I am sure you would have seen the headline news about million-dollar HDB flats. Every once in a while, a record-breaking transaction will appear in the news.
Even Diana Ser did a short video on the topic.
Million Dollar HDB Flats Are An Outlier
In 2018, there were 71 flats that was sold for at least $1 million dollars.
In the grand scheme of thousands of HDB resale transactions, this is a very small number.
However, HDB flats are public housing which have strict regulations imposed on them.
The mission of HDB is also to provide affordable homes so it is very likely million dollar HDB flat are exceptions and not the norm.
That being said, are million dollar HDB flat are like the canary in the coalmine? An initial indicator of property prices to come?
Million Dollar HDB Flats = Warning Signs of Rising Inflation?
While the number of million dollar HDB transactions are very limited, there is an increasing number of HDB flats being sold above the $600K – $900K mark.
Interesting isn’t it?
In Bedok – a mature estate with an ageing population – flats that are less than 10 years old can be sold for $750K.
In Bishan – a highly-sought after estate – old HDB flats which can be almost 30 years old – can be sold for $700K and above.
In Clementi – on the other side of Singapore – we see a similar trend of flats that less than 10 years old being sold for $700K to $800K range.
Do take note that old flats selling at high prices are also an outlier – it doesn’t happen regularly.
The million-dollar HDB flat transactions is a reminder.
The sub-million dollar HDB flat transactions is another reminder.
The relentless increasing prices of properties is another reminder.
All these are actually signs of an invisible and insidious force at hand that can significantly impact your finances or future retirement plans.
The meaning of the word insidious is stated below:
It is not just the name of a series of horror films.
It also describes the invisible and harmful impact of inflation as it creeps up quietly on you.
Here are 4 invisible impact on you and your daily living in Singapore – if you are not careful.
#1: Rising Cost of Living
You can check out the inflation rate at MAS website.
Over the period of 2006 to 2016 – the inflation rate was higher than the CPF Ordinary Account interest rate of 2.5%.
Remember inflation in the short term seems to have very minimum impact. Your kopi-o costs 10 cents more this year than last-year.
But overall it adds up in an insidious manner – after 10 years – you realize that money sitting in the bank actually loses its value due to inflation.
#2: $600K – $900K flat transactions are rising
The flats below are centrally located near the Central Business District. Such locations typically demand a higher price.
The flats below are the DBSS type. They are HDB flats essentially except they have different designs and come attached with a balcony.
You can see the premium prices these HDB flats command – close to the prices of a private property.
I shared this transactions to remind YOU that HDB flats are not just sold between $200K to $500K range. They are also hitting the upper limit towards $1-million prices.
Let’s chew on that for awhile that public housing like a HDB flat which has various restrictions – can be sold at these high prices.
#3: If you have a million dollars – is a HDB flat really the best choice?
Do take note I am just merely comparing the quantum amount.
Below are some recent private property transactions whose prices are comparable to the $800K-$900K HDB flat prices.
While those in the price range of $700K are studio units which might not be suitable for families, there are available 2-bedder units that has been sold at below $1 million dollars.
Below are some recent resale units in Lakefront Residences that has been sold. Some has transacted below $1 million dollars.
Of course, these private property units will be small and not suitable for large families.
Studio units might be too small for your needs.
But if you are willing to top up slightly more, you might as well purchase a 2-bedder private property that comes with more amenities and lesser restrictions.
There is also greater opportunity for capital gains if you choose the correct development.
But because you set your heart in buying HDB – you miss out on all the other positive points investing in a private property brings.
#4: Inflation Is Not That Bad If You Are Reaping The Benefits
The truth is this – inflation is a double-edged sword.
Inflation is very bad for passive assets like your cash that merely sits in your bank account – underutilized as the money is not being put to work.
Your money loses its value gradually.
However, there is a reason why the wealthy park their money in properties. It acts as a hedge against inflation.
The beauty of inflation is that as prices go up – it pulls up your property prices as well.
That is why the allure of property investment remains strong and why Singaporeans continue to flock to showflats and new condo launches.
We Live In An Era of $2000 PSF Units
Inflation is unavoidable.
We live in an era where units are being sold at $2000 PSF – in Woodleigh!
There were many interesting comments on this FB post.
I like to highlight one of them.
Just nearby the Woodleigh area, the Bidadari BTO launched in 2015 was selling at $500K and above.
Despite the high price tag, the demand was so high and flats were oversubscribed by 4 times in just 24 hours.
Imagine, the prices of these Bidadari BTO flats after they hit the 5-year Minimum Occupation Period?
In the future, property PSF prices could hit newer peaks.
Morgan Stanley has already made a similar prediction back in 2017.
Inflation is relentless, unavoidable and insidious – unless you learn how to leverage and protect yourself from its negative effects.
Protect Yourself From Inflation
There are several ways to protect yourself from inflation.
You can try to:
- increase your salary/income to cope with rising costs of living. This requires learning new skillsets by investing in time and knowledge.
- increase your returns from investments. Depending on the type of investment – it might also require investing time, knowledge and capital.
- reduce your costs of living. However, there is a limit on what you can do because you can only cut so much.
Property investment to a certain extent – it is a passive form of investing. Your monies are parked in your property.
However, property is a great hedge against rising inflation.
In any investments, there are always risks. It can be a small risk. It can be a huge risk.
Alot of things are actually beyond your control.
You cannot control inflation, you cannot control property prices, you cannot control property policies.
So instead – focus on what you can actually control.
You can control your decisions.
You can control your ability to understand, interpret, and make informed decisions.
The cost of goods and services will always be increasing.
But your income increment might not be aligned with inflation.
Your savings will be devalued if you do not try to mitigate the effects of inflation.
If this becomes the norm, just imagine the impact of inflation for the price mechanism of everything on business to costs of living.
For me, what I write is based on what I know – and that comes with time and experience.
What is important is to get the big picture right and sweat the small stuff later.
If you are interested to leverage inflation and use it as a positive force for your finances through property investments – I invite you to contact me for a no-obligation discussion. Drop me a whatsapp message or a message via the contact form.