Category: rEstateSG

SG condo price level #Susan.Lee

Posted on by tiger40490

Hi Susan,

Just to share my “biases” against the widespread and deep-rooted investor confidence in SG private properties.

Many realtors believe that over long term (10Y+ is my horizon), Singapore property prices will continue climbing. I am not sure.

Hongkong may or may not be a valid reference, but that’s the only comparable location. The supply/demand profile is different in each region and in each era:

  • Chinese tier-one property markets (Shanghai, Beijing, and possibly Shenzhen) have evolved under its own political, economic, demographic environment, so I don’t feel Chinese cities are reliable references.
  • Europe, Australia, North American, Japanese cities are also unreliable references if you ask me, because I am convinced that the (mainland and overseas) Chinese mentality — preference for buying over renting.. betting on windfall appreciation and ignoring rental income..– is one of the biggest demand-side factor that can’t be overstated.
  • Europe, North America, Australia, and Japan have a much longer history of prosperity

Over the last 30 years, the Chinese property investors have not seen a real bust as in Japan. https://asia.nikkei.com/Business/Markets/Property/Tokyo-property-prices-near-bubble-era-levels shows a 30-year property market recovery that’s still incomplete.

I would imagine that because of this positive collective memory, Chinese investors can’t intuitively assess “over-valuation” and “bubble”. This is such an important point in my reasoning that I will attempt to give a few analogs:

  • Until I saw, as a pupil, a magnet pushing another magnet without touching, I couldn’t imagine such a phenomenon. This is a natural science example. Rest are social science examples.
  • For centuries, people can’t imagine any country’s population could shrink permanently so we couldn’t imagine such a shrink. Now we are seeing it in some developed countries. Permanent? Let’s watch.
  • U.S. investors have watched the U.S. stock market recovering from every collapse very swiftly, without fail, so U.S. investors can’t imagine a prolonged “trough” like the ones in Japan, Europe and China.
  • Singapore property price history is similar to U.S. stock prices — over the last 30 years it has always rebounded after every correction, so the market watchers can’t imagine a Japanese-style long trough.

I’m slightly different from other Chinese investors —
1. I feel I don’t need a huge windfall profit — most realtors talk about 500k+ realized profits.
2. I value current rental income more than windfall appreciation
3. I wish to diversify geographically, like spreading over China, U.S., SEA

“Slightly” is my honest self-assessment. I’m 60% same as other Chinese investors in terms of my drivers — greed, fear, analysis, observations, information source, the people I listen to…

I really want to be more independent, marching to the beat of my own drum, but I can’t really tell myself to shut out the outside influence. I need a selective filter … tough balance.

HDB affordability=hard4other cities

Posted on by tiger40490

reason — in other cities, the private developers are too powerful and influential. They can sway public policy. Policy makers are humans.

reason — in other cities, given the current level of valuation, any policy that threatens to decrease residential property valuation over 50 years will hit deep and systemic resistance. Call it “vested interest” if you like. HDB scheme has that “destructive” power in public perception.

HDB jumbo unit #location careful

Posted on by tiger40490

—-The Susan discussion

  • Say my #2-1173 unit has NGRY=5%. If I can find a 7% NGRY jumbo unit, then it’s worthwhile to upgrade. I get S$1k/month additional  rental income
    • How about 6.5% NGRY? Not so worthwhile.
  • The jumbo unit would slowly lose value, but I don’t care so much.
  • my kids don’t need this inheritance
  • 🙂 Within 5Y MOP, you still can rent out entire unit if your family is overseas.

—- personal preferences

  • #1 factor — location determines rental demand and appreciation
  • location also determines my and wife’s commute, shopping convenience, schools etc. not to be taken lightly
  • If built more than 40 years ago (below 60Y lease remaining), then resale price will be affected (discounted), but if location is good it would be great for me.
  • Carving out a room in the living room with a window is probably allowed. Need window
  • prefer units with two entrances.
  • prefer corner units. Otherwise, typical size is 130+ in sqm like 68 sqm x 2

—- end game, assuming zero inflation:

Rental yield is likely higher than a regular HDB unit. I think we still can sell for some residual value. This high-income poor-appreciation asset is exactly what I need now.

May also get en-bloc, but the likelihood is 4%

—- financing

Mortgage can’t exceed 75%.

I have used cpfOA =151k

My current cpfOA = 17k only; 29k for wife.

[17] HDB Exec condo #Jun.Z

Posted on by tiger40490

update — Jun.Z has some first-hand experiences

Prerequisite — Singapore citizens, with combined income below $16001/month. Must sell existing HDB flat within 6M after getting the key.

  • Good: Buy from HDB, not private developer. Ballot if necessary. First timers have higher chance.
  • Good: Price is discounted compared to private condo. Discount is similar to Genn’s BTO flats.
  • Good: After 5 years, can sell to PRs. After 10 years, can sell to foreigners.
  • Good: if I can get a mortgage (say 20Y) and If i dump in all CPF (250k?) my monthly installment might be 2k and I free up S$500k cash

After getting the key, you could rent it out immediately by appealing to HDB that you family is overseas. HDB might approve for 2 years at a time. Your 5Y MOP will start after you come back.

  1. Action plan — any time my income drops below, I would apply. Convenient location is less important than rental demand.
  2. Long term plan — rent out, satisfy MOP then sell at a handsome profit.