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Singapore Private Property prices still up or down? Part III


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17 hours ago, Icedbs said:

I am not sure why this thread has turn into some sort of sarcasm thread.

I hope that every senior MCF members realised that there are members of public who come to this thread looking for new information every day.  While not an obligation, we should be kind enough  to share our honest views and not some form of sarcasm. 

In investment matters, there is no right or wrong...only different views due to different investor profile, different risk level, different objectives. different age.  Just because some views differ from us does not mean they are wrong. We just have to give our  views, justify why is that so and then open our mind for different perspectives.

This thread can be potentially the best thread in MCF if we all want it to be so.

I hardly read this thread now. Much prefer the one started by Bro Merc which is more information instead of opinions. Maybe that is what makes this one so controversial. Recent reads I find too many typical MLM-style laden materials.

 

 

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7 hours ago, Rskc said:

Agreed. It used to be one of the best thread where the for and against will share their thoughts constructively, agreeing to disagree. It has been degraded to a certain degree of self trumpeting e.g. one's earning power at times and what one drinks or wear at time. What value does it bring to this thread? For fun and laughter is nice, too much becomes a drag. 

Let us get back to the nice debates from both sides and let forummers decide by themselves. They are not stupid and will know what to ignore.

By the way bro Icedbs, I always remember you posted some nice views previously and I thank you for that. Cheers. 😎 

Thanks and appreciate it.  

Somehow I have stop sharing my insights on property in this forum because my post are often viewed with skepticism; that I must have an agenda  simply because I am licensed agent.   

Anyway, I am in the process of starting a website that focuses on  property data research for data driven decisions.  In early 2018, I wrote an e-book on my top 5 best value new launches based on a set of metrics that I designed.  At that time, there were dozens of new launches, so I wanted to know myself which 5 has the best value. 

That e-book was only given to a small circle of friends and investors. Few days ago, out of curiosity,  I re-look into that 5 new launches again and check their latest average $psf.  They are all near to their TOP now, but still under construction.  Out of the 5 new launches,  three of them had gain 11+% appreciation, one at 5+% appreciation and another one at 0.2% appreciation.   I think  I  have mentioned about this e-book somewhere in this thread few years back.

It is stuff like this that fascinates me. 

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2 hours ago, Icedbs said:

Thanks and appreciate it.  

Somehow I have stop sharing my insights on property in this forum because my post are often viewed with skepticism; that I must have an agenda  simply because I am licensed agent.   

Anyway, I am in the process of starting a website that focuses on  property data research for data driven decisions.  In early 2018, I wrote an e-book on my top 5 best value new launches based on a set of metrics that I designed.  At that time, there were dozens of new launches, so I wanted to know myself which 5 has the best value. 

That e-book was only given to a small circle of friends and investors. Few days ago, out of curiosity,  I re-look into that 5 new launches again and check their latest average $psf.  They are all near to their TOP now, but still under construction.  Out of the 5 new launches,  three of them had gain 11+% appreciation, one at 5+% appreciation and another one at 0.2% appreciation.   I think  I  have mentioned about this e-book somewhere in this thread few years back.

It is stuff like this that fascinates me. 

Please do continue to share.👍 I think most accept constructive criticism except the 1 or 2. Let them be since this is a forum. Most of us accept we can never be always right. 🙂

Agent or not, I think most of us have some inclinations.😉 

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9 hours ago, Showster said:

The conversation will inevitably dwindle in quality because:

1. Buyers committed and no longer need to seek or contribute opinions.

2. Other potential buyers are either unable or unwilling to buy. Whether one is comfortable with the price, so few can actually qualify to buy.

3. Very few other than agents want to put forth their theories or thoughts to be proven right or wrong.

I would say, loosen all the measures, then we will qualify people who really want to buy. The quality of the discussion will then increase tremendously.

Let those who over commit and those who underestimate true values pay or earn for their mistakes and their right judgement. 

I need to clarify for point 3 I don't mean that only agents put forth their positive views. In fact, some agents like Ku Swee Yong also put forth negative views. 

I meant that few other people would actually bother to explain and clarify and test their hypotheses about their predictions. Out of concern, I explained in 2016 to 2018. Today, I share the same concern as well. But who will really believe in that kind of concern? 

I have put up an excel table explaining the viability of property before, but it was shot down by those who obviously knew what I referred to. Those tables are still valid today. 

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One example:

In those tables, I assumed an average interest rate of 2% and it was shot down as being too low an assumption. They said I should use 3.5% or higher as the base interest rate.

Will need to revise the interest rate to 1% or 1.5% if I were to ever do those tables again. 

Much lower rates than expectations...

Will find those tables when time permits. Let’s visit this again.

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https://www.straitstimes.com/business/property/dysons-sell-3-storey-penthouse-at-wallich-residence-in-singapore-for-62-million?utm_campaign=STFB&utm_medium=Social&utm_source=Facebook

 

Ultra Rich people really bo la sa.. Buy if they like, sell if they don't like.. Hack care whether is it a profit or loss.. They have so much more money then 10 to 20 million losses. 

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12 hours ago, Showster said:

One example:

In those tables, I assumed an average interest rate of 2% and it was shot down as being too low an assumption. They said I should use 3.5% or higher as the base interest rate.

Will need to revise the interest rate to 1% or 1.5% if I were to ever do those tables again. 

Much lower rates than expectations...

Will find those tables when time permits. Let’s visit this again.

Yes, please share that excel file again here.  Thanks!

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22 hours ago, Arcachon said:

1M65

Why I dread going to a Property Showflat | A Pen Quotes


https://apenquotes.wordpress.com/2020/10/17/why-i-dread-going-to-a-property-showflat/yield.jpg

See my reply to Apenquotes:

Hi Apenquotes,
I thought I share my “discovery” with you regarding property investment for rental income. Like many others, I used to calculate the rental returns by dividing the net income by the purchase price of the property. So for eg., the cost of the property is $1M, and my net rental income is $25K after deducting cost such as maintenance fees, loan interest payment, agent fees etc., I would compute that the returns as $25K / $1M or 2.5%
But thats not how “enlightened” property investors do. They leveraged.

They dont pay the full price of the investment property, instead they leveraged on a bank loan. And in these times of low interest rates, this leverage works wonders.

So lets take the case of that $1M property. Lets say you pay $350k and take a loan for the rest at $650K. The loan interest at 1.4% pa will cost you about $9,100 a year.
Now the net rental income (after deducting cost) is $25K, so the ROI for you would be
$25k / $350k = 7%

And if say, after two years, there is capital appreciation of $40,000, then the appreciation ROI is
$40,000 / $350,000 / 2 years = 5.7% pa

This is the reason, why property investment is still popular.

There is of course risks of economic downturn like now with Covid, where getting tenants can be a problem and even capital depreciation. So, one must have holding power to invest in property.

Personally, it has been profitable property investment journey for me. I compare my networth with colleagues who are happily staying put in their HDBs without investing nor upgrading to private property, my NW came up tops by $2M or more.

This sharing is not to entice you to invest in property but to give you a perspective of what “enlightened” investors see in property investment.

Hope these people see that leverage is the tool to make extra money in this instance, not necessary the property. 

property is good cos it’s one of the biggest ticket we can leverage on. 
but there are also many other liquid instruments that others can leverage as well. All your stocks, funds, ETFs are all leverage friendly stocks if they are not the penny kind.. 

 

anyway the “enlightenment” should be how leverage increases your returns not how property increase your returns. 

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2 hours ago, Dp26 said:

Hope these people see that leverage is the tool to make extra money in this instance, not necessary the property. 

property is good cos it’s one of the biggest ticket we can leverage on. 
but there are also many other liquid instruments that others can leverage as well. All your stocks, funds, ETFs are all leverage friendly stocks if they are not the penny kind.. 

 

anyway the “enlightenment” should be how leverage increases your returns not how property increase your returns. 

Good reminder. But do leverage within means. 

I was educated by someone younger than me on this property yield too many years ago. 活到老,学到老。 

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For the sake of discussion, let's assume the following:

Property price = $1,000,000

25% cash/CPF and 75% loan

Interest rate 1.5%

Assume rental from day 1 = $2500/mth = 3% gross yield (pretty generous in today's market)

Maintenance = $300 per month

Renovation = $10000 (relatively low assumption)

Please feel free to challenge/correct my assumptions 

Then factoring in the leverage (or actual cash/CPF outlay), rental income, stamp duty, agent renting/selling fees, interest, legal fees etc., my calculations show that if I were to sell in 3 years and the capital appreciation is:

  • total 5% ($1,050,000) then the IRR (annualized return) is 3.04%
  • total 10% ($1,100,000) then the IRR is 8.31%

In the case of 5% capital appreciation where IRR is only 3.04%, I would argue it may be better to keep my CPF earning a very safe 2.5% instead. It makes more sense to buy if the cap appreciation is 10% over 3 years but my genuine question for the experts here is how common is this 10% and above appreciation in today's market? Perhaps we could quantify it as out of 10 recent property launches, how many achieve 10+% appreciation over 3 years?

 

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I thought this table shows good reference. (From the other thread)
most gains are about ~4-5%pa without factoring any costs. 
 

so it’s just likely to be market/below market returns without leveraging? 
 

75% LTV to invest in property maybe still not too bad. 
but once the LTV is much lower, the attractiveness of the leveraging tool (property in this case) becomes less. 
 

and if talking about it wrt investment, then most likely a second/third/fourth property? Then the LTV becomes a lot less attractive ... then the returns follows, no? 
 

haven’t even talk about the illiquidity of the investment yet.... 

 

how should I change my view to see what you guys (positive property investors) see? 

2880671B-66FF-491D-8DAF-3510DB9F0A74.jpeg

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6 hours ago, Mm63 said:

For the sake of discussion, let's assume the following:

Property price = $1,000,000

25% cash/CPF and 75% loan

Interest rate 1.5%

Assume rental from day 1 = $2500/mth = 3% gross yield (pretty generous in today's market)

Maintenance = $300 per month

Renovation = $10000 (relatively low assumption)

Please feel free to challenge/correct my assumptions 

Then factoring in the leverage (or actual cash/CPF outlay), rental income, stamp duty, agent renting/selling fees, interest, legal fees etc., my calculations show that if I were to sell in 3 years and the capital appreciation is:

  • total 5% ($1,050,000) then the IRR (annualized return) is 3.04%
  • total 10% ($1,100,000) then the IRR is 8.31%

In the case of 5% capital appreciation where IRR is only 3.04%, I would argue it may be better to keep my CPF earning a very safe 2.5% instead. It makes more sense to buy if the cap appreciation is 10% over 3 years but my genuine question for the experts here is how common is this 10% and above appreciation in today's market? Perhaps we could quantify it as out of 10 recent property launches, how many achieve 10+% appreciation over 3 years?

 

Assuming your calculation is correct and IRR of 3% is your base case, it is a bit low for 3 years. However, if IRR is 3% for next 10 years which a possibility of capital appreciation to even higher (sensitivity check for best case - IRR at 8%), I may still bite. 

Looking at bro Dp26's next post, it seems like investment properties of over 10 years or more have better returns. Even for leasehold like Amaryllis ville at Newton. I remember when I first saw it back then, I said who would buy at such price for a 99 yrs. I was wrong.

I guess one's investment horizon matters and if one believes higher capital appreciation within next 10 years will happen.

Just my mho. Feel free to comment. 🙂

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2 hours ago, Rskc said:

Assuming your calculation is correct and IRR of 3% is your base case, it is a bit low for 3 years. However, if IRR is 3% for next 10 years which a possibility of capital appreciation to even higher (sensitivity check for best case - IRR at 8%), I may still bite. 

Looking at bro Dp26's next post, it seems like investment properties of over 10 years or more have better returns. Even for leasehold like Amaryllis ville at Newton. I remember when I first saw it back then, I said who would buy at such price for a 99 yrs. I was wrong.

I guess one's investment horizon matters and if one believes higher capital appreciation within next 10 years will happen.

Just my mho. Feel free to comment. 🙂

 

Hi,

You mentioned that looking at the table from Dp26's post, it seems like investment properties of over 10 years or more have better returns.

When I look at the table, I see a pattern where the sellers in almost all of the profitable transactions (except 2) bought before 2010 and all of the sellers in all of the unprofitable transactions bought in 2010 or afterwards. Just to be clear, the table is only a small sample of overall transactions but does it represent the general trend in the market?

Some will argue that this is due to the numerous cooling measures in place that is "artificially" keeping the market relatively flat. Others will argue that the high property appreciation rates from yesteryears are over.

Open for discussion........

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11 hours ago, Mm63 said:

For the sake of discussion, let's assume the following:

Property price = $1,000,000

25% cash/CPF and 75% loan

Interest rate 1.5%

Assume rental from day 1 = $2500/mth = 3% gross yield (pretty generous in today's market)

Maintenance = $300 per month

Renovation = $10000 (relatively low assumption)

Please feel free to challenge/correct my assumptions 

Then factoring in the leverage (or actual cash/CPF outlay), rental income, stamp duty, agent renting/selling fees, interest, legal fees etc., my calculations show that if I were to sell in 3 years and the capital appreciation is:

  • total 5% ($1,050,000) then the IRR (annualized return) is 3.04%
  • total 10% ($1,100,000) then the IRR is 8.31%

In the case of 5% capital appreciation where IRR is only 3.04%, I would argue it may be better to keep my CPF earning a very safe 2.5% instead. It makes more sense to buy if the cap appreciation is 10% over 3 years but my genuine question for the experts here is how common is this 10% and above appreciation in today's market? Perhaps we could quantify it as out of 10 recent property launches, how many achieve 10+% appreciation over 3 years?

 

When you do the IRR for the 5% capital appreciation after 3 years, did you add in the $90,000 rental income that you also collected over 3 years?

Also, don't forget that your initial outlay is only $250k + BSD. But your returns are around $50k (appreciation) + $90k (rental income) or a gross return of around $140k

That seems to me more than 3.04% annualized returns, although I did not go into the math in detail. There should be a leverage effect on the returns.

Now, your next question is how many new launches could give 10% appreciation in 3 years? I can't give you a direct answer for this, but I did a top 5 best value new launches "pick" 2.5 years ago and 3 of these new launches (currently about to TOP) has already gain 11% appreciation.  I wrote that in this post:

https://www.mycarforum.com/forums/topic/2716502-singapore-private-property-prices-still-up-or-down-part-iii/?do=findComment&comment=6986424

The thing is you need to find out which are the best value ones. I designed some metrics based on data analytics to measure this,  but it will never be a crystal ball thing due to changes in land development, new mrts, new masterplan, etc which cannot be predicted upfront.  But using data to drive decisions is better than randomly listening to every agent and developer out there.

Edited by Icedbs
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10 hours ago, Arcachon said:

Fast forward 30 years later, you have a 1 million dollar asset that gives you a $30,000 a year return.

or do nothing you have $471,114 and a return of $11.491 a year return

image.png

hi all bro here ... need some help ... let's say i got $300K to invest today.

found 1 property at $1,000,000 and already got a tenant (swee) for 36 months @ 2,500/mth

 

Downpayment = $250K

BSD = $24,600 

Agent fee (1%) = $10,000 

Legal fees, valuation fees, chapalang fees, etc = $3,000

Collect key, touch up here and there (may be also buy a new tilam for tenant and ikea cheap furniture) = $2,400

Total = $290K

 

Rental income = $90K

3yrs maintenance fees = $180 (cheap?) x 36mths = $6,480

3yrs property tax = annual value of $30,000 = $3,300 x 3yrs = $9,900

3years income tax for rental (after deduction of all expenses) = $1,000 (fair?) x 3years = $3,000

Net rental income = $70K

 

Monthly Mortgage = $2,588 x 36 mths = $93K

Outflow cash = $23K

$290K + $23K = $313K

Sell property (after 3 years) = $1.1M - $689K (outstanding loan) = $411K

Net profit = $411K - $313K = $98K

 

alternative investment

$300K to buy ascendas reits @ 3.2 = 93,750 shares

93,750 shares x $0.15 (dividend) x 3 years =  $42K

assuming 3 years, the share price up by $0.30 at $3.50 (very likely and higher) = 93,750 x 0.3 = $28K

yearly dividend can reinvest to buy more shares but rental cannot because every month is negative (rental not enough to cover mortgage + expenses)

Net profit = $70K + $X (reinvest)

 

And I MUST NOT go for new launch right? so can only buy resale or ready unit?

new launch, build = 3 years , rent = 3 years , net rental income = $70K

reits dividend for 6 years = $84K

so buying new launch = lost? [confused] 

 

this is not a bashing. since we welcome all views and opinions and talk about numbers.

please advise. we welcome all views from left and right. thanks! 

 

 

Edited by Wt_know
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51 minutes ago, Wt_know said:

hi all bro here ... need some help ... let's say i got $300K to invest today.

found 1 property at $1,000,000 and already got a tenant (swee) for 36 months @ 2,500/mth

 

Downpayment = $250K

BSD = $24,600 

Agent fee (1%) = $10,000 

Legal fees, valuation fees, chapalang fees, etc = $3,000

Collect key, touch up here and there (may be also buy a new tilam for tenant and ikea cheap furniture) = $2,400

Total = $290K

 

Rental income = $90K

3yrs maintenance fees = $180 (cheap?) x 36mths = $6,480

3yrs property tax = annual value of $30,000 = $3,300 x 3yrs = $9,900

3years income tax for rental (after deduction of all expenses) = $1,000 (fair?) x 3years = $3,000

Net rental income = $70K

 

Monthly Mortgage = $2,588 x 36 mths = $93K

Outflow cash = $23K

$290K + $23K = $313K

Sell property (after 3 years) = $1.1M - $689K (outstanding loan) = $411K

Net profit = $411K - $313K = $98K

 

alternative investment

$300K to buy ascendas reits @ 3.2 = 93,750 shares

93,750 shares x $0.15 (dividend) x 3 years =  $42K

assuming 3 years, the share price up by $0.30 at $3.50 (very likely and higher) = 93,750 x 0.3 = $28K

yearly dividend can reinvest to buy more shares but rental cannot because every month is negative (rental not enough to cover mortgage + expenses)

Net profit = $70K + $X (reinvest)

 

And I MUST NOT go for new launch right? so can only buy resale or ready unit?

new launch, build = 3 years , rent = 3 years , net rental income = $70K

reits dividend for 6 years = $84K

so buying new launch = lost? [confused] 

 

this is not a bashing. since we welcome all views and opinions and talk about numbers.

please advise. we welcome all views from left and right. thanks! 

 

 

Just my quick thoughts:

Agent fee is usually paid by the seller agent through co-broke thus can remove it from cost

Buying a property requires 5% cash, rest by CPF/Loan. and yes although CPF is my hard earn money, technically i need $100,000 cash to purchase a property and have a estimated profit of $100,000 (as per your calculation) at the end of 36 months. BSD to be paid by cash first, and can be reimbursed by CPF.

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