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Singapore Private Property prices still up or down? Part III

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1st Gear

https://www.straitstimes.com/business/banking/higher-deposit-safeguards-insurance-policy-protection-for-private-hire-drivers-kick

Insurance coverage on bank deposits to be raised to $75,000 from April 1, 2019

Your money in the Bank belongs to the Bank, you only got the right to withdraw if the Bank is still around.

The Bank got the right to create Money, MAS got the right to control the rate of creation.

CASH is called the M1 money supply.

https://tradingeconomics.com/singapore/money-supply-m2

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5th Gear

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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1st Gear

image.thumb.png.57fee57440cd67b8dd8c0efc817b1daa.pngimage.thumb.png.a99175ca1e011c313bf02dd551c091b3.png

Only pay $787.50 to stay plus maintenance fee and property tax... very cheap.

Better than renting.

Re : #03-05 msg from developer: 

#03-05 will not be release till further notice for balloting. However, guide price for you to gather interest is $840,000. Subject to changes.

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5th Gear

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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1st Gear (edited)
12 minutes ago, awhtc said:

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

 

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.

Edited by Arcachon

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3rd Gear
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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4th Gear (edited)
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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Supersonic

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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Turbocharged
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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1st Gear
13 minutes ago, Rskc said:

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. 

Will you buy knowing the CMs are distorting the market or will you wait when the CMs are removed and the market return to normal.

The Half-empty will see the distortion as bad.

The Half Full will see an opportunity.

Back to Basic, simple mind thinking. Can buy don't buy wait for what?

 

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1st Gear
15 minutes ago, Throttle2 said:

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

That was what happens when I bought my first private property.

Whoever knows after 4 years can profit 1 million dollars will be very rich and there are just 197 owners.

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Supersonic
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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5th Gear
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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3rd Gear
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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1st Gear (edited)

image.thumb.png.42e86e6aef013c507481934029cfa971.png

When you buy a property and when it is time to sell and you don't get a profit it is because you bought too high.

 

Edited by Arcachon

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Turbocharged
6 hours 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)

One earns rental, one earn dividends.

Give me I take dividends, free myself from all the legwork and concnetrate on earning my next $300k.

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4th Gear
12 minutes ago, kobayashiGT said:

One earns rental, one earn dividends.

Give me I take dividends, free myself from all the legwork and concnetrate on earning my next $300k.

Depends how you see property prices moving as well. Reits is more liquid but physical property, you can leverage your 300k by taking loan.

Not that you can't get leverage to invest your 300k.

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2nd Gear

I can see why there are so many ppl interested in the thread or property investment yet haven’t act on their purchase.

they calculate the numbers and are not convinced themselves. They are others here that try to show the way, but unfortunately talk half here half there. (See the numbers, feel the magic, 😏.)

I’m interested cos I’m not convinced also and am hoping to see the “enlightenment” 

I’m convinced that borrowing or leveraging is a useful tool but once the LTV drops(2nd/3rd property) it becomes less attractive.

i also always wonder why ppl can do so many assumptions on property investment; rental @ 3%pa, growth @ 5%pa blah blah blah and is totally fine with it. (The numbers that dont lie and will be there are the taxes)

History also told me if i put my money in stock X or stock Y or index X or index Y, i will be many dollars better than today. Should i go around telling ppl that they are doing right/wrong and so forth? Everyone is different so I cant assume they can or want to do the same. And i cant guarantee that the dividend will be there nor the growth will be like what it is for the last 20-30 years. Nobody can guarantee the future right?

 

I have a good friend that is super into property investment and we always have interesting conversations everytime we catch up. He’s one of those that also attends property seminars and talks. He is adamant that he will be a multiple landlord in the near future and that’s the ‘end game’ for his investment/retirement portfolio. In the last 10 years, he has bought/sold/upgraded 2 properties and made some money in the pocket. Recent years he also starts to get a bit interested in the stock market and follows the same characteristics or acumen of his property investment. (This one good, dividends strong, up 10% sell blah blah blah) 

told him to replace the property with this particular stock that he’s pretty convinced and use the same leveraging spreadsheet he has and make a calculation base on his own projection on dividends and growth. Suddenly his eyes light up. He was ever so convinced that property is the only way to go.

Property is good, but not the only way to go.

 

 

TLDR: many road leads to rome. 

Views are personal only, sorry for the lengthy post. 

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