ST : Change in retirement plan

Sep 11, 2010

FLAT AS INSURANCE

Change in retirement plan

MR GINO LIM, 38, regional sales manager

OLD DREAMS

Mr Lim is decades away from retirement but is nursing the perfect retirement plan: Rent out his two-bedroom condominium unit in the Hillview area for a regular income, and live in an HDB flat.

Having two properties would assure him and his wife of 'perpetual income', insuring them against the vagaries of the employment market.

He says: 'Right now, there's a lot of uncertainty in the economy and you can never be sure of your job. There are a lot of booms and busts.

'Already, I don't see my colleagues getting high pay increments. What if things turn sour tomorrow?'

A resale HDB flat fits into his plans because 'it is the cheapest property you can find', and also a relatively safe asset in an increasingly volatile property market.

But concerned about the fast-rising prices of resale flats, and how expensive they would get by the time he was ready to retire, he moved forward his plans to buy one.

'HDB flat prices may not come down because Singapore is planning to add another million to its population,' he reasons. 'By the time I retire, I will definitely need to move back to an HDB flat. But when I want to downgrade, the price will be very high.'

And so, he began his hunt for a three- or four-room HDB resale flat recently, with a budget of $400,000.

WHAT CHANGED ON AUG 30

Mr Lim's plan was thwarted because HDB disallowed concurrent ownership of private homes and HDB flats within the flat's minimum occupation period of five years.

Buying a resale flat would have meant that he had to sell his condominium unit within six months of the purchase. He would also not be allowed to buy a private home for five years.

NEW HOPES

He now plans to wait for another two years.

He says: 'I want to save a bit more and then look for a studio apartment. The price will be higher so I really have to think about it carefully.

'I am not going to get a (shoebox) studio so my choices will be limited.'

Selling his condo unit now is out of the question. It is located near an upcoming MRT station, which means he will lose out on the potential rise in value, should he sell before the station is fully operational.

Mr Lim thinks the Government should allow locals to own one HDB flat and a private property.

'The regulations should be easier on the locals...I think buying an HDB flat should be a privilege (kept) for Singaporeans.'

REAL OPTIONS

Experts say Mr Lim should just stick to private property, unless he wants to sell his existing condo unit.

But he will have to deal with a lower loan ceiling of 70 per cent - instead of 80 per cent - should he choose to buy another private home while servicing the mortgage of his Hillview home.

C&H Realty managing director Albert Lu says: 'It is still better to invest in another private property than to leave your money in the bank, which offers less than 1 per cent interest.

'Property investment usually offers higher returns, with rental income of at least 3 per cent per annum. Plus, property values may appreciate with time.'