HDB flats unadvisable for making profit

Home-seekers might be taking flats from HDB despite recession at this time, but making money by investing in public flats is quite impossible. One reason is that HDB flats are centred in providing basic housing to people, meaning they are not considered as properties of investment grade.

”If you're looking to make capital appreciation or good rental income, then it is still the private condominiums because people who rent look for facilities”, said Associate Director Eugene Lim of ERA Asia Pacific property firm. ”The highest you can fetch in rent for an HDB flat in a good location is probably $2,000 plus. Any higher, people will go to condos.”

Figures of HDB show that a flat with three rooms at Ang Mo Kio, Serangoon or Jurong West typically have an average rent of $1,400 per month in Q2 this year. Even selling properties at HDB is also not an advisable way to gain income.

”HDB is not a market that swings very widely. It is a gradual market”, Mr. Lim said.

Strict rules of HDB make it difficult for anyone to gain profit from selling or renting flats. An occupation period for home owners is being imposed by the board before they can sell their flat on open market. The period depends on the flat type, financing and mode of purchase.

Those who purchased subsidised flats from HDB would have to keep them for a minimum of five years. An owner who purchased a flat at resale without subsidy can have it sold after two and a half years if a loan from HDB has already been made. If he hasn’t, or has loaned from a bank for his purchase, the flat can be sold after one year.

In renting out flats, owners who purchased resale flats without the government’s housing grant are allowed to sublet their flat after three years of occupying it. Owners who purchased a flat from HDB or from open markets that has a housing grant should occupy it for five years before they can sublet the flat. In subletting the whole flat, approval from HDB is needed, which is given upon fulfilling the required minimum occupation period. If owners want to sublet rooms of their flat, they don’t need to have HDB’s permission, but they must stay in the flat during the period.

Home owners with three-room flats or bigger are the ones only allowed in subletting a room. At the beginning of the year, HDB has acted against 12 owners who have sublet their flat without approval.
Last yea, over 28 flat owners were caught. It’s understood that some were fined and some got away after being warned, but the heaviest penalty is having the property taken by HDB.

HDB relies on ads in the classified section of various newspapers and tip-offs to determine those owners who sublet their flats illegally. Semi-annual inspections of the flats are also done by HDB for subletting cases that have been approved.