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We met Mr and Mrs Tan 10 years ago for a consultation session. They were in their thirties and had 2 young children. Their HDB had reached the Minimum Occupation Period and they were thinking of upgrading to a private property. At that point in time in 2013, new cooling measures started to kick in – the property prices were stabilising and were much lower than what they are today.

Mrs Tan was excited to move forward with the proposed plan as the financial calculations made sense for them. The HDB prices for their area was at its peak and with the cash proceeds from their HDB, they could easily upgrade to a private property. However Mr Tan was more conservative and felt that it was not the right time to make a switch. They had 2 young children and were very comfortable staying in the HDB. They thought they would wait it out a little longer for the HDB prices to increase further. In the end, they decided to postpone the plans until their children got older.

This year 2023, they reached out to us again and decided that it was time to put their plan into action now that their children have grown up. When we sat down with them for the financial calculations, we realised their HDB did not increase much in value and it was only slightly higher compared to the value 10 years ago. Our heart sank because we all know the price index of HDBs has been increasing so quickly especially in the last couple of years. However the HDBs in their area was still pretty stagnant.

At the same time, private property prices have risen a lot faster than the prices of HDBs, the price gap between these 2 property types have widened over the years. This meant that it was challenging for them to proceed with the plans of upgrading. This was a triple whammy for them:
⁃ There was opportunity cost as their private property would have appreciated over the 10 years if they have decided to upgrade
⁃ Their HDB value remained stagnant in today’s market
⁃ Age caught up and the loan tenure from banks have shortened which meant their loan quantum was lower

In the end, Mr and Mrs Tan decided to drop the idea of upgrading as private property prices have risen so much and it was not possible for them to make the switch. It breaks our heart to see clients in this situation. We all know that the cost of living in Singapore has risen so much and the only was to hedge against this is to have real assets that appreciate with time.

Lessons we can learn from them

1. The best time to proceed with upgrading is NOW especially when the financial calculations make sense. You will never feel 100% ready and you just have to take that leap of faith.
2. The price gap between HDBs and private properties will only get wider and wider as time goes by. Don’t wait until it’s no longer within your reach.
3. The longer you wait, the lesser the loan tenure and this will affect the loan quantum you qualify for.
4. Many of you can relate to Mr and Mrs Tan in that if they had taken action to upgrade 10 years ago, they would be reaping the benefits and gain healthy capital appreciation right now.

We hope this sharing has provided some insights to you in case you have been sitting on the fence. Remember to choose your hard – do you want to live the life of regret knowing that you could have made the move but decided not to, or do you want to bite the bullet and take action knowing that your future self will thank you for? Both situations are hard, so why not choose the one that makes you a healthy capital appreciation.

If this resonates with you, feel free to reach out to us and we will be glad to assist you in your upgrading journey.