes
with 999 year or even freehold. Obviously, the 999-year and freehold are more
expensive but if you are buying an ancestral home for future generation(s),
then it makes sense.