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Singapore Private Property prices still up or down? Part III


pChou
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for a straightforward discussion ... let's ignore CPF

$300K full cash ... what to invest?

buy $1M investment property or put $300K into Reits (real estate investment trust)

Edited by Wt_know
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21 minutes ago, Arcachon said:

You can pay for your profit or pay from your experience.

In fact, when you get the right person to help you, you pay nothing.

DIY is good if you know what you are doing.

 

ok thanks.

so conclusion is to get a guru and follow guru advice ... 

guru know best what they are doing ... 

found a proper and certified financial planner to consult ... thanks

 

Edited by Wt_know
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8 hours ago, Icedbs said:

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.

 

Hi,

Yes, I accounted for the NETT rental income after deducting interest ($9K), maintenance ($3.6K), annualized agent's fee ($1.25K), Prop Tax ($1.8K), Income Tax ($2K) which works out to around $12+K per year. Prop and Income taxes are only approximations but you can see that the NETT ($12+K) is pretty far from the GROSS ($30K).

Based on your exercise in determining the top 5 best value launches, would you agree that 10+% capital appreciation over 3 years is more of an exception than the norm?

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52 minutes ago, Wt_know said:

for a straightforward discussion ... let's ignore CPF

$300K full cash ... what to invest?

buy $1M investment property or put $300K into Reits (real estate investment trust)

$300k?  Buy a few watches? 😃

Edited by Throttle2
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12 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,

I agree with you that the worst thing is probably to do nothing.

In my exercise, I used CPF as an example as it is the safest investment out there with somewhat confirmed 2.5% interest. However, there are other investment instruments other than CPF and property. For example, I could put my money into grade-1 REITs which pays out approx. 3-5% dividends a year. This would easily beat property as an investment if capital appreciation is less than 10% over 3 years even if we take leverage into account. REITS are also much more liquid and you can buy/sell in parts.

So far, from the responses posted, I gather that >10% growth over 3 years exist but they seem to be more of the exception than the norm. Can I say that probably only 2-3 out 10 of all new launches achieve 10+% growth over 3 years?  If so, that is a pretty significant risk for the buyer to undertake.

 

 

Edited by Mm63
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1 hour ago, Kaka23 said:

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.

Actually the agent fee should be 2% and this cost is incurred when he SELLS after 3 years.

Edited by Mm63
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Talk talk talk only about downpayment and loans, as if future income is guaranteed and guaranteed to grow in leaps and bounds.

be a bit more prudent lah,  build in an element or probability of job loss, career failure etc....

life is not a bed of roses.  Winter may hit you when you are weakest.  Be prepared.

but if Risk is all you are then so be it!  Just leverage to the hilt and work your life off praying that you dont hit a bad patch.

 

Whatever it is, there isnt a fixed path, and if some guru comes out and tells you that there is, you better spit at him and walk away

Note also all these discussions are incomparable if the risk appetite is not aligned, age and family situation not considered.

conclusion, its just forum yakkety yak.   Huat ah! 

 

 

Edited by Throttle2
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1 hour ago, Wt_know said:

for a straightforward discussion ... let's ignore CPF

$300K full cash ... what to invest?

buy $1M investment property or put $300K into Reits (real estate investment trust)

I also need some help , seriously.

ignoring CPF as well, currently i still have about $1.2mil sitting around doing nothing. 

It’s not much i know, but any good suggestions? Good one lah.  Thank you .

Edited by Throttle2
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22 minutes ago, Arcachon said:

Use a simple mind to think, Ah kong give you 2 cherries did you take.

MAS said you can only buy 1 property did you buy.

If the above is NO, Why?

My personal opinion is it's fine to buy 1st property for own stay because own stay involves non-commercial considerations. The question I'm investigating is, assuming I'm decoupled from my spouse, is whether to invest in 2nd property or other investment instruments instead.

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I have crunched some numbers for a $1 mil dollar 99 LH property as a 2nd property for investment.  For a relatively high income earner (say >$150k p.a.), it does not make financial sense to invest in a 2nd property, especially one that has < 80 years lease left.  The BSD+ABSD and associated loan interest on these stamp duties will knock out all annual profit, and that is assuming 100% tenancy.  This is not including the decaying 80 years lease and 50% LTV from CPF.  Some details have been simplified.

 

image.png.be1adcaa757b82bee598ddcb99eea504.png

 

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I have forgotten to add condo maintenance ~$250 per month for this unit.  This will push the loss deeper by $250 x 12 = $3k.

Hence, from this simple exercise, the LTV and ABSD were selected to kill off most investors...

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1 hour ago, Wt_know said:

for a straightforward discussion ... let's ignore CPF

$300K full cash ... what to invest?

buy $1M investment property or put $300K into Reits (real estate investment trust)

i will do reits as i can diversify into different sectors/trust, high liquidity and no out-goings. in fact i have been constantly putting aside a sum of money per year into reits to build on my passive income. there are some downsides to reits as well but to me it is more manageable as compared to property

property investment there are a few caveats for your model to work i.e. you have a residential address under your parents/spouse name and your individual income can sustain the loan.

43 minutes ago, Mm63 said:

Actually the agent fee should be 2% and this cost is incurred when he SELLS after 3 years.

Yeah i actually miss out on the selling portion. so the net profit is about $85,000?

 

 

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12 hours ago, Mm63 said:

 

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........

Yup. The sample size is small. Agree with you that the CMs are distorting the market and we nvr guess what govt is going to do next. It reduced SSD period in 2017 and market shot up in next 2~3 qtrs and then the sledgehammer came and prices stayed there since.

This is the reason I feel that if IRR base case is indeed 3% (based on mm63) and best case is 8% and one's horizon is long enough, he might be able to see the light. The debate is if 3% is base case. It could get lower. Next year is key.

Of course, being all others equal, location is impt. 

Edited by Rskc
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Lets face it, the reality is that properties no longer provide the kind of yield which makes a fair investment for what it is.

so gone are the days

secondly, the capital appreciation is also sporadic and unlinear and a best unknown in todays world.

in terms of liquidity, property sucks

in terms of commitment, property is a killer long term burden on the shoulders.

 

but why why why do people still scream shout Properties!!!

because as rightly pointed out, it is the one asset class that allows high leverage over long periods

For such “schemes” to work, must ensure the waves keep coming , like ponzi . Otherwise, house or cards will crumble.

properties huat ah! Wan sui

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1 hour ago, Mm63 said:

 

Based on your exercise in determining the top 5 best value launches, would you agree that 10+% capital appreciation over 3 years is more of an exception than the norm?

Like all things in life, there is no sure thing, not to mention an investment instrument.

All we can do is do our own homework and stack the odds in our favour.

 

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6 minutes ago, Icedbs said:

Like all things in life, there is no sure thing, not to mention an investment instrument.

All we can do is do our own homework and stack the odds in our favour.

 

Fair enough, so to each his own still at the end of the day

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1 hour ago, Arcachon said:

A baby (BOY) takes 26 years to know whether the baby becomes an asset or a liability to the parent.

What is your timeline?

Do you want to wait 26 years later and look back on what happens if you NATO?

I NATO for 10 years and regret it every day.

My estimation is on per annum basis.  If every year at 100% tenancy gives negative cash return (not even factoring in decaying lease and 50% LTV), then it looks rather unattractive to purchase a resale leasehold property for investment.  Unless one is very fortunate to get a good enbloc chance years later...

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16 hours ago, Arcachon said:

 

Which is better for your money in CPF earn 2.5% or reduce your Principal by $60,751.16.

Add Property Tax, Agent Fee, Maintainance Fee, renovation, fire insurance, etc.

After 3 years you sell at 1 million.

1 million.jpg

 

image.png.fd920daa0ab2143eec305e9c669d9fde.png

I took the purchase figures off your table. Since you are a registered salesperson, care to comment on my calculation?

There is a cash outlay of $1208 per month for mortgage and the final balance is base on an assumption of property growth of 3% per annum, which I think is the tricky part.

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