Cross the Bridge and Burn It

Hi Nix, 

First and foremost, thanks for your wonderful blog of ideas and accounts on your stay in Perth. This is my first time to bug you on sound hdb/migration advise (wont be last I'm sure). 

My hubby and I (35 and 30 years old respectively) applied for a BTO Punggol waterway 5rm unit back in 2011 when we first got married. Fast forward a kid later in 2013, we secured our skilled occupation visa back in Jan 2013, and have been saving since for the big migration. 

The BTO project was slated to complete in Q3'15 but to date no news. Concurrently, we booked our one way tickets to Melbourne (15 Aug) with contemplating thoughts of cancelling the BTO upon our departure. 5% deposit from our CPF has paid up $25k towards the choice unit. If we get the keys to the unit, we have around $150k to wipe off from CPF and the rest $200k on hdb loan - works out to $1.2k per month instalment repayment. 

Friends and relatives kept urging us to keep the BTO as a safety net... in case we dont "make it" there, there is a home to come back to. In the meantime, rent out 2 rooms legally till 5 yr Minimum occupation period (MOP), thereafter sell or upgrade to condo. Take it as a sound investment. 

Our main concern is, we wont even get to meet the MOP considering we will be out of SG for some time. Furthermore, we will both be unemployed by the time we leave SG, how will HDB recalculate our loan eligibility? 

I read on forums that HDB grant discretion on case by case basis. If after 5 yrs i intend to sell the house and do not meet MOP, HDB will repossess and pay 85% of the purchase value.

I am not asking you as a HDB call centre, I have gotten in touch with them and was presented with the facts above. What we look to you for is sound advise and a voice of reason amidst this mayhem of a HDB unit. To keep or not to keep?

Sincerely, 
Y


Hi Y,


Firstly, congratulations and good choice of making Melbourne your home. It is certainly not as full as Perth so more Singaporeans should make move to Melbourne.


There is no sound advice to your question unless you to have full clarity of your goals. Ask yourself these questions:


How do you define 'making it' in Australia?
Will you return to Singapore if you 'make it'?
Will you return to Singapore if you do not 'make it'?
Do you foresee a good housing market in the next 30 years in Singapore?
Will your friends and relative take up responsibility if your sound investment go bad?


Your answers to the above will lead you to your decisions.


Now about dead-locking yourself in the scenario you take up the BTO flat. If you return to Singapore once a year for about a month each time, it will take you 60 years to clock a 5-year MOP in order to qualify you as legal sellers, according to HDB's current policy of fatuity. So let's not think of profiting from Say if you decided to sell it at 85% of your purchase price X years later, will your rental collected over X years cover this 15% loss? The equation is simple: HDB will makan $52.5k off you. Say if you plan to sell the place after 4 years, you will need to be able to rent up your rooms for $1093.75 a month in order to break even (not factoring inflation and interest rates). Will you be able to do that? If not, you will need to rent it out for a longer period to break even or get positive returns on your investment. (Note: 4 years in Australia makes you eligible to apply for citizenship = renounce SG citizenship = take out CPF funds) Bad or good investment? You decide.


Say if there is a high possibility of returning to Singapore after encountering some hurdles, it is definitely a good idea to have a safe haven waiting for you by the Waterway. Much will depend on your mindset. If you are taking this option, do your loan assessment before leaving and return after a year or so to collect your keys, do your renovation and rent it out. By that time, they don't give a damn whether you are employed or not as long as you pay your mortgage on time. Alternatively, move your folks into your new cosy house for them to enjoy instead of the tenants and rent out their older HDB flats whole.


Or lose $5k(?) to give it all up and save all the trouble and focus your full energies on living a new life overseas. 


I'll choose losing my deposit (btw 5% is downpayment, not deposit). You see, the likes of OSU always claimed that Singapore is working hard lure overseas Singaporeans back to Singapore. The fact that such a HDB policy exist, seemingly as a move to cool down the property market fevered mainly by the sharp influx of Singapore PRs, but does not exempt Singaporeans, tells me otherwise. For Singaporeans who obviously need a house to live in which country we are working overseas at, we are allowed to hold a HDB flat only we do not buy a second property overseas. So they are expecting us to live under the bridge or in caravan parks? Or bite the bullet and rent houses for as long as we are away, which makes no financial sense since we are overseas to earn money in the first place, only to burn them all up in house rental. Policies against the people. Mind blown. 


The message that HDB and the Singapore Government is conveying to me is clear, "Cross the bridge and stay put or burn it." There is no middle ground.


So if you have made the decision to leave, fuck them and their fucken policies and leave like you mean it.



14 comments:

  1. Wah then people like me die lor. CPF less than 13k. Didn't buy HDB, no safety net.

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    Replies
    1. No "worries", Louise, because there are others like you too (me included), who do not have a lot of money in CPF by virtue of not having worked much in Singapore, and not having our own HDB flat because of our singlehood.

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  2. Aiyo, another one to Melbourne, siao liao, overcrowded soon.

    Anyway, Nix is right, cross the bridge and burn it. Safety net are for people who haven't made up their mind to migrate, if you want to migrate, forget about safety net. Because that will be one of the reason for you to return to the greener side. Give up the downpayment, $5K can be easily recoup. Lessen any unforeseen problem in SG and concentrate on your life in Australia. The more you carry with you, the slower you will be able to move forward.

    Finally, welcome to Melbourne, the four-season-a-day city in Australia.

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  3. Not sure if they'll know if rellies help 'clock' MOP...

    -S

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  4. I think he said he paid 5% which is 25k. So that's what he'll forfeit if he gives up the flat. 25k is plenty.

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  5. Well, I was caught in the HDB ruffle when my wife and I migrate to Melbourne. HDB will ask you write in with the prove of Aust permanent visa doc, follow up with a stupid survey on why u are leaving SG. The survey is compulsory to HDB reply. After going through the bloody exercise which is geared for information collection, HDB reply is still NO as we stay 3 years out of the 5 years occupancy rule. Therefore, we rent out our place for last 2 years to our friends prior to selling it in 2013.

    When we want to sell our house, there was a lot of kind advise from our family and relatives to hold the flat as our safety net. In the end, we still go ahead with the sales making a profit prior to the drop in the SG property prices. Part of the profit assist us to purchase a house in Melbourne. The rest of it is locked in the bloody CPF account until I give up my SG citizenship.

    Frankly, a lot of SG like to hold on to HDB flat and complaint they are unable to buy a house in Aust. At the end of day, unless one is born with silver spoon, u can't had best of the both world.

    Anyway ultimately you need to make the choice, initially this great move will be a struggle. Let me be frank with you. It is not easy don't expect a bliss. After 2 years, you will be more settled due to the fact that you are entitled to more centrelink payment which will easy up the family expenses if you managed the cashflow wisely.

    Looking back, on my 3.5 years AUST journey. My wife did not regret especially my son is born in Melbourne with a rare heart condition with a right team of helpful public healthcare. My mum always said," If your son is born in SG, I think you will go broke due to the medical consultation." LOL

    Good luck on your journey whom many has took!

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  6. If you should choose to continue with your BTO sales, you should like advised by like Nix said, get your parents to live in it while you rent out your parents place. Collect that rent as passive income in Australia. However , considering the quality of BTO these days, you might be better off throwing that 25k away...

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  7. This question depends how you weigh your opportunity cost and minimize your loss.

    If the combined CPF-OA (i.e. combining yours and your hubby's) can sustain 5 years or longer period of HDB loan (including 2.67% interest), I suggest you keep this 5-room BTO because the end goal is the Capital Gain.

    I presume your BTO price for Punggol 5-room is $350k, but market resale price in Punggol for 5-room is cushioning around $480k to $500k. Your projected valuation is $130k to $150k now, but this is gross. Nobody knows this projected valuation 5 years later, you better pray it is only getting better. If you want your projected valuation to increase, you must pray PAP wins GE 2016, so they let more foreigners come into Singapore to create over demand and under supply in the resale market.

    Since your monthly HDB loan repayment is $1.2k, for the 1st 5 years 50% of $1.2k is paying loan, so you actually paid 60 months x $0.6k = $36k just on loan.

    Therefore your estimated Capital Gain = Projected Valuation (assuming 5 years later is the same as now at $150k best case) - $36k of paid HDB loan interest = $114k.

    The question is whether you are willing to forgo this estimated Capital Gain of $114k, 5 years later, assuming 5 years later is the same economical status as now.

    If yes, you don't have to think so much, forfeit your $25k deposit, just go to Australi and start afresh.

    If no, it doesn't matter whether you prefer to invite your parents to stay (so they can rent theirs) or leave it vacant.

    You can go to HDB and declare both you and your husband will be working overseas, but once this is approved by HDB, your MOP will freeze 5 years count (i.e. wait until you return and start counting). Under this status, a special status, you can rent your property, but do note that you property tax will also be higher than those who didn't rent out (i.e. stay or leave vacant).

    I presume your $150k that will be wiped out is manipulated, unless you are telling me your $150k is raw because this will determine if you are financially capable of keeping or losing your BTO HDB 5-room.

    If your $150k is manipulated, hence you have the financial resource to hold 5 years, I would suggest you to keep your BTO.
    If your $150k is raw, I think you better forfeit your $25k deposit because you have no resource to sustain 5 years.

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  8. Sometimes, the only way to leave is to burn the bridge and move forward. What are you waiting for?! Do you know there are many people who wish they could get at Aussie PR? The pass into the land of plenty (and I am not just talking about material things)

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    1. Think of it as paying $25K to get into Aust..wide open spaces, beauty and nature all round instead of this little polluted dot. Some people got the $ also cannot go..skill not on SOL..too old..England no good enuf..not enuf biz or investor experience or track record..you are very LUCKY..just GO like what Nix advises, but if you like Perth just goto Perth, dun listen to him on this one!

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  9. I'm Y, wrote to Nix on this. Thanks guys, decision is that we are forgoing the BTO and starting afresh in Melbourne. Wish us luck! :))

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    Replies
    1. Hi, i assume you have landed to Australia to formalise your PR since 2013. Pls be mindful you MUST fulfill the 3yrs out of 5yrs residency requirement to get your PR renew. Welcome to Australia and wish you all the best!

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    2. Melvyn... don't scare me leii.... read up on border.gov.au that RRV min 2 out of 5 years stay in Au, not 3 of 5 years.

      And yes, made my initial entry in 2013 right after visa granted.

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    3. Whether its 2 or 3 years doesn't matter now right? Since you have already burn the bridge, enjoy your stay here and integrate into the OZ culture. The faster you did that, the better it will be for you.

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