Private property or HDB flats?
In Singapore, buying private property is something that speaks of wealth. Real estate investments are quite important in this city-state, and owning several houses guarantees well-being from a financial point of view, due to some factors, such as the CPF interest rate, the tolerance to interest rate spikes and the availability lower interest rates for the wealthy.
Private owners pay lower interest rates than HDB flat owners, even though HDB flats cost less. The rate difference ranges from 0.9% to 1.2%, which can be quite significant. The explanation is that, for private property, a bank loan is always the option, with rates ranging from 1.4% to 1.7%, while the HDB concessional loan is around 2.6%, since it is fixed by 0.1% above the CPF rate.
However, when choosing a bank loan, you should consider your tolerance for interest rate spikes, as bank loan rates are variable, meaning they can easily go up or down, making them in a riskier option for the average Singaporean. They can’t afford to get too high. The advantage of HDB’s concessional interest rate loan is that it is virtually constant, meaning there is not a high risk that it will rise dangerously over the life of the loan. In other words, HDB apartment dwellers cannot afford private property, because they cannot afford the risk involved.
those who they can paying a bank loan has more to benefit from CPF (Central Provident Fund), too. If you buy a house and decide to make your house payments with CPF money, which is an acceptable option if you take out a bank loan, your CPF money is likely to grow at a much faster rate than the loan initially. , and as you pay off more of the loan, your monthly payments decrease, due to the fact that your mortgage loan gradually amortizes while the CPF grows at 2.5% compound interest. If you use the HDB concessional loan in this case, the interest rate is 2.6%, that is, 0.1% above the current CPF rate.
HDB flats must continue to be public housing, a fact that has led to some measures being taken, such as the decoupling of the prices of new flats from the prices of resale flats, which makes these flats a less important asset than the private property.
Therefore, when it comes to the ultimate advantage of private property in Singapore, buying private property is unrivaled as it is simply a means of becoming richer and a much better asset.