The landed property segment is one of the smallest in Singapore. Partly because it is so exclusive and limited – we tend to have an impression that those who stays there are rich, privileged and successful.
So is owning landed property a very difficult goal and near-impossible?
Let’s explore.
The Landed Property Segment In Singapore
From Q4 2008 to Q2 2018, the total stock of landed homes rose 6.4 per cent, from 68,761 units to 73,150 units.
Yet, the total stock of non-landed homes went up by about 70 per cent from 172,443 units to 293,593 units over the same period.
(Source : https://www.businesstimes.com.sg/hub-projects/property-2018-september-issue/right-time-to-buy-landed-property)
In 2018 – there was 67,900 landed properties in Singapore.
Out of which – about 5.1% of the Singapore population are staying in landed (2018)
The Shift From Landed Property To HDB
Back in 2018 – I helped to handle this transaction of selling off a landed property and purchasing their next property – which was an EA HDB flat in Jurong.
They bought this freehold terrace property back in 2011 for $2 million.
In 2018 – I helped to sell it for $2.42 million.
Below are some of the important figures:
- Estimated Selling Price $2.42M
- Outstanding Loan $1.5M
- CPF contribution with Accrued Interest $100k
- Cash Proceeds $820k (including the initial downpayment when they bought)
Selling a landed property is tougher than selling a HDB flat. With a much higher quantum, this means a limited pool of buyers.
But with proper marketing and some good luck, I managed to sell it off within 2 months.
(We began discussions in Jan 2018 and the house was sold by 21 March 2018.)
With the cash proceeds – they bought a $500K EA flat in Jurong.
Why The “Downgrade”
On first glance, most people will jump to the conclusion that “oh no – the family is not doing well. From landed downgraded all the way to HDB!”
But that is also not true. Money is just money. It is meant to be shifted around.
And smart investors know when it is time to extract the most value from those monies parked in the various assets.
By selling the landed property – they unlocked their gains and are able to extract those gains for other purposes.
It also allows them to free up their names and buy another property if they desired.
In this case also – with them getting older – the idea of climbing stairs everyday is not so appealing. With the older children moving out – it also gives them a smaller space that suits them far better.
The EA flat offered the size they wanted at a familiar location for them. It was of good value, economical and near convenient amenities – suitable for the next stage of their lifestyle as retirees.
Challenges Faced In The Process
Selling a landed property is far more challenging than buying a HDB flat. So my focus was on selling the landed property first.
At the right price – it will be let go.
At the same time, negotiating with the right buyer was also important to provide some flexibility. In this case – to allow previous owner to rent for 3 months.
Why? It is to provide some time for the previous owner to have their flat renovated before moving in.
The timeline for managing the move was very important – so I also had to find a HDB owner who was eager and ready to sell.
The best fit was the HDB seller is one that has vacated the house and purely selling. In this case – the seller happened to be a HDB upgrader who had shifted to an EC and was now focused on selling.
A perfect match!
How Invisible Rules Hold You Back
There is no rule that states that it is wrong to stay in a HDB flat after staying in a landed property.
But for most people – it is perceived as a downgrade. And in our Asian culture – it seems like a loss of face.
This is a form of invisible rule that we imposed on ourselves which we unconsciously follow.
However this is also a type of thinking that will constrain our thoughts, our beliefs and our behaviour.
Be careful if you find yourself coming up with multiple reasons to keep something and maintain the status quo.
It might to your detriment.
In this case – buying the landed property was also a good investment – they managed to make some gains from it as well.
But those gains can only be extracted by selling it and buying something else that is far more affordable.
Have you considered any rules that you imposed on yourself?
Conclusion
The main reason I wrote this is that there are many paths to profits and doing well in your property porfolio.
From landed to HDB might not seem glamourous but just imagine:
- They stayed in a landed home for 7 years and enjoyed that lifestyle
- Technically they stayed there for free
- And they made a nice $400k profit from the sale
That is the power of leverage in property – if you make it work for you.
Most importantly – they made the most pivotal decision – to exit from their beautiful landed home and the lifestyle – to cash out on their gains.
How many of us are willing to do that and let go of a home and all that it represents – to secure our future retirement?
Something to think about 🙂
Have questions about your own property choices? Let me know. Drop me a whatsapp message or contact me via the form here.
Hi thank you for your article and you are spot on about the need for such a big house, climbing up the stairs and staying for “free”.
I want to ask what do you mean by freeing the names to buy another property? You mean the EA can be under 1 name?
Hi William
Thank you for your comments & feedback.
For this case :-
The landed property was under 5 names – parents + 3 children.
The EA was bought under public scheme : parents name + youngest child.
Could they have bought the EA under 1 person’s name alone?
For this case, parents are in their late 50s and semi-retired.
The youngest child is not yet 35 years old so he does not qualify for the single Singaporean citizen scheme.
They bought the resale EA under Public Scheme using bank loan.
They decided to include the name of the youngest child as the 3rd owner as he is staying with them and he can help support the monthly loan repayments and contribute his CPF to the EA.
The parents can choose to fully paid the flat but prefer to keep a portion of the cash proceeds from the sale of their old age.
Hope this answers your question.