HDB Resale Prices have Increased 50% in 5 years. Getting Unaffordable For Many Singaporeans and How We can Solve it to Benefit Housing Aspirations

HDB Prices have grown 52.7% from 1Q2020 (131.5) to 1Q2025 (200.9). That is a 52.7% rise in HDB resale prices. Like it or not, this is an unsustainable increase and is pricing many non home-owning Singaporeans out and affecting their housing aspirations.

Unaffordable and Making People not See Singapore as a Home

While Singapore has a cheaper housing scheme called the BTO and Balance of Sales, the number of housing applicants is overwhelming where people have not been able to get a home through this scheme despite the expanded supply; yours truly has experienced rejection letters from HDB more than the number of times I have been rejected by girls : p

Why has HDB Prices Gone to Unaffordable Levels?

Entirely my view, this is due to the influx of foreigners and their ability to pay a considerable amount for rental due to their lifecycle. This makes a HDB resale flat a great investment as dividend income.

For many foreigners or I would like to call sojourners, their time in Singapore amounts to about 20-30 years of their lifespan. During their 20s-50s, they migrate to Singapore to make money, squirrel aside savings for retirement at their home country (due to low cost of living and weak exchange rate) and then migrate back. Their expensive expenses (mainly housing) only lasts for 30 years.

Whereas for Singaporeans, post our age of 50-90, we are still stuck unable to move to another country (unless of course Singapore legislates a law to allow us dual citizenship). With double of our lifespan in this country, we are unable to bear the burden of a high accomodation cost for 60 years vis-a-vis foreigners of 30 years.

So back to the foreigner's life cycle, given they are only here for 30 years, they can pay up to 50% of their salary for rental expenses. This justifies why a 4 room HDB resale can be shared by 3 individuals at a monthly rental expense of $4,000. 

Maths wise, to an owner who is renting out a resale flat, a $48,000 rental income, netting off half a month commission and $6,600 in property taxes, a $1 million dollar 4 room resale flat still nets $39,300 in rental. That's a high rental yield and positive to an income statement given assuming a home interest loan at 2.6% interest.

$1 Million Resale Flat (affordable to investors but not affordable to Singaporeans who want a home)

As shown in the above example, to an investor, buying a $1 million resale flat makes good investment sense on the grand scale of things. Based on an LTV ratio of 70%, 2.6% interest for a 25 years loan tenure, an investor would need to make a cash outlay of $38,112 per year to finance his "investment" home, renting a HDB home out, an investor receives a cash inflow of $39,000 per month after property taxes and commission. 

At the end of the 25 years, the investor technically gets a home for free, only paying with CPF/Cash for 30% while paying nothing else; he/she can then rent for another 30-40 years, earning another cool $1 million in the process. It is a superb investment decision to use a HDB resale to earn money from foreigners.

However, to Singaporeans who are unable to ballot because of their income of say $15,000 per month, financing a $1 million resale flat is a financial disaster. An annual pay package of $195,000 (take home pay of $180,000) means 20% of their post tax income is used to finance a house. Of course, we know couples who are of slightly older age, earning less than $195,000 who does not wish to wait for a BTO and are buying such expensive resales so that they can have a home and family formation. Due to their circumstance, they are spending more than 20% of their income to actualize their housing and family aspirations.

The need to Equalize Difference between an Investor and Genuine Owners of HDB Flats

Simply based on finance, there is a difference beween an investor and genuine owners of HDB flats.

On one hand, investors find it easy to recoup gains utilising a HDB flat by renting it out. On the other, family owners due to them chasing the same unit of good, are killed financially trying for their aspirations. 

Solution

The simplest would be a return to the old pre-90s HDB policy where rental of HDB flats are not allowed for foreigners. However, the truth is that such a policy will lead to the destruction of property value and stress test will show banks such as DBS will collapse arising from underwater loans due to such a policy change. So stopping foreigners to rent HDB flats is a definite "no".

Alternative 1- Non Owner Occupied Property Tax Regime

Taxation is one of better policy measures, where non owner occupied tax rates should be increased. In my view, the current lower tier 12/20% taxation rate should be raised until mathematically investors of a resale HDB are in a worse off state than genuine owners of a HDB resale flat. My own back of the envelope calculation is that for E pass foreigners, they can afford up to 5k per month accomodation expenses based on a 15k post tax salary. This means Singapore has to formulate a property tax regime where it pains would be investors to stop investing in HDB resale.

Assuming (i) an interest expense of $18,000 on a HDB flat 25 years loan and LTV ratio of 70% for a 1 million resale flat, (ii) half a month agent commission of $2,000, idle cost of about $3,000 per year, the painpoint will only start when $34,000 out of the $60,000 rental income is taken out of the investment planning. This means $34,000 of the rental income should be deducted via taxation. Hence the lowest tier of HDB non-owner occupied should be set at 55% with the second lowest and thereafter set at 60%.

A reasonable non owner occupied HDB property tax should be as follows, which will benefit Singaporeans housing aspiration dreams while penalising investors of HDB resale:

Alternative 2- Accessible Housing to All Singaporeans for First Time Owning

Similar to what Ho Ching has suggested, all Singaporeans should have access to an HDB flat easily for their first time trying to purchase a home (with the only condition still limiting them to be the current monthly income limit). This means the government has to expand the BTO/ balance of sales supply to enable all Singaporeans are able to get a flat (singles or married and regardless of age) within 2 tries. This is due to the need to account for the fact there is a need to wait 4 years for it to be completely built.

This prevents would be genuine owners of HDB flat to compete with would be individuals who plan to use a HDB resale as investment.

HDB Should Not Be Used for Speculation or Investment, Otherwise if Investment is to Remain, HDB has to be Accessible to All Singaporeans

In summary, a HDB flat should be used to help Singaporeans achieve their housing and family formation aspirations. The current investment regime and alteration of HDB rental policies since 1990s have hurt us Singaporeans too much. There is an urgent need to restore parity between a genuine owner of HDB flat vs would be investors.

While a return to pre-90s rental policies is ideal, it would destroy the current banking sector dooming even DBS with under water HDB property loans. Hence, using the non-owner occupied property taxation is ideal. Second, adoption of the proposed taxation policy will help the government to get higher tax revenue and this eliminate financial budgetary headaches.

Otherwise as per alternative 2, all Singaporeans should have access to a HDB flat for the first time.

Look Beyond High Interest Savings Account, T bills/Insurance Policies; REITs and a few SGX companies Provide Better Yields with Low Risk

In recent meet ups, I have heard the lamenting that the reduction in interest rates of local bank's high interest savings and T bills have meant their money now compounds slower.

Safe but Very Slow

No doubt bank savings account are protected by the SDIC but due to how secured it is, the interest rates earned is fairly low.

In my view, Singaporeans should look beyond complete protection and stability. Taking some risk is needed to earn higher returns, it is a rule (pherhaps even law) in all investments. The rate of returns follows the rate of risk taken.

But That Dosen't Mean Taking Extreme Risk

That brings me to offering the solution of investing in stable companies that offer higher yields such as the local REITs (especialy Keppel and Capitaland [CICT]) and that of the 3 local banks. They are at 6.5% and 5% yield respectively.

No doubt there is risk involved, but my view is due to their systematic importance to Singapore's economy, the government will put a backstop in a severe economic downturn. Singapore neither wants to see a collapse of one bank nor a total selldown in City's area commercial office/retail space at 35% discount (like what is happening in China Tier 1 Cities). 

Should any of these situation happen, it will cause a downward spiral of Singapore's economy and a permanent loss of wealth for the rich of this country. Something the current government will not want to happen.

Hence while it is not a 100% chance they will be saved, it is likely a 95% chance; hence for some risk with a high degree of stability, investors can earn a much higher yield than what high interest savings, T bills or even insurance policies can offer.

Putting in Words the Solution

Therefore look beyond the realm of high (ironically now low) interest savings account and Singapore T bills, there are better options: the 3 local banks, Keppel REIT, local Capland and Fraser REITs; higher returns while investors take a low degree of risk.

Of course, people will point out that I do not invest in them (except for Keppel REIT) but that's because I wish to take higher risk on higher yield SGX stocks

Grab Full Year 2024 Results: Loss Making, Prepare to see Company Still Loss Making for 2025

 Grab Full Year Results is out and the company has narrowed its losses to US$158 million from US$458 million (page 4).

It is indeed good to see Grab continuing to efficiense itself. However, I think the company is not out of the woods.

Increase in Cost due to Mandatory CPF Contribution by Employer for Platform Workers

While the Singapore government will be bearing most of the cost during the next 3 years as transit, some costs is still borne by Grab, hence whatever cost savings Grab has been obtaining will be erased for Year 2025. 

I forsee its full year 2025 will still be loss making. Furthermore, with more South East Asian countries looking to protect its platform workers, costs borne by Grab in its Delivery and riding segment will rise.

This does not bode well.

Guidance

For FY2025, company us guiding for EBITDA gains of US$470 million, this is a gain from its current US$313 million, if we follow this, this means net income will improve by US$157 million. This means Grab will still be in loss making zone for FY2025.

Revenue Growth

Barring a recession, it is likely Grab will continue to grow revenue. But the truth is that the company is not reporting profits yet, which means growth in asset value. As of now, Grab has continued to make losses. Revenue growth has to grow at least 40% more before it turns profitable. And even if it turns profitable, its profits are minute compared to what Sea Group has obtained.

Grab is in lousy business segments which is cut throat and suffers from high labour unit cost as it expands. The ability to reap economies of scale is smaller as compared to e commerce companies. 

While Grab has a book value of US$2.79, I do feel eventually book value will grow but it will take a while. At price of US$4.40, it is overvalued by a mile. Only at US$2.79, would I consider it. For now, I would put it a mile away. This is an overvalued Tech company which is struggling to be profitable after a decade. A terrible company at present.

Spending for Feb 2025: Nearly Maximise Maybank Credit Card Cashback (7% cashback)

Spending Performance for Feb 2025

Total expenditure was $834 with $61 in cashback clocked (7.3% cashback). This is close to the best of my ability to fully utilise Maybank's credit card cashback system.

Grocery Spending

My basic neccessities spend remains high, of course this is due to the high cost of living in Singapore :p

This category's spending exceeds the cap Maybank has at each (per) category, however, I have been actively trying to cut my food ingredient expenses etc to ensure a minimalist lifestyle. Mirroring myself like a company, I am guiding for my recurring grocery expenditure (maintenance CAPEX) to be at $300-$350 monthly range.

Transport Expense

Transport will be at the $80 monthly range. Otherwise nothing to report and thanks to inflation, my expenses now allow me to utilise Maybank's Family and Friend's Cashback; previously hitting $800 monthly expenses was a stretch, now it is easier. Good thing or bad thing, its debatable. 

Fortunately due to my resourcefulness, I have cushioned the cost of living crisis with my skill set in the realm of credit cards.

<Non Sponsored Post on Maybank Credit Cards> 

UnitedHampshire US REIT - 11% Gains in 4 Months, Can The Gains Continue?

Since the 2 December 2024 post when United Hampshire US REIT was at 45.5 cents, the REIT is now at 48.5 cents and had given dividend of 2.05 cents. Investors who have bought it since then would have reap a 5.05 cents gain at a cost price of 45.5 cents.

That is a 11% return.

Will There be More Gains?

That is a yes. Despite the sale of 02 properties, the REIT has actively de levered. While its net property income will be lower this year, its interest expense will be lesser due to a lower leverage. Second with interest rates likely to be lowered due to the expectations of a declining US economy and incomptency of President Trump tariffs effects, I expect further fall in interest expense. Currently, the REIT's average interest rate is 5.17% with 26% of its loan tied to the floating interest rates.

Third, I expect the REIT manager to start taking units as part of its fees. So dividend should remain at 2.05 US cents per half a year and 4.1 US cents per year.

How about capital gains? Well as the market continues to appreciate the sustainability and strength in dividends provided by UtdHampshire, a re-rating will happen resulting in capital gains. My view is that this REIT deserves to be a 6% dividend yielder. Further, with escalating rents received each year, DPU will only rise from 4.1 US cents. In its hey days, this REIT was a 5.88 US cents yielder. However, I think this will be a stretch to regain its old times.

Target Price

I expect UtdHampshire US REIT to give 4.5 US cents dividend in 2026. At 6% yield. this values it at 75 US cents (it should be 64 US cents in 2024). This is a 50% upside with recurring dividends of 8% gains. It is worth buying the REIT and surpasses buying any Singapore property (for rental+ capital gains) even on leverage.

Asian Pay TV: Sustainable 1.05 Cents Dividend, a 13% Dividend Yielder

Asian Pay TV (APTT) has released its full year results.

Summary

• Total revenue declined by 5.4% due to sunset TV business
• Dividends of 1.05 cents, guiding for 2025 to be 1.05 cents
• Broadband Business Growth of 5%

Business Prospects

Revenue will keep falling at around 5% per year, this is due to the shift away from TV. CEO has commented the task now is to upsell customers to higher tier broadband plans to ensure revenue does not decline as much.

Sustainable Dividend

APTT generated 149 million in cash last year, I expect further decline to 145 million in cash this year.

Interest Cost is expected to grow as well to 42 million with the expiration of hedges. With Capex needs of 35 million and taxes of 13 million, APTT has 55 million in spare cash. Its current dividend payout of 1.05 cents equates to 19 million in cash. 

Hence, there is headroom to maintain its 1.05 SG cents dividend as it continues to use the excess cash to pay down the expensive Singapore offshore debt. I expect APTT to eventually become a $120 million annual cashflow generating trust still giving it the ability to maintain 1.05 cents dividend.

Good Dividend Stock to Own

APTT will continue to see revenue loss due to its large TV segment being in a sunset industry. However, dividend wise, APTT can maintain a 1.05 cents dividend.

So it is a good dividend stock to own as long as 10% dividend yield is maintained. At current price of 8.3 Sg cents, it is a good buy.

Yangzijiang Financial: More Stock Price Gain to Come

 Yangzijiang Financial Holdings (YZJFH) has delivered full year results which is within expectations.

Summary

• Earnings per share of 8.6 cents
• Dividends of 3.45 cents
• Earnings was boosted by china government grant (1 SG cents) and no more credit allowance provisions in losses

Currently YZJFH trades at a share price of 56.5 cents or SGD$1.98 billion market cap.

Earnings

As said, YZJFH recorded SG$40mil in government grant, SG$30 mil in exchange rate gains. I am sure this will not be replicated in FY 2025. However, as the company's debt investment portfolio continues to decrease, we might see more reversal in credit allowance which is a "gain". This will offset government grant income.

I expect YZJFH to log a 8 SG cents in annual earnings for FY2025. 02 reasons: first, its maritime investment business in Singapore is growing and second, the company will start reversing its credit allowance because its china debt investment is growing smaller.

$1,380 Million in Cash and Cash products in Singapore

One important point from the year end results is that YZJFH has transferred a significant amount of cash from China to Singapore. With the cash in Singapore, it can be easily verified and reduces the allegations that the cash items in its balance sheet is fake. 

The total amount of funds in Singapore cash and yield enhancement produces is now SGD$1.380 billion. The company has 52 cents in cash equivalent products. This means 90% of its current market cap is in easily realised assets. 

Cheap at Current Price 

Even at 56.5 SG cents, the stock is way too cheap. At future 8 SG cents earnings and 3.2 SG cents dividend, this stock is at least a 5% dividend yielder. Hence target price is at least 64 SG cents.

However, I do not think this is a fair value as it slowly winds down its China debt investment, with continuing share buybacks, YZJFH should march towards a $1.20 NAV. Putting it at 0.8 times price book, it is 96 SG cents. There is a lot more upside to go.

<Author is vested in YZJFH>