Forum: Beware debt trap from flipping HDB flat

HDB flats around the Telok Blangah area. ST PHOTO:CHONG JUN LIANG

The reason people flip properties is predicated on the rise in property prices over time (Increase minimum occupation period for new BTO projects, Nov 22).

They buy not with the aim of occupying but selling them to earn a quick buck or generating passive rental income if they cannot sell. In an expanding economy, this may work well and many have enriched themselves from flipping.

In an upswing, valuations go up. Someone flipping and moving on to the next property could lead to larger bank borrowing. They could end up leveraging more against higher valuations. Inevitably, they get into more debt in the hope of making another quick buck.

But valuations cannot go up forever. What goes up must come down eventually.

Once prices slide, flippers' plans may not pan out as hoped. It may be harder to sell amid weak market sentiments or even to rent out. They may be stuck with huge housing loans with no avenue to service the instalments.

Amid the present economic slowdown, it is mind-boggling that many still get sucked into larger debt to "upgrade" to private properties from HDB dwellings. No one is exempt from layoffs amid corporate downsizing and restructuring.

While monetising one's heavily subsidised first HDB flat may be a way to put money into the hands of an owner, it is a practice that inadvertently lures many into debt that they can ill afford.

Public housing should serve the purpose of owner occupation, not the start to debt traps that may make us poorer.

Lee Teck Chuan

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A version of this article appeared in the print edition of The Straits Times on November 25, 2019, with the headline Forum: Beware debt trap from flipping HDB flat. Subscribe