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Thread: My first property foray - a HDB flat - ended in a $100,000 loss

  1. #1
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    Default My first property foray - a HDB flat - ended in a $100,000 loss

    MY FIRST foray into the property market was the purchase of an HDB flat in year 2000. There weren't any HDB grants during my time and we couldn't afford a flat near our parents as we had only started working.

    We couldn't afford the Executive Condo either. My starting pay was only $1,850 per month to be exact.

    There were only 3 choices of location -- Woodlands, Jurong or Sengkang. Not much of a choice, so we selected the "cheapest" location in the north as Sengkang was much more expensive.
    The problem with picking the north zone was that it was very far from our parents' place. Once the baby came, we had to move near to the care-givers.

    In the end, we hardly stayed in our executive flat which cost $380,000. The problem was that under HDB rules, we could not buy any property within 5 years and could not lease out our home either. The rules were extremely strict. In the end, we kept it empty for almost 5 years. To top our stupidity, we spent $40k on renovations.

    The chart shows you we bought exactly at the peak of the market cycle and sold at the bottom. What "perfect timing"!

    You can see the market was in a doldrums from 2001-2005.


    Lesson 1 - Buy a property only if you intend to stay in it or rent it out.

    We couldn't stay in it and we couldn't rent it out due to the rules. It was basically a white elephant. We could have 'secretly' rented it out but it was illegal to do so.

    Having said that, if you own a HDB flat today and are eligible to rent it out, my advice is that you keep the goose that lays the golden egg unless the offer is too compelling and you have better use for the proceeds. The yield from HDB flat is one of the best you can find.

    Lesson 2 - Don't buy a property that comes with so many restrictions

    The fact that I could not buy another property or sell within 5 years were restrictions imposed to ensure that we did not abuse the "market subsidy"which we supposedly received when we bought the HDB executive flat.

    Lesson 3 - Don't be greedy when buying HDB flat!


    "It took me more than 10 months to find a buyer and the buyer was a PR family which offered me $295k for my flat."

    It was very funny to see the reactions of people when I told them I lost money on my HDB flat. They couldn't believe it. I have to tell you that I was greedy. I thought to myself, "HDB sure can make money if you buy directly from them".

    I could not be more wrong. Hahaha. I bought the biggest flat available to us instead of 4- or 5-room flats and as you know, executive flat received the lowest "market subsidies" from the government.

    After 5 years, I decided to sell my flat at a loss and move on but the joke was that there were many unsold units in my block even after 5 years. At the time when I was selling my flat, HDB was selling the unsold units in my block for between $220k to $280k.

    It took me more than 10 months to find a buyer and the buyer was a PR family which offered me $295k for my flat.

    The real joke was HDB wrote a letter to me, wanting an explanation from me why i sold my flat for $295k when the valuation was $340k. I gladly replied that I would love to sell it to them for $340k if they were willing to buy. (As a side note, my brother-in-law bought a 4 room flat in Sengkang and after 5 years, sold it for a good profit).

    Lesson 4 - Cut loss and move on

    By 2005, I had lost enough money from the stock market to know how to cut loss and learn about market cycles. I wanted to free up my CPF savings to buy properties in better locations and catch the next property cycle. The fact that I didn't even live in my flat and couldn't rent it out provided the catalyst for me to do something about it.

    As you can see,my first foray into the property market is a painful one. Lost at least $100k if I include part of the renovations. Sigh.

    It was a painful lesson which I will never forget but I will treat the $100k as an expensive school fees. There are no better schools to teach you about what life really is.

    Epilogue: The fortunate thing is we didn't have to top up the "CPF losses" suffered from the sale but there wasn't much money left anyway. :-) The loss almost wiped out our CPF accounts and we each had a couple tens of thousands left.

    We had been working for more than 8 years and had been diligently saving up but the combined amount wasn't fantastic -- probably around $100k. Coupled with the remaining $50,000 in the CPF, we had a capital of $150,000 to buy the next property.

    https://www.nextinsight.net/story-ar...-a-100000-loss

  2. #2
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    The article does not seem right. I remember in year 2000 minimum occupation period is not 5yrs. It is only 2.5years if u loan from hdb. The writer bluff through the story??

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    Quote Originally Posted by star View Post
    The article does not seem right. I remember in year 2000 minimum occupation period is not 5yrs. It is only 2.5years if u loan from hdb. The writer bluff through the story??
    It has always been five years when bought direct from HDB.

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    Quote Originally Posted by Pynchmail View Post
    It has always been five years when bought direct from HDB.
    The Know and the Don't Know and some refuse to Know.

    You are right 5 years MOP, only resale and SERS got less than 5 years MOP before the CM.

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    The writer named 4 lessons learnt from his investment loss in HDB flat. He did mentioned that he bought the HDB flat during the peak (mini bull run) of 1999 to 2000 thereafter the market went into a doldrums over the many years. He should also include Lesson 5 - avoid buying during the market peak. He should have bought his HDB flat between 2001 to 2006, a good 5 year window for him to buy.

    For someone like him without any financial buffer, buying during the market peak carry huge risk. Having said that, I believe many weak buyers like the writer who bought BTO flats between 2011 and now carry with them the same risk. You need to be financially strong to buy during the market peak.

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    Why 1999-2000 peak only two years but current peak is 7 years???

    Anyway it's not about the peak but also the type of property one buys.

    Quote Originally Posted by Amber Woods View Post
    The writer named 4 lessons learnt from his investment loss in HDB flat. He did mentioned that he bought the HDB flat during the peak (mini bull run) of 1999 to 2000 thereafter the market went into a doldrums over the many years. He should also include Lesson 5 - avoid buying during the market peak. He should have bought his HDB flat between 2001 to 2006, a good 5 year window for him to buy.

    For someone like him without any financial buffer, buying during the market peak carry huge risk. Having said that, I believe many weak buyers like the writer who bought BTO flats between 2011 and now carry with them the same risk. You need to be financially strong to buy during the market peak.
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

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    Executive flats are probably in the range of 500k now.

    Since the post was made in 2012, we can add one more lesson.

    Last lesson: sometimes it's all about the holding period...
    The three laws of Kelonguni:

    Where there is kelong, there is guni.
    No kelong no guni.
    More kelong = more guni.

  9. #9
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    Quote Originally Posted by Kelonguni View Post
    Why 1999-2000 peak only two years but current peak is 7 years???

    Anyway it's not about the peak but also the type of property one buys.
    Quote Originally Posted by Kelonguni View Post
    Executive flats are probably in the range of 500k now.

    Since the post was made in 2012, we can add one more lesson.

    Last lesson: sometimes it's all about the holding period...
    Didn't I qualify that buying into the peak needs to have financial buffer?

  10. #10
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    Quote Originally Posted by Arcachon View Post
    MY FIRST foray into the property market was the purchase of an HDB flat in year 2000. There weren't any HDB grants during my time and we couldn't afford a flat near our parents as we had only started working.

    It was a painful lesson which I will never forget but I will treat the $100k as an expensive school fees. There are no better schools to teach you about what life really is.

    Epilogue: The fortunate thing is we didn't have to top up the "CPF losses" suffered from the sale but there wasn't much money left anyway. :-) The loss almost wiped out our CPF accounts and we each had a couple tens of thousands left.

    We had been working for more than 8 years and had been diligently saving up but the combined amount wasn't fantastic -- probably around $100k. Coupled with the remaining $50,000 in the CPF, we had a capital of $150,000 to buy the next property.

    https://www.nextinsight.net/story-ar...-a-100000-loss

    how much is that executive flat worth today? I did a cursory check, and a blk 797 exec flat (woodland drive 72) x value is now 540k (built in 1997).
    https://www.srx.com.sg/listings/7521...ment-rare-unit
    the writer should have just kept the flat instead of selling at a loss. I think the lesson here is "don't buy the wrong property for you".
    Last edited by tonymontana; 28-05-17 at 13:11.

  11. #11
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    Quote Originally Posted by tonymontana View Post
    I think the lesson here is "don't buy the wrong property for you".
    You are right, this is the most important lesson. Not many will agree until they bought and live in it.

    1988, I can get a 5 room point Block HDB at Bukit Panjang for 75K but I bought a 4 room A model at Kim Keat Ave for 81,300.

    All my colleagues say I am stupid to buy a 4 room instead of a cheaper 5 room.

    My parents and in law stay in the east, to buy the west I need to travel the distance and when I have children it is even worst.

    There is story of people buying a big unit at Yishun and after 1 year returns the unit to HDB.

    Buy property where you don't need to travel much, it saves you time and also money.

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