My economic model for Singapore Property

[Limwsv]

This thread arises of a discussion initiate in the car/lifestyle section.  However, some very interesting points came up as to how Singapore properties should be considered.  The emphasis is deliberate as the model only works for Singapore.

 

There are a lot of property gurus here, so please ignore this un-sophisticated newbie who is just venturing into property and trying to justify his purchases.

 

Fundamental assumption : Singapore will continue to exist as a nation or if not, a quasi nation with independence and that the calibre of national leadership remain high.

 

Let with with an analogy from Singapore/Malaya history; Rubber planting.

 

As all Singaporean students knows from their history books, rubber tree takes 5 - 7 years to mature.

 

So, any businessman intending to venture into this industry has to

1. Buy the land

2. Clear the land 

3. Plant the cuttings and continue to care for the younglings

 

These are the years where there are negative profits as the businessman has to continue to pour money into his investment with no guarantee on returns (storm blows down estate, commodity prices collapse, disease toll on trees, etc).

 

However, if the plantation make it through and extraction starts, profits will start to flow in and can continue to flow for another 25 years or more.  Also, the rubber estate itself also gain value as it could be sold to buyers with a risk premium for taking on the early year risk.

 

One thing that a number of people keep telling me is rental margins and so on... but they always left me scratching my head, the time horizon they use is very short.

 

Like rubber planting, buying property for me is for the long haul with time horizon of 30 - 40 years or more.  Analogous

1. Buy the property

2. Do interior finishing

3. Continue to care for the property

 

These are the years where profits may be negative (if you cannot find a tenant) as the investors has to pour money into the investment.  

 

However, once the mortgage is paid off, profits will start to flow in and continue to flow as long as you own that property.  That is not in addition to capital appreciation if you sell off the property.  

 

So, the total cost and total profit that can be taken from the property over a time horizon of 30 - 40 years is actually more important then short term rental margins gained while the mortgage is still in force.

[Porker]

Technically you can consider cash in flow as profit only after you've broke even.

[Throttle2]

Lets just put it this way.

 

1. Its not how much you make but how quickly you can make it.

2. Its not how much you lose but how much more you make over the losses.

 

There is no need to explain yourself unless you are a policy maker whose decisions impact the lives of the masses

 

Bottomline,

Your money

Your life

Your decision

 

Happyholidays muayhahahahahah

[Weez911]

Well done TS!

 

So, when can we start to buy property in Singapore? Condo and landed...

 

I assume this thread can chit-chat?

Edited December 31, 2015 by Weez911

[Mason016]

I am looking for a tl;dr version. LKY noted that if you cannot get to the conclusion in two pages double spaced...he didn't read it.

[Acemundo]

bro,

 

far from it, I find your posts are quite intellectual albeit with an academic flavour in them. what do you do for a living?

 

 

There are a lot of property gurus here, so please ignore this un-sophisticated newbie who is just venturing into property and trying to justify his purchases.

 

 

 

[Lala81]

erm. why need an analogy for this?

[Limwsv]

bro,

 

far from it, I find your posts are quite intellectual albeit with an academic flavour in them. what do you do for a living?

 

 Clerk in one of the ministry..

erm. why need an analogy for this?

 

Running argument with one of the bro's here...

Lets just put it this way.

 

1. Its not how much you make but how quickly you can make it.

2. Its not how much you lose but how much more you make over the losses.

 

There is no need to explain yourself unless you are a policy maker whose decisions impact the lives of the masses

 

Bottomline,

Your money

Your life

Your decision

 

Happyholidays muayhahahahahah

 

Happy Rolexes year to you too....

Well done TS!

 

So, when can we start to buy property in Singapore? Condo and landed...

 

I assume this thread can chit-chat?

 

Sure, why not... the no chit-chat in the previous thread was to make sure that chit-chat happens....

 

This one... I have no expertise... chat away...  

[Acemundo]

haha Prime Minister's Office?  must be one of the scholars in our ministries.

 Clerk in one of the ministry..

 

 

[Limwsv]

haha Prime Minister's Office?  must be one of the scholars in our ministries.

 

No lar.. Patent Office.

[Acemundo]

haha is that related to Intellectual Property Office?  I know someone there.

No lar.. Patent Office.

 

[edwin15]

Mr Lim,

 

I saw this topic heading and thought it might be you.

 

I was right.............    

[edwin15]

As one of your critics, I would like to point out that this assumption is harder to hold the longer the period considered;

 

Fundamental assumption : Singapore will continue to exist as a nation or if not, a quasi nation with independence and that the calibre of national leadership remain high.

 

This year we just celebrated SG50. So when you talk in terms of 40 years, it is almost as long as we have been an independent country for.

 

I'm no property guru also, but my naive view is that buying property in a country is essentially taking a bet on the economy of that country. It is a popular investment tool as it is usually one of the most leveraged investments you can make with cheap funding relative to leveraging other assets.

 

For those that think property can only go up in the long term, I would like to post the example of Ireland;

 

https://en.wikipedia.org/wiki/Irish_property_bubble#The_crash_in_2009

 

 

 

[Limwsv]

haha is that related to Intellectual Property Office?  I know someone there.

 

Eh... maybe i know the person?

[Lala81]

No lar.. Patent Office.

 

IPOS staff?

Patent examiner?

[Limwsv]

As one of your critics, I would like to point out that this assumption is harder to hold the longer the period considered;

 

Fundamental assumption : Singapore will continue to exist as a nation or if not, a quasi nation with independence and that the calibre of national leadership remain high.

 

This year we just celebrated SG50. So when you talk in terms of 40 years, it is almost as long as we have been an independent country for.

 

I'm no property guru also, but my naive view is that buying property in a country is essentially taking a bet on the economy of that country. It is a popular investment tool as it is usually one of the most leveraged investments you can make with cheap funding relative to leveraging other assets.

 

For those that think property can only go up in the long term, I would like to post the example of Ireland;

 

https://en.wikipedia.org/wiki/Irish_property_bubble#The_crash_in_2009

 

Hmm... I knew these were bound to pop up...  but you still had to do it 

 

1. Your long run is too short...  all properties bubble will pop and show poor results within the selected time period.  

2. Ireland is a big country with the full spectrum of property types and cities can sprawl. 

3. Singapore has finite amount of land.  Not comparable to Ireland.

 

Although we have being an independent country for 50 years, land ownership in Singapore has continuously lasted for almost 200 years.  I know that not comparable to owning an apartment, but unless we get conquered or blown up by another country, it's reasonable to expect land ownership to persist in its current form for another 100 years.

 

There are many rich third generations families quietly living in Singapore whose forefathers acquired land in the early period.  Once in a while, they pop up in the news like the case where the old lady nearly got cheated by ah tiong.

 

Anyway, I am sure that I have chosen the right path.  Nobel prize winning economist has shown that only land ownership can drive a consistent decade through decade return regardless of inflation.

IPOS staff?

Patent examiner?

 

Clerk lah.. where got so high-power like patent examiner and such...

 

Doing the buttwork and filing.

Edited December 31, 2015 by Limwsv

[edwin15]

Hmm... I knew these were bound to pop up...  but you still had to do it 

 

 

 

Someone had to do it. 

 

But my point is that with your assumption about the +ve prospects of Singapore, you will almost always come to the conclusion that Singapore property is a good buy. The assumption leads the conclusion.

 

I haven't see the study you spoke about to comment about its relevance here. But the one key thing about property as an investment is that to make a concrete investment, you have to tie yourself to the economics of a particular country and these 2 are strongly correlated. 

[edwin15]

 

Anyway, I am sure that I have chosen the right path.  Nobel prize winning economist has shown that only land ownership can drive a consistent decade through decade return regardless of inflation.

 

 

This one only time can tell and I'm in no position to comment on your investment decisions.

 

Your opinion on how property prices will go in the future is as good as mine. Main thing is that if you have the conviction and have already done the homework, you should go for it. Fortune favours the bold.

 

I only wish to discuss assumptions and logical consistency of the model you put up.