Cory Diary : Property Curbs

Investing in property in Singapore has been a popular choice for retirement planning due to the rental income and capital appreciation it can provide over the long term. However, it's important to recognize that past trends and government policies do not necessarily guarantee future performance.

An analogy that can be used is that of a kettle whistle. When the pressure in the kettle gets too high, the whistle sounds, and the heat is lowered to prevent the water from boiling over. However, over time, more energy is added to the kettle, and it will boil again. This is similar to how government cooling measures can temporarily slow down the real estate market, but economic conditions, population growth, and consumer preferences can impact the market over the long term.

Personal experiences with property investment can vary. For instance, I have an investment property that I purchased more than a decade ago when the government introduced curbs. In addition to the possible rental income, the capital appreciation of my property has probably resulted in strong 6 digits in capital gain excluding costs.

However, it's worth noting that the current state of the market may not be ideal for investment. The Singapore Property Index, which tracks the performance of the residential, commercial, and industrial sectors of the real estate market, has risen significantly in recent years. While past performance does not guarantee future success, the high market prices suggest that property investment in Singapore may be more challenging than in previous years.

While property investment can provide benefits, it's important to consider the risks involved. There are costs involved in maintaining and managing a property, and rental income and capital appreciation are not guaranteed. Additionally, factors such as location, property type, and market trends can impact the performance of an investment.

In conclusion, property investment can be a viable option for retirement planning in Singapore, but it's important to approach it with a clear understanding of the risks and considerations involved. The kettle whistle analogy highlights the temporary nature of government cooling measures, but it's important to research the market, consider the risks, and make informed decisions based on your individual circumstances and experiences. While past performance and personal experiences can provide valuable insight, it's also important to consider the current state of the market and whether it may be too high to invest in.

Cory

2023-0506

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Cory Diary : Another Round of Property Curb - TDSR

One of the tougher restriction is as follow.

"The government will also tighten the total debt servicing ratio threshold to 55% from 60%, which takes effect from Dec 16. This means that a person’s total monthly loan payments, including mortgages, cannot exceed 55% of the individual’s total gross income."

Many experts say is just 5% only. So let see how much it will be like.

TDSR Formula

To calculate a borrower’s TDSR, use the following formula:

(Borrower's total monthly debt obligations / Borrower's gross monthly income) x 100%

Residential property or secured by residential property

Not less than 3.5% or the prevailing market interest rate, whichever is higher.

Let say debt is $5000 monthly for a Condo today, Gross Salary needs to be $8333. With the 5% increase in TDSR, Salary now needs to be $9091. That's $758 increase of Gross income. Personally I feel this is not a small sum. A 9% increase in gross income needed. Basically put many people out of reach for a few years.

Merry Christmas and Happy New Year

Cory

2021-1225

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Cory Diary : Things I found out from Property Ownership

Not in any specific order, I am writing them down as notes as it comes off my mind for the past few days. No right or wrong but welcome to correct any errors.

1. Using CPF to pay for the housing

I think every couple should own their first property a HDB. Is the most affordable and one should only buy the right size that fits their income. If overstretch, relationship can be bad. And couple could be stressed.  Happy family, happy life, and good health. 

Question will be should we tap on CPF to purchase the property ? No right or wrong imo due to different circumstances. Just to be aware that there is accrued interests that we need to pay back to our own CPF account generally. Reason being I view CPF guaranteed returns are attractive and it makes sense for me to refund using idle money in the bank.

For my case, my SA account is not filled therefore VHR makes sense as I will do OA to SA transfer immediately after. So now hit FRS. After which I can do VC3AC to build up my SA further. There is annual limit of $37740 for MC+VC.

2. Condo Maintenance is sizeable

Let say $300 monthly. This is equal to $3600 annual ! And as I know this is generally paid by landlord if you rent out. So if one has no plan to use the condo for investment returns rather home stay, there is cost attached. In-addition there are gov benefits that ties to type of housing you live in. However life on earth is limited and each one has their own lifestyle. Make the full use of it.

3. Monthly Instalment there are 2 portions

Why I mention this is because the impact from interest rate is mitigated as time past due to large portion of our monthly installment is for paying down the principal loan. One reason why I refinance to a Fixed rate loan for 5 years. Lock lower rate on surface but also bought 5 years.

4. Property Tax

Yes, there is a cost. Period. In-addition I missed my 2nd payment because they switch to paperless without my explicit approval. They then allow me pay up without penalty for this time only. I feel like kenna kick and still have to bow to them. Life is Brutal next to Arrogant. 

5. Employment/Income Risk

You will be tied down. Risk of unemployment. Age risk. At age 51, if I am out of job, what is the chance that I can find another similar paying job within one year ? And if I could not, maybe is unlikely 5 years down the road. To mitigate this, do you think 1 year emergency fund enough ? So chances are is either get another job quickly at much lower pay of mismatch skillset or plan to be retired regardless I like it or not. Yes, is a waste of my skill but bo pian. 

6. Loan Year Restriction on Age

This is big for me because of my older age I can only borrow for 14 years max today. What this mean is my monthly amount will be much larger due to shorter loan period and need to meet the TDSR the same time. So if I plan to buy my next property,  I will need to pay much more in cash.

7.  Rental Income

For $3000 monthly rental, annual income is $36,000. This is good amount to offset loan payment for investment property at my age. Therefore I would only own more properties if regulation is more relaxed. There is risk if we do not have stable income or saving asset, we could panic. So we need to plan right as at current yield for my age, many properties are cash flow negative due to shorter loan period even though long run I will still be on top.

8. HDB or Private Property Loan

1% rate difference for $500k in simple term is $5k annually. Not cheap. So if I am to take HDB loan, make sure is worth it as it is much more expensive. I don't think it makes sense that people take HDB loan to minimize their chance of returning HDB flat if they failed to pay up. Either they overspend or cannot afford it in the first place.

9. Condo Space

Space is much smaller for New and Private. So if want to stay in one make sure we buy the size we want in number of rooms and total psf. If cannot afford, think twice. However if target rental, not sure 1 or 2 bed rooms are better. I do see quite a number of rent for 3 bedrooms just not as many. Due to gov curbs on number of properties,  getting the larger affordable unit will be a better choice.

10. Home Ownership

Shifted homes from HDB 1 room, 3 room, 4 room, 5 room and Condo. Can be due to family size, estate renewal, working distance, upgrade, etc. home is not forever because is not my experience. We move and change with times and needs. However each time we move, is for better.

11. Invest in Property or Reit ?

I do both. I think maybe good to have at least one rental property income for diversification. Do be prepared for cash flow negative periods due to increasing price. Currently I use a chunk of the Reit dividends to top up the differences.

12. Location Matters

for OCR, Integrated central location, the psf is much higher than 5 min or 10 min away apartment. Delta can be more than 300 psf. However once top, the psf increase for good location increased by 30% with good rental value. So rental investment wise, a key consideration ?

13. Renovation Cost

As condo is half furnished, there is some saving. I do the fan, lighting and curtains. However due to limited space, customized bedding needed for smaller room. In total less than 15k i think. 

14. Store room

Being used to store room in HDB, quite surprise the Condo unit I have do not have one. Many things are thrown before we move in. Minimalist by circumstances ?

15. Weather

Choose the NS direction. There are swimming pools below about 30m away to the side. So is not noisy.

As the unit is inward facing and unblocked, the temperature is quite cooling. However clothing takes longer to dry.

16. Leverage " Demon "

Property is high leverage considering for first property say we pay only 20%. So any gain or loss, magnifies. However there is cushioning from Rental income. Say over 5 year we make 250k for 1M apartment, the money put down including cost could be only 230k. So returns easily 15% annual for past 5 years excluding Rental Support. If we include say 30k annual rental income after cost, the returns  will be roughly = 34% annual ! The range can be between 30% to 40% due to actual sell price 5 years later cannot be confirm .(updated)

I put item 16 the last because I want people to think hard about it. 

Cory

2021-0413

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : Historical Milestone - Net Worth

Asset Class diversification is important for peace of mind. It can be Equity, Bonds, Property, Cash, FD and diversification within like for example recently I expanded to Euro and Pound denominated Reits in Europe properties. I also developed a plan entering into US market by mini portfolio even though timing could be better. Bonds wise I have SSB Max and in the work to reduce Company Bonds for CPF.

One of the challenge will be how to Simplify my operation while achieving the Diversification needed. This means reducing errors, market volatility with poor quality assets and getting better in my investments. And therefore more time for family and work.

To combat inflation, having investment returns and also a shelter over my head when needed, I decided to invest in Property. This allows me to sold off all my gold position which serve inflation purposes. In my earlier article I have worked out the Math on why property investment is attractive due to Rental income and leverage. TDSR and ABSD have also limited over speculation so one is unlikely impacted by installment arrears. Even if one got their timing wrong, over the long term the return from rental or own stay which avoid paying rents, will likely gives property buyer a high chance in the black and probably good returns on average. 

To add for residential property, I feel is very unlikely to have EHT or Noble events that we see in stock market as long we can hold our property. Being in equity market over decades, property is certainly the easier path to go and imo for most people who can afford, within the current regulatory constraints that interesting help largely minimize the risk of default. The stock market is not a level playing field even though over the years we are getting better. Is much tougher to profit from it with many learnings needed to stay in the game even though I have profited some amount. 

Why all the write up above with the subject line. I just checked URA transactions, and PSF wise there is another increase on recent month. Is a surprise. Covid ? What Covid ? This bring my Net Worth to another magical milestone level. Interesting just yesterday, I told my wife that if I hit the Net Worth milestone, we can afford to buy another larger de-humidifier. It was a passing remark as it will be our 3rd in the home. So if we going to get it, and the stock market doesn't look like will push it that far in the next month or so, it could be far fetched. Looks like is not far enough ....

Cheers

Cory

2021-0331

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : Home anytime ?

When I was developing my retirement datasheet, one of the most influential item is housing loan. It takes a big chunk off my saving. Therefore if I could, I would prefer to borrow for the longest period like 30 years whenever possible so that it reduces my monthly or annual drawdown as I build up my others. And that's me. Of-course like many things in life, people have choices to their preference. Some want to pay up asap. Some won't even buy a home unless they can fully paid a home upfront. They are either from Mars or never able to execute to the plan they wanted. Obviously I do not mean either only. There are many options and rationales and I wouldn't feel like stepping on anyone toes.

Spikes follow by corresponding reduction Chart

There are also others like me that are more conservatives ( Relative term for one who invested more than a 1M in stock market ) or them ( looking at property agents ) who will tell you that for stay, buy anytime. Personally, anytime ? Absolutely rubbish imo.

Home is the most costly and one of the most important asset to most people.  Just have to give an example. If you see a price chart where the price spikes like a needle, good luck to those who follow through their life time deal. Hopefully you won't have to work on the remainder or big chunk of your life time to save the differences !

So is it a good time to buy now ? Your guess is as good as mine. I like to know too ! but I would take a home anytime for a reasonable price after glancing the chart or table or whatever ....

Cory

2021-0321

Articles in this Blog is personal take and educational purposes only. Reader should seek their own professional help when making financial decision and be responsible for their decision.

Cory Diary : Rental Income - Why I have to invest in property

Scenario of Rental Income

Property Price : $1,140,000

Monthly Rental : $3300

Yield at Cost : 3.47 %

Annual Net Income

After considering below

1. Condo maintenance cost : 400 monthly

2. Rental Agent fee = 0.5 month annual.

Monthly Net income  : $3300 - 400 - (0.5 month / 12) = $2763

However, usually people borrow quite an amount to finance the purchase. So there is leverage in play. And this is where Math becomes complex.

3.. How much you leverage

4. Stamp Duty & Fees : 2.72% one time

5. Interest Cost.

 

Let's assume item 4 in build into the condo valuation. Basically ignore.

Leverage resulting I need to pay $606 of interests portion monthly

Monthly Net income  : $3300 - 400 - (0.5 month / 12) - 606= $2157

Implied, Annual Net Income = $25, 884

YIELD

Now, let's talk about Yield. Yield at Cost based on net income : 2.3 %.  This Math sucks right ?

One thing to note. Property valuation can change with time. If property valuation increase 35% after 10 Years. The capital returns are  then plough  back into the monthly income in simplify manner.

Yield at today valuation approximately 4%. Basically doubled. And that's before property tax, tenant issues, empty months, .... alamak. Still no good enough.

However let's assume 33.3% of the property is my money injected. The rest are borrowed.

At current valuation yield will be 6.9%, or 12% if price increase by 30% 10 years later.

This are all rough estimation. Should I just stick with Reits or it can be another form of diversification that we cannot afford to miss as I like the Maths now.

Rental Income Tax (updated from feedback)

Depending on one tax status. Can varies widely between a retired and a director level salary income tax.

Please DYODD.

Cory

2020-1115

Cory Diary : Housing Leverage

Just want to share something from my personal experience on housing.

Used to own HDB Maisonette years ago and sold it for slightly more than 100K profit only to see it go for another after. As I am often based overseas, decided to acquire a Private home later if I decide to return for good.

Here's my previous thoughts. How my thinking change over time and steps I took.

1. Link on My Home in Year 2014
This basically say how I felt about rising property prices is not helping us socially. Rising price.

2. Link on Shrinking and Integrated Property in Year 2015
With prices running above income, shrinking property size. Value of integrated property thoughts. The situation.

3. Link on Money in Gaming in Year 2015
Money is continuously shrinking. The inflation.

4. Link on Million Dollar home in Year 2017
In  Year 2013 I blogged about $1M home goal which post I have moved to draft to clean up.
However my 2017 article basically summaries. Acted.

With that, I realised that it does not make sense for me to hold Gold as property can be a good hedge against inflation.  In Year 2019 today, my value of my home has increased by 25% approximately. This is based on current similar property price on location and estate. As is only 20% down with roughly 5% expenses.  Maybe I can do a similar XIRR on the returns and it works out about 21% annually. Kind of surprise.

This explain the power of housing leverage unlike typical stock investment. The other benefit is the diversification from stock market.



Cory
2019-0531

Cory Diary : Why are we trying to beat the system ?

Apartment loan

When I bought my apartment years ago, I wanted to have more cash flow therefore decided to tap of CPF OA. By then I have some knowledge on Good Debts.  Fast forward now, if I have to go through this again today, I would have leave CPF alone. First of all the amount I tapped is just 5% of the housing value. The hassle is not only unnecessary, and if the amount is to be compounded, I would have less saving in total as I need to pay myself the CPF interests that has been borrowed. In addition for comparison, CPF is AAA rated, backed by Singapore government. If I am to buy a private bond, it would be much lesser returns and unwarranted risk to private companies. This totally do not make sense for myself as my exposure to CPF is not major.


Minimum Sum

By age 55, I could withdraw amount above minimum sum. I would expect a number of people to do that. Let's think about it. Why are we so keen to withdraw the monies. CPF is design to support our retirement and to safe guard our golden years. So it seems illogical why people is rushing out the door once they hit the age. The main reason could be the mistrust of institutions. The other is they just want to spend it before their times are up. Both of which is illogical to me. For one, most of my monies will still be denominated in Singapore dollars. And if there are distress in government debts, even saving bank could be frozen or cut. So is either I have a stake in Singapore future or am I not. The later reason on money available to spend is not only irresponsible but there are high risk of financial difficulties if one reached 70s-90s. The one viable scenario I could think of is when I am much way above the minimum sum that drawing some out will give a better return (Not guaranteed) or lifestyle which I COULD AFFORD.


My CPF Plan

Unlike other segments where there are risks, CPF is safer than bonds of good interests. Personally to me this one of the best available investment tool available to be managed at portfolio level offering stability and respectable growth. Ironically, the lock-in is the best part of the system which provide robust protection to citizen. As most of my assets are Non-CPF it will be unlikely I will ever need to do early withdrawal. This will form a nice retirement portion to supplement my monthly income at 65. If I could exchange off min sum at 55 for higher interests, I would opt-in !















I am sorry if there are dissenting voices due to political differences therefore CPF. To me this is purely my personal judgement on financial standpoint as an average investor to go along with the system available to work with us. At the end, if there are money in my CPF-Life once I passed, that's my legacy to my children definitely but certainly I would't want to be HDB as this could mean I have failed as a parent to bring up my children sufficiently.


Cory
2018-1023

Cory Diary : Million dollar home

Few people would have remembered, I blogged about $1M home goal few years ago. To be exact is 4 years ago as per link here. Happy or sad to some, depending on each people felt level, i got mine.  If we include inflation over this period maybe in current dollar term would be 10% lesser in purchasing power. What this mean is Million Dollar home is just a matter of time.

The plan for this home will be for my family for the initial years as I am often based oversea.The reason I like about this property is due to the central location and amenities. I may not be able to get what I want from another project. The other reason is I felt as I blogged earlier in another article, is home has to get smaller for the same price. The cost of government is not going to go lowered and will need land income to support with time. So delaying any further will be asking for smaller home assuming everything else equal.

In the current market situation, property has been held artificially suppressed for more than 3 years already. Will this go on ? Yes, why not. Forever, hardly. Taking a look at the private property index, it has come down 10%, back to 2010 level. link. That's a 10 years chart replicated below.

There is still some room to go lower but not much I feel. But it could be another ride up and I would miss the rare opportunity to upgrade. We can't live forever and bring our property and money to the grave. We work hard so that we have better quality of life for ourselves or our love ones. If there is appreciation on the property, is bonus. If go lower, is occupied anyway for use.

Fortunately I have enough saving for the down payment and increase my portfolio as well. Prepared more than 6 years of cash funds too which I plan to have them mainly in SSB ( 100k limit ) and FD. Surely slight delay in purchasing helps me financially too.  I foresee this will likely be my retirement home if i choose to return to Singapore, my Country, my Homeland, my Birthplace one day.



Cory
20170414

Cory Diary : Forest Woods

Almost 70% (357) units of Forest wood Residence (OCR) has been lodged with URA website. Price range between S$1300~1500 psf sitting on site area of 150,712 sq ft.

When North Park Residence first launched, it was a success too. Both private condos are in prime locations and 12F. I remembered complaining how small the units and felt this will only get smaller considering TDSR limiting the affordability and Land Pricing. So how this been going after more than a year ? Using site area to compute ...

Forest Woods : 150,712 sq ft / 519 units = 290 sq ft / unit
North Park Residence : 442,234 sq ft /  920 units = 480 sq ft / unit

Forest Woods has smaller land mass than North Park Residence by almost 40% ! This is despite North Park Residence has 920 units. So by population density measure we are going to see more people around the blocks.

Will the smaller trend continues ?


Cory
20161024

Cory Diary : Experience in New Private Apartment enquiries

Like to record my experience on my property enquiries on a new private apartment. Using $1M amount as a reference calculation on the loan and fees needed. Recorded to the best of my memory re-collection using one hour of my morning time today to type. Hopefully no error in my understanding and re-collection.

Property Agent
An agent Trust Worthiness is important. Diligent and supportive are key criteria. Willingness for long term relationship will indicate his character clearly. Getting the right person is the first step in my property search. He is also the key person i ask about home procedures, lead time and industry practises.

In Principle Loan
Getting support from the bank on how much I can borrow and criteria to meet are important especially for those who are based oversea. We do not want last minute surprise risking the initial 5% deposit of the property value if we decide not to proceed with the deal. Provide as much information as possible for correct assessment by the bank.

Paper Work
Each bank may have slightly different expectation that I need to provide. Need to get ready and available on the moment notice. Talk to the bank. Credit Card statements, Salary Statements, Employment and Income Proof etc.

Booking
Ideally we like to be present to preview, ask questions, sign and handover our cheque for the home we want to buy in the show room. However you can ask someone else to sign for your intention if you are not available and trust their advice. There is a 5% booking fee that can be use to offset the initial 20% for first property. There maybe penalty on specific amount of the 5% if you fail to follow through on the purchase.

Initial Amount
I need to pay up 20% of purchase price for 1st property. Using $1M, that's $200 K in Cash and OA CPF. So if you find difficulty even at raising this amount maybe that property is not for you and need to adjust your expectation accordingly. Personally it should be well above my budget and above allocated emergency funds for housing.

Loan

Need to prepare to take a loan of $800 K. There is small sum of processing/valuation fee.
If you are oversea, time your returns to settle loan matter and lawyer. At least 3 weeks.
I included consideration on job security and emergency fund amount in my decision of the property value I would like buy. There is also age restriction on the tenor period i can borrow which will affects the monthly re-payment amount. 

Another key consideration is Interest rate. A Low interest rate is a double edge sword. You pay lesser for your borrowing cost but you may find yourself in over-leverage territory easily due to the low base of the rate. A small hike may impact your ability to continue to service your loan or affect your quality of life. Although the regulatory requirements and banks have built-in some safety measures we need to do our sum.

Personally to me, low interest rate stability for the entire loan term is important as I may not want to re-finance, and need to meet a host of criteria again. So sudden jump in interest rate due to board rate mechanism will not work well for my case especially in low interest rate environment.

Declaration

I also need to do declaration on other loans such as car loan, housing loan, provided guarantee to someone, over draft and credit cards etc. You maybe surprise they can directly hit the amount you are allowed to borrow quite significantly. So be careful on this and be prepared for buffer. I have a well paid relative who have to borrow money from poor me because they mis-calculate the amount needed and need to tie over short-term cash flow problem.

Fees

In-addition to the 20% purchase price amount at minimum for those with first property, need to be prepared for the following

Booking Fee : 50 K. Get your cheque book ready. I am a little uncomfortable handing over blank cheque to the developer to signal our intention to purchase. Is done on-site and widely practised afaik. Authority should prohibit this practise with strong penalty against developers. There is room for issues and also put buyers at a disadvantage in pricing of development. I hope someone can bring this up to appropriate authority as it does not make logical sense.

Lawyer Fee : 2.2 K. Their service is worthy. Make sure the firm is in your bank approve shortlist.

Stamp Duties : 29 K. May varies with individual condition. So check up with your agent and lawyer.

Cory
20160723

Cory Diary : Impact of Increasing Rates on Home Loan

As all property owners, with increasing rates and weakening economy, there is some worry we may have difficulty paying our loans. We need to have a feel to assess how much an impact it can be in the future. So here's what I did using an on-line loan calculator for my calculation.

For a respectable condo size and location, S$1.125 M dollar price tag rounded up to $900 K loan amount at 80% loan to value. Applying DBS FHR18 +1.8% ( 3rd Year ), FHR18 is around 0.6% currently per DBS website. 

Loan Rate 2.4%

This works out to $5,958 monthly repayment for a 15 years loan. That's provided monthly income hits $10,723 to get a loan and assuming you do not have any other debts like credit card or car loans. Any of this debts will hit right into the calculation of your monthly income value. So beware.

Let's ease a little and pull the loan longer to 30 years. Monthly Income requirements down to $6,735 for a monthly repayment of $3,509.

Loan Rate 2.6%

Monthly Repayment: $6,043 (15 year loan), Income Required: $10,723 ( No change )

Monthly Repayment: $3,603 (30 year loan), Income Required: $6,735 ( No change )

Loan Rate 3.0%

Monthly Repayment: $6,215 (15 year loan), Income Required: $10,723 ( No change )

Monthly Repayment: $3,794 (30 year loan), Income Required: $6,735 ( No change )

Conclusion

The delta is a few hundreds buck more monthly. While is still a hit in the pocket it doesn't look as bad as I thought it would be. One of the main reason is the repayment has two components. Interest and Principal.

For a 15 year loan of the last example, when Interest go up to 3% , Interest cost is $1,215 but the Principal amount is still $5,000 which remains unchanged. Interest/Principal Ratio is 24.3%.

For a 30 year loan, Interest/Principal Ratio is 51.8% due mainly to lower principal repayment amount of $2,500. For people who overstretch themselves to buy a property using longer repayment period, few hundreds dollar increases can be a pain as they have lesser disposable income.

Cory

20151229

Cory Diary: Property

Visited a show room recently so thought i pen something to share from my learning. Elsewhere maybe different as i am no property expert. Read this as my personal thought talking to myself and not advise.

Room Size

The show room units are truly well designed. Is a promise of future living. However rooms are really small if you are "HDB type". And if you plan to wait longer so that it can grow bigger in future, we may need to accept it that is not going to happen even if price gets significantly lower.

Decoration

Kitchen, Flooring, Air Con, Toilet, Doors are all done up. The lights are excluded. Conceit piping/wirings.

Fridge and Washing/Dryer machine provided. There is a glass section through the kitchen.

If i am to value it, maybe 100k effort max.

Facilities

Is quite huge. In fact, 2/3 of the land mass. The "public area" looks beautiful. So only 1/3 is unit space. So unlike HDB, the common area in private condo is really private. So you have to pay for it which will works into the unit price.

Unit Price

Unless you go for investment, 2 Bed Room (BR) is rather small for a family. For the 3BR, easily hit S$1.1 M price tag for well located unit and good project location like this one i have visited. That's kind of high i thought but not after i do the maths.

From the forum information, the land was bided $1077 psf ppr. The unit on average were sold $1300 which doesn't add up as per analyst this will put the developer selling the unit sightly below cost. Well businessman do this for reason i think.

Strategy

1. Integrated Strategy/Strategic reasons - Meaning they can earn from malls and to protect their market share and margins.

TDSR and 80% 1st Home loan

2. Is the demand affordability due to TDSR and 80% max loan limits. The person who thought of this is ingenious.

Here's why. If we target household who are employed, Median household income S$8300. Max loan allowed is about 5K monthly payment using rough estimation.This mean S$1.1M unit is already brink due to 80% loan max with 220K ( CPF+Cash ) for this example. All the figures can varies but the point is the concept that restrain the bull.

Thus the developer will have problem moving units if priced higher psf. Buyers are constrained by the 80% ratio, TDSR, CPF and available cash. In addition we have the ABSD that cap on PR and Foreign investors. For people look on 2nd property ... the hurdle is even higher ...

The unit area has to shrink some. This trend will be hard to change. Probably integrated development is the way to go for the future.

Cory

1st May 2015

Cory Diary: World of Warcraft (WOW) Online Economy

Every time when there's a major patch in the WOW game, there will be new contents, game play change, new crafting materials and more character levels. In addition, the currency in the game using Gold coins will suffer through significant Inflation Spikes.

After several rounds of patches (analogy to Economic Cycles), ones will learn the pain of inflation and the obsolescence of old materials used in crafting or consumption. Few facts in the game. There's aren't property and coins are virtual (not backed). The best way to beat inflation is to work to provide service by helping to beat Instance BOSS for players of new characters for weapons / equipments or improve our levels, develop new skills and produce new materials to trade. The enterprising ones will organise the service and do hard trades. Other than that is to convert most pre-patch materials to coins either through sales in auction before they become worthless. Cash is King !

In real life as time or technology progress, it will be home material decays/spoils/obsolete. Crude Oils and most Commodities don't go away other than Price Fluctuation but is not easy for most. Property do get old or lease shorten much but that's across a long period for you to manage it and subject to economic conditions and cash level. Entrepreneurs are few. For most, other than some fixed low returns and saving, our cash is subject to harsh inflation.

Well there are also alternative which is to continue to Work like in the game. But this may mean retirement at later age even if we are doing well and saved some money. 20-30 years down the road after your final pay check (several patches of the game), you will realised your purchasing power eroded significantly . Just ask yourself how much you pay for your bus ticket or a bowl of noodles 20 to 30 years ago. And soon you will be like your elders and complain things are expensive just like when i was in the game after every patch. I refused to buy this and that. And miss out some fun. Or go through the hard way to get them which may be a a lot more expensive process to do. We need to be at the forefront to actively tackle the issue before it becomes a problem especially so for those who like to retire early.

We know from the game, holding on to old things won't work well. Inflation is slippery slope.We need to keep learning and have the willingness to take on new things that suits us to stay ahead of the game.

My solution is to try to make Money from Money in real life which the game couldn't. To Save, Preserve and Grow our Capital. And for this, I have to Invest Prudently. I am not saying this is easy and risk is real but there simply not much alternatives for the old me. My Strength is Wisdom and Capital, so make use of them wisely.


Cory
26th April 2015

Cory Diary: My Home

Something strikes me today after reading AK's comment in his post on singapore property.

If I am to buy a home say S$1M, and a year later the price comes down by S$100K. Will I be sad ? Ofcourse i will, silly ! But sad due to what is the critical issue here. Well i am sad because my home value drops 100k. But why should i when is a place to stay other than being sad for paying 100K more. Someone will pay more someone will pay less in any trade. If i am to sell it 100k lesser 5 years later, i will be getting cheaper price from others of another property anyway. 

If i got my home and price shoot up say 100K in a year, should i be happy then ? Why not, 100k take someone years to save ! But i cannot realise it since is a place to stay so what so big deal about it then ?

Well, i can sell it 5 years later and if price holds 100k up, i will be good. But then i will be buying another property from others at higher price too aren't we ?

And here comes the fundamental question if you haven't realise it yet. Higher property price only make the rat race course larger for your children and you. And a lot of paper work at your expense.

thanks

Cory

14th Nov 2014

Cory Diary : Property Crazy Question

Let say i have enough budget for either.
Apply value investing and quality of life, which should i go ?

Property 1 : Condo (New)
Region: RCR
Area: 850 sqf
Price: S$1 M
Rental Value: S$3000
Proximity: School, NE MRT/CIRCLE

This leave me with heavier loan, small family, less money for equity and need more loan for car.

Property 2: HDB Re-Sale (10 yrs)
Region: NE Region
Area : 1200 sqf
Price: S$600K
Rental Value: S$3300
Proximity: School, Coffee Shop, Supermarket, NE MRT/LRT

This leave me with 400K to do stock investment, larger family, major renovation and a car.

Cory
20 April'14

$1M Home Goal

Over this weekend, i have decided $1M (Today Price) home features will be the goal i hope to achieve. So this is what i want.

- Private Condo
- More than 1K sqf
- OCR
- Retirement and Recreational facilities
- Low Pollution and Traffics will be ideal
- Close to ammenties
- Reasonable rental income is a nice option

Next is can i afford ?
- 20 Years Loan (Using 20 for this example. There is a constraint on age: 65. So if you are 45, only 20 years)
- 1.5% Interests Rate

With 20% Cash and CPF, i will need $800K loan to be re-paid in 20 years with interests.
And about 3% stamp duty with cash. Assuming i have no problem with cash and cpf on the 20% and fees.
At 1.5% rate, monthly payment : $3,860
At 3% rate, monthly payment : $4,437 (up 14.9%)
At 5% rate, monthly payment : $5,280 (up 32%)

Total Cost excluding stamp duty, renovation and lawyer fees.
At 1.5% rate, $926,400. Total interests paid = $126,400.
Effective compound rate : 0.74%

At 3% rate, total interests paid = $264,880.
Effective compound rate : 1.26%

At 5% rate, total interests paid = $467,200. Almost half my condo price. I love Banks. :)
Effective compound rate : 2.33%

Investment Return
If I can achieve 3% on average annual property appreciation long term and with rental support bonus, this deal may makes sense. Anything more, else what am i waiting for ?


Cory
20th Jan 2013