Posted on 03 Oct 2019
Really want to get our own house nearer to the central area. However, we can only afford older resale flat e.g. Ang Mo Kio area. Any advice?
For a couple in your late 20's, I wouldn't recommend getting anything older than a unit built in the 1990s. It would dramatically reduce the amount you can get in grants and loans, and would put a cap on how much CPF you can use. Instead, pick a flat that can cover you and your spouse til the age of 95.
My advice would be not to regard your home purchase as an investment. Rather, think of it as a lease for you to build a family in the long term.
That said, here are the pros and cons.
Much shorter waiting time compared to BTOs
Resale flat = can pick a location closer to your targeted (central) area. BTOs are typically in far-flung locations or just out of your control in general
Older resale flats are typically larger than the shoebox sizes you'll get with BTOs
The larger flat size for resale vs BTO = better for family planning in future
More space = possibility of renting out one or more unused rooms for extra income
With the new Enhanced CPF Housing Grant + Family Grant + Proximity Housing Grant, you could potentially get up to $160k in subsidies depending on your combined income
Generally much better amenities and closer to MRT stations
Know exactly what you're getting before you move in (with BTOs, you just gotta select your flat and hope for the best)
May have to fork out more in renovations as a 20-year-old flat would likely need a lot of plumbing, electrical updates, etc.
If your goal is to upgrade in future when you have more income, you may find it difficult to sell off an older flat
Older flats depreciate in value based on the remaining lease
I am not sure how old is "old". Many people have different definitions, so let me roughly share some aspects I know of
the nearer to the expiration of the leasehold (99yrs), the lesser banks are willing to lend you. If the banks are still offering 80% (market rate) of the resale price as the loan, then the HDB flat may not be that old (phew.)
A few older units- banks are no longer offering 80%, but 50% 60% etc instead. Case by case.
If the couple intends to sell and move to another place later, then may note that by the time they intend to sell, the unit may attract fewer buyers due to 1)-less bank loans
As it gets closer to 99 expiration, the unit price should drop, depreciating like a used assets
Some years ago I bought an apartment that has only 60+ years left. I calculated that if I rent it out for the 60 yrs, the total return is more than what I am going to pay for the resale price + interests + more. Hence I decided the unit is worth the age.
You can do this similar type of exercise.
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