HDB rents falling

[revhappy]

Just rented a 2+1 nice renovated hdb unit in Tampines st 43 for 2k. Few months back it was impossible to find anything in a hot area like Tampines for less than 2.2k.

Agent told me lot of supply. I can see ads for those mickey mouse condos for 2.5k rental and 2 year leases. Boy many those owners are going to be very nervous soon :D

[roly8]

alot of condo gonna TOP these few years..
and ton of new HDB coming up..


if you got holding power, there is nothing to worry about.. :cool:

[latour]

How much is the rental for a 4room HDB flat now in Tampines or Simei, walking distance within 300 meters?

[revhappy]

How much is the rental for a 4room HDB flat now in Tampines or Simei, walking distance within 300 meters?

2.5k to 3k depending upon condition and renovation.

[ikan bilis]

2K rent for a 3rm hdb flat is too high...

a 800K 2/3bdr condo, 640K loan, 30yr, 1.5% per month installment is 2.2K... (or 2% at $2366)

:2cents:

[revhappy]

2K rent for a 3rm hdb flat is too high...

a 800K 2/3bdr condo, 640K loan, 30yr, 1.5% per month installment is 2.2K... (or 2% at $2366)

:2cents:

I am foreigner, not even a PR, so no choice got to bear the rent. :doh:

[hyenergix]

I am foreigner, not even a PR, so no choice got to bear the rent. :doh:

What made you choose HDB over an MM condo?

[revhappy]

What made you choose HDB over an MM condo?

I would have been ok if it was a 1+1 600sqft like those on flora road, those are good.

But the Mickey mouse are studios 400 sqft, everything in the same room, not used to that kind of concept. I feel it will be claustrophobic especially if someone is staying at home whole day(My wife would be staying at home, and we have a 6 month old baby). MM's are perfect for working couples or singles.

Just my :2cents:

[ikan bilis]

I am foreigner, not even a PR, so no choice got to bear the rent. :doh:

die die must find way to get PR...
360K 3rm hdb, 290K loan, 30yr, 2%, monthly installment at $1072
cpf should be able to cover >S$500...
lagi if wanna rent out 1 bdrm at S$600 will have some spare change back...

;)

[hyenergix]

I would have been ok if it was a 1+1 600sqft like those on flora road, those are good.

But the Mickey mouse are studios 400 sqft, everything in the same room, not used to that kind of concept. I feel it will be claustrophobic especially if someone is staying at home whole day(My wife would be staying at home, and we have a 6 month old baby). MM's are perfect for working couples or singles.

Just my :2cents:

Thanks. I think it is mainly because you have a kid.

[revhappy]

die die must find way to get PR...
360K 3rm hdb, 290K loan, 30yr, 2%, monthly installment at $1072
cpf should be able to cover >S$500...
lagi if wanna rent out 1 bdrm at S$600 will have some spare change back...

;)

Yeah, gonna apply around april, lets see how it goes.

[revhappy]

Thanks. I think it is mainly because you have a kid.

I think its a matter of getting used to. If you have lived in a place like HK all your life, may be MM is ok. But if you are used to having a seperate bedroom, kitchen, living room then getting used to MM is tough, I guess. I dont know, I am just guessing.

Another thing is we are not really fitness freaks, i.e. going to gym, swimming pool etc. We dont even have a car, I ride a motorbike though.So all the amenities that come with Condo are waste for us. A well renovated HDB would be of better value.

[birdies]

Great news..!! Bubbles bubbles POP POP POP..!!

[Westwind]

I think its a matter of getting used to. If you have lived in a place like HK all your life, may be MM is ok. But if you are used to having a seperate bedroom, kitchen, living room then getting used to MM is tough, I guess. I dont know, I am just guessing.

Another thing is we are not really fitness freaks, i.e. going to gym, swimming pool etc. We dont even have a car, I ride a motorbike though.So all the amenities that come with Condo are waste for us. A well renovated HDB would be of better value.


With a wife and a baby, you should place a premium on space over other considerations.

Just my :2cents:

[chiaberry]

Yeah, gonna apply around april, lets see how it goes.

All the best! You are very sensible and practical. Sounds like you made a good choice with the current accomodation. See if you can get yr own place when you're PR. Rather than pay so much to rent, it might as well go towards your own pty.

[revhappy]

All the best! You are very sensible and practical. Sounds like you made a good choice with the current accomodation. See if you can get yr own place when you're PR. Rather than pay so much to rent, it might as well go towards your own pty.

Thanks bro :)

[rick1]

die die must find way to get PR...
360K 3rm hdb, 290K loan, 30yr, 2%, monthly installment at $1072
cpf should be able to cover >S$500...
lagi if wanna rent out 1 bdrm at S$600 will have some spare change back...

;)

which bank gives out 2% housing loan for 30 years? please advise.. :scared-4:

[buttercarp]

All the best! You are very sensible and practical. Sounds like you made a good choice with the current accomodation. See if you can get yr own place when you're PR. Rather than pay so much to rent, it might as well go towards your own pty.


Thanks bro :)

It is sis chiaberry.:)
All the best too to you, revhappy.
Btw.... what cc motorbike you riding?

[ikan bilis]

which bank gives out 2% housing loan for 30 years? please advise.. :scared-4:

heya... you just wanna argue for sake of arguing like what you kept doing at cna side.... you can go on keep renting 3rm hdb and thank you for contributing $$ to the rental market...


~~~~~~~~~~~~~~~~

Senario (A) for TS, low interest rate
- 360K 3rm hdb, 290K loan, 30yr, 2%, monthly instalment at $1072
- cpf should be able to cover >S$500...
- lagi if wanna rent out 1 bdrm at S$600 will have some spare change back... (may be no need to come out cash)


Senario (B) for TS, high interest rate
- say 3rm flat rental crash to $1500/month
- 360K 3rm hdb, 290K loan, 30yr
- interest rate has to gone up to 4.68% for $1500/month instalment

- if he renting out a room at $500, then interest rate has to gone up to 7.36% for $2000/month instalment

- if looking at cashflow with cpf of $500/month utilised, interest rate has to gone up to 9.79% for $2500/month instalment (meaning say if he can only afford to come out cash of S$1500/month max, he will only get into trouble when interest rate is at 9.79%)

- HDB is his after the 30yrs... and not paying at may be $6K/month rent for a 3rm hdb 30yrs later....

~~~~~~~~~~~~~~~

for rick1, nobody put a gun at your head asking you to buy, ofcoz you can go on keep renting your 3rm hdb and feed your landlord fat-fat, while everyday worrying about iran war, europe collapse, retrenched and etc... that's your choice mah, bro...

:rolleyes: :D

[devilplate]

jus few yrs ago in 2005/06, hdb 3rm flat rental only 1k.....hehehe

[ysyap]

Thanks bro :)Should be Thanks sis... ;)

[ikan bilis]

jus few yrs ago in 2005/06, hdb 3rm flat rental only 1k.....hehehe

those hdb above that new clementi mall, room rental rate hit $1k liow. i won't be surprise whole 3rm hdb at $3k if they are allowed to rent out... rent is too high now... :beats-me-man:

[devilplate]

those hdb above that new clementi mall, room rental rate hit $1k liow. i won't be surprise whole 3rm hdb at $3k if they are allowed to rent out... rent is too high now... :beats-me-man:
ya....one agt told me he rented out one master room in redhill flats for 1.2k......WAKAKA

no wonder MM min 2.3k lah

[ezonme]

heya... you just wanna argue for sake of arguing like what you kept doing at cna side.... you can go on keep renting 3rm hdb and thank you for contributing $$ to the rental market...


~~~~~~~~~~~~~~~~

Senario (A) for TS, low interest rate
- 360K 3rm hdb, 290K loan, 30yr, 2%, monthly instalment at $1072
- cpf should be able to cover >S$500...
- lagi if wanna rent out 1 bdrm at S$600 will have some spare change back... (may be no need to come out cash)


Senario (B) for TS, high interest rate
- say 3rm flat rental crash to $1500/month
- 360K 3rm hdb, 290K loan, 30yr
- interest rate has to gone up to 4.68% for $1500/month instalment

- if he renting out a room at $500, then interest rate has to gone up to 7.36% for $2000/month instalment

- if looking at cashflow with cpf of $500/month utilised, interest rate has to gone up to 9.79% for $2500/month instalment (meaning say if he can only afford to come out cash of S$1500/month max, he will only get into trouble when interest rate is at 9.79%)

- HDB is his after the 30yrs... and not paying at may be $6K/month rent for a 3rm hdb 30yrs later....

~~~~~~~~~~~~~~~

for rick1, nobody put a gun at your head asking you to buy, ofcoz you can go on keep renting your 3rm hdb and feed your landlord fat-fat, while everyday worrying about iran war, europe collapse, retrenched and etc... that's your choice mah, bro...

:rolleyes: :D

Simple calculation like Mr Tharma...$1000 pay can buy HDB flat :P

[eng81157]

Simple calculation like Mr Tharma...$1000 pay can buy HDB flat :P

don't get me started on the $1000-can-buy-HDB theory. all these PAP buggers should try living on a $1000 shoestring budget and see if they can get by before spouting nonsense

[DaytonaSS]

Simple calculation like Mr Tharma...$1000 pay can buy HDB flat :P

if u r earning $1k u can try applying for the 2 bed room and u know if can or not.

[DaytonaSS]

don't get me started on the $1000-can-buy-HDB theory. all these PAP buggers should try living on a $1000 shoestring budget and see if they can get by before spouting nonsense

issnt the govt trying to help these pple buy a 2 room flat with max $60k grant? Come on, open your eyes and look at other countries. Is there even public housing scheme to help pple earning 1k per month?

The qn to ask is y is this group of pple earning $1k, if they are trap in this proverty cycle, how to get their children out of it?

[revhappy]

It is sis chiaberry.:)
All the best too to you, revhappy.
Btw.... what cc motorbike you riding?

Opps sorry to sis chiaberry.

I ride honda phantom :)

[buttercarp]

Opps sorry to sis chiaberry.

I ride honda phantom :)



Honda phantom..... powerful bike.
Last time my husband rode the simple small engined Yamaha.
I pillioned with him till 6 months pregnant, then cannot climb up the bike so had to buy car.

[HP65]

jus few yrs ago in 2005/06, hdb 3rm flat rental only 1k.....hehehe

Another true case, in 2003, SARS time, my cousin rented Mei Ling EA for $1k! How times have changed.....

[revhappy]

Honda phantom..... powerful bike.
Last time my husband rode the simple small engined Yamaha.
I pillioned with him till 6 months pregnant, then cannot climb up the bike so had to buy car.

Haha, I used to pillion my wife too, until she was 6 months pregnant. Now that we have baby, the bike is only for me to go to office or buy groceries. We use taxi or public transport when we go out, together.

[revhappy]

Another true case, in 2003, SARS time, my cousin rented Mei Ling EA for $1k! How times have changed.....

Times have indeed changed. During SARS even foreigner workers would dread to come to Singapore. They would rather stay back home and stay poor than to get some life threatening desease.

[ay123]

issnt the govt trying to help these pple buy a 2 room flat with max $60k grant? Come on, open your eyes and look at other countries. Is there even public housing scheme to help pple earning 1k per month?

The qn to ask is y is this group of pple earning $1k, if they are trap in this proverty cycle, how to get their children out of it?

the only way to get out of poverty is education. isnt the govt working on this? to get 1k earner buy a 2 room flat is also helping them out of poverty. instead of putting the little contribution into CPF earning 2.6% interest. is better to use it to fund the 2 room flat to preserve and grow your wealth

[rick1]

heya... you just wanna argue for sake of arguing like what you kept doing at cna side.... you can go on keep renting 3rm hdb and thank you for contributing $$ to the rental market...


~~~~~~~~~~~~~~~~

Senario (A) for TS, low interest rate
- 360K 3rm hdb, 290K loan, 30yr, 2%, monthly instalment at $1072
- cpf should be able to cover >S$500...
- lagi if wanna rent out 1 bdrm at S$600 will have some spare change back... (may be no need to come out cash)


Senario (B) for TS, high interest rate
- say 3rm flat rental crash to $1500/month
- 360K 3rm hdb, 290K loan, 30yr
- interest rate has to gone up to 4.68% for $1500/month instalment

- if he renting out a room at $500, then interest rate has to gone up to 7.36% for $2000/month instalment

- if looking at cashflow with cpf of $500/month utilised, interest rate has to gone up to 9.79% for $2500/month instalment (meaning say if he can only afford to come out cash of S$1500/month max, he will only get into trouble when interest rate is at 9.79%)

- HDB is his after the 30yrs... and not paying at may be $6K/month rent for a 3rm hdb 30yrs later....

~~~~~~~~~~~~~~~

for rick1, nobody put a gun at your head asking you to buy, ofcoz you can go on keep renting your 3rm hdb and feed your landlord fat-fat, while everyday worrying about iran war, europe collapse, retrenched and etc... that's your choice mah, bro...

:rolleyes: :D



no mah.. i am asking where got mortgage on 2% for a 30 years loan? u never tell him in case when interest goes up to 4-5%.. mai saboh ppl lah.. tell them everything and let them make their own decisions..:2cents:

[devilplate]

no mah.. i am asking where got mortgage on 2% for a 30 years loan? u never tell him in case when interest goes up to 4-5%.. mai saboh ppl lah.. tell them everything and let them make their own decisions..:2cents:
he oredi stated 4-5% wat

int rate raise up to how many %% den exceed 2k rental?

definitely no brainer to buy HDB den rent one if one can buy

when market at peak peak....buy smaller flat

[ikan bilis]

no mah.. i am asking where got mortgage on 2% for a 30 years loan? u never tell him in case when interest goes up to 4-5%.. mai saboh ppl lah.. tell them everything and let them make their own decisions..:2cents:

heya... you don't hor.. now try kaykay pretend pretend lah... seen you had been nitpicking/picking bones from eggs in trying to shout down property price... :D



anyway, say...
- 3rm hdb as 360K, and he is paying S$2K/month or $24K/year,
- if we ignore property tax, town council charges & hdb property depreciations, repairs, which are quite low for 3rm flat
- on some quick calculation/accounting, he will break even when interest=rent, which would be 24K/360K=6.7%... profitting for anything lower than 6.7%...
- for cash flow, he can atually tahan higher interest rate (>10%) bcoz part of the instalment is paid by cpf, or he could even rent out one room. Not much risks.
- 2% interest rate is happening now and had been for 2yrs,... 6.7% interest rate? "May be" will come if you bears keep shouting loud enough,... but you bears like no eat rice leh... i waited for property price correction until neck long long liow.. :scared-3:



;)

(btw: yield for 3rm hdb is damn high... even higher than my industrials...:scared-3: :simmering: .... got rebate and free toilet upgrade somemore )

[minority]

Just rented a 2+1 nice renovated hdb unit in Tampines st 43 for 2k. Few months back it was impossible to find anything in a hot area like Tampines for less than 2.2k.

Agent told me lot of supply. I can see ads for those mickey mouse condos for 2.5k rental and 2 year leases. Boy many those owners are going to be very nervous soon :D

some folks don't believe this is fair comparison.
Well they are not worried coz they got mrt n mall!! Anyway time will tell.

:doh:

[rick1]

heya... you don't hor.. now try kaykay pretend pretend lah... seen you had been nitpicking/picking bones from eggs in trying to shout down property price... :D



anyway, say...
- 3rm hdb as 360K, and he is paying S$2K/month or $24K/year,
- if we ignore property tax, town council charges & hdb property depreciations, repairs, which are quite low for 3rm flat
- on some quick calculation/accounting, he will break even when interest=rent, which would be 24K/360K=6.7%... profitting for anything lower than 6.7%...
- for cash flow, he can atually tahan higher interest rate (>10%) bcoz part of the instalment is paid by cpf, or he could even rent out one room. Not much risks.
- 2% interest rate is happening now and had been for 2yrs,... 6.7% interest rate? "May be" will come if you bears keep shouting loud enough,... but you bears like no eat rice leh... i waited for property price correction until neck long long liow.. :scared-3:



;)

(btw: yield for 3rm hdb is damn high... even higher than my industrials...:scared-3: :simmering: .... got rebate and free toilet upgrade somemore )


Hehe. Ur calculation is like fairy tales. I wanna laugh. Wait until year end and see u still can continue to be so bullish or not.

[roly8]

singapore's highest interest rate for the past 20 years is 4% .

:)

[rick1]

singapore's highest interest rate for the past 20 years is 4% .

:)
Are u sure? Please check properly first.

[Allthepies]

don't get me started on the $1000-can-buy-HDB theory. all these PAP buggers should try living on a $1000 shoestring budget and see if they can get by before spouting nonsense

U should be happy for the $1000 income family has the option to own a roof over their head with heavy subsidies from the government. What is nonsense to you? Why are you unhappy? Did the $1000 income family ask u to be their spokesperson or u have some other motivation?

[rick1]

singapore's highest interest rate for the past 20 years is 4% .

:)

http://www.moneytalk.sg/2010/05/be-prepared-for-higher-interest-rates.html

http://3.bp.blogspot.com/_JpoIMGqhkCc/S8ne9WSOGZI/AAAAAAAABig/O-ONZepCOQ4/s1600/Historical+3+Months+SIBOR+Chart.bmp

[price]

U should be happy for the $1000 income family has the option to own a roof over their head with heavy subsidies from the government. What is nonsense to you? Why are you unhappy? Did the $1000 income family ask u to be their spokesperson or u have some other motivation?

I agree to this. Really don't understand why people are so offended with this statement. Singaporeans are too ignorant and well protected. They should travel and stay abroad more

[teddybear]

After every crisis, 3-mth SIBOR always inevitably become lower as a norm. E.g, Since 1999, 3-mth SIBOR has never increased more than 3.5%. In next recovery cycle, the peak of 3-mth SIBOR is expected to about 2.5% due to massive paper money printing. :D



http://www.moneytalk.sg/2010/05/be-prepared-for-higher-interest-rates.html

http://3.bp.blogspot.com/_JpoIMGqhkCc/S8ne9WSOGZI/AAAAAAAABig/O-ONZepCOQ4/s1600/Historical+3+Months+SIBOR+Chart.bmp

[JohnTan]

After every crisis, 3-mth SIBOR always inevitably become lower as a norm. E.g, Since 1999, 3-mth SIBOR has never increased more than 3.5%. In next recovery cycle, the peak of 3-mth SIBOR is expected to about 2.5% due to massive paper money printing. :D

Money placed in property will be placed in bank instead with 8 percent interest rate, no risk of losing capital, no need to worry about tenant, no tax on profits, no miscellenous fees, pure profit!!!!

8 percent interest rate, i want 8 percent interest rate. Flush out all the weak holders and reward prudent savers!!!!!

[devilplate]

Money placed in property will be placed in bank instead with 8 percent interest rate, no risk of losing capital, no need to worry about tenant, no tax on profits, no miscellenous fees, pure profit!!!!

8 percent interest rate, i want 8 percent interest rate. Flush out all the weak holders and reward prudent savers!!!!!
8% only a spike lah....wakaka

u want 8%, go to aussie lah

i kinda agree wif teddy.....next decade, ave int rate shd be around 3% only which oredi includes the spread

[devilplate]

remember my story of grandpa A, B and C?

last time int rate easily 4-5% for savers.....and den wat happens to those savers now?

[NorthernStar]

a old article talk about relationship with interest rate vs inflation..

with the new printing strategy, will the trend go reverse direction? i.e inflation up but rate down? :scared-4: it is a different game now..


COMPARE SINGAPORE HOME LOAN: SIBOR VERSUS INFLATION CPI

August 14, 2009 by property
Filed under Compare Singapore Home loans


COMPARE SINGAPORE HOME LOAN: SIBOR VERSUS INFLATION CPI

Get home loan

Many people say that, what happens if the interest rates go up? What will happen to my home loan installment?

When interest rates go up, your loan repayment becomes more expensive. Does that really hurt you?

The common answer is yes, it hurts you due to more expensive loan.


However the answer can be NO, it does NOT hurt you. The reason for this is because during times when interest rates are high, Inflation(CPI) is also high.

If you have a house, a job, shares and other assets, those values tend to rise as well. It is mostly a zero-sum game. In some cases, those asset values rise faster than CPI rate or it could rise even more than the cost of your housing mortgage.


SINGAPORE BANKS CANNOT LEND YOU AT LESS THAN THE Consumer Price Index (Inflation – CPI)


The point is, banks cannot lend you money at a rate that is less than the CPI, otherwise their money will lose its value as those same money will only be able to Afford less goods and services.




WHEN DO Singapore BANKS REALLY MAKE MONEY?





Some say that in 2006 and 2007 banks make a lot of money. While they probably did make money, charging you 5% for your home loans, but CPI was at 6.5%, that means that their money is depreciating.

In fact they are losing money doing that. This is a very rare event in History.

http://propertybuyer.com.sg/userfiles/image/Sibor%20versus%20CPI/Sibor%203%20month%20versus%20Inflation%20(CPI).png


SO DOES INFLATION (CPI) AFFECT INTEREST RATES?

Absolutely YES!!! Inflation is the base line. If Inflation rises, everything rises along with it. Due to Inflation rises, Sibor or SOR will have to rise along side.


If SIBOR or SOR rises, there is NO DOUBT that the bank’s floating rates will also have to rise. How fast they raise rates will depend on how benevolent the banks are.



So what do you think the banks do? Are they benevolent?

I think you know the answer.

[Eldenfirefly]

I never hear before. Devilplate. You must refresh my memory. I not on the forums all this while ah. :)

[Eldenfirefly]

a old article talk about relationship with interest rate vs inflation..

with the new printing strategy, will the trend go reverse direction? i.e inflation up but rate down? :scared-4: it is a different game now..


However the answer can be NO, it does NOT hurt you. The reason for this is because during times when interest rates are high, Inflation(CPI) is also high.

If you have a house, a job, shares and other assets, those values tend to rise as well. It is mostly a zero-sum game. In some cases, those asset values rise faster than CPI rate or it could rise even more than the cost of your housing mortgage.

.

Errr, I not so sure about this part. Depends on whether majority of your money inflow is from investment returns, or from your income (employment). If its from investment returns, then yes, you just need to ensure it is invested into assets which keep up with inflation.

But if its from employment, then it depends on whether your income can rise in tandem with rising or high inflation. That is not always possible to control wan. Sometimes, depending on your industry, the position you are in, etc, upward increases in income may be limited. Even if inflation and CPI goes up to 10% (which is a crazy rate), I don't think everyone will auto get a 10% pay rise...

[JohnTan]

8% only a spike lah....wakaka

u want 8%, go to aussie lah

i kinda agree wif teddy.....next decade, ave int rate shd be around 3% only which oredi includes the spread

There is a time to be a saver and a time to be a spender. There is a time for everything under the sun.

[JohnTan]

remember my story of grandpa A, B and C?

last time int rate easily 4-5% for savers.....and den wat happens to those savers now?

I know, I know, they now come to this forum to talk down property prices. wahahahaha

[roly8]

a old article talk about relationship with interest rate vs inflation..

with the new printing strategy, will the trend go reverse direction? i.e inflation up but rate down? :scared-4: it is a different game now..


thx for sharing. very interesting read.

[NorthernStar]

Errr, I not so sure about this part. Depends on whether majority of your money inflow is from investment returns, or from your income (employment). If its from investment returns, then yes, you just need to ensure it is invested into assets which keep up with inflation.

But if its from employment, then it depends on whether your income can rise in tandem with rising or high inflation. That is not always possible to control wan. Sometimes, depending on your industry, the position you are in, etc, upward increases in income may be limited. Even if inflation and CPI goes up to 10% (which is a crazy rate), I don't think everyone will auto get a 10% pay rise...

True.. that was the old thinking.. My company's HR review CPI/market rate and adjust salary every 1-2 years during off cycle review. However, with the new high CPI due to printing, not all company can adjust the pay accordingly. I am not a finance personal but definitely new game's approach ahead...

[teddybear]

You point out a very important point: Nobody is going to let you earn 8% return for your money by letting you put in the bank with no risk of losing capital, no worry about no rental income, no tax tax on profits, no property tax, no miscel fees, agent fees, maintenance fees, repair costs etc and earn 8% net! :mad:

The govts all over the world understand this now and will never let this happen again! You want to earn 8%, can, please take risks with your money! In the process, you can lose everything!



Money placed in property will be placed in bank instead with 8 percent interest rate, no risk of losing capital, no need to worry about tenant, no tax on profits, no miscellenous fees, pure profit!!!!

8 percent interest rate, i want 8 percent interest rate. Flush out all the weak holders and reward prudent savers!!!!!



After every crisis, 3-mth SIBOR always inevitably become lower as a norm. E.g, Since 1999, 3-mth SIBOR has never increased more than 3.5%. In next recovery cycle, the peak of 3-mth SIBOR is expected to about 2.5% due to massive paper money printing. :D

[minority]

a old article talk about relationship with interest rate vs inflation..

with the new printing strategy, will the trend go reverse direction? i.e inflation up but rate down? :scared-4: it is a different game now..


COMPARE SINGAPORE HOME LOAN: SIBOR VERSUS INFLATION CPI

August 14, 2009 by property
Filed under Compare Singapore Home loans


COMPARE SINGAPORE HOME LOAN: SIBOR VERSUS INFLATION CPI

Get home loan

Many people say that, what happens if the interest rates go up? What will happen to my home loan installment?

When interest rates go up, your loan repayment becomes more expensive. Does that really hurt you?

The common answer is yes, it hurts you due to more expensive loan.


However the answer can be NO, it does NOT hurt you. The reason for this is because during times when interest rates are high, Inflation(CPI) is also high.

If you have a house, a job, shares and other assets, those values tend to rise as well. It is mostly a zero-sum game. In some cases, those asset values rise faster than CPI rate or it could rise even more than the cost of your housing mortgage.


SINGAPORE BANKS CANNOT LEND YOU AT LESS THAN THE Consumer Price Index (Inflation – CPI)


The point is, banks cannot lend you money at a rate that is less than the CPI, otherwise their money will lose its value as those same money will only be able to Afford less goods and services.




WHEN DO Singapore BANKS REALLY MAKE MONEY?





Some say that in 2006 and 2007 banks make a lot of money. While they probably did make money, charging you 5% for your home loans, but CPI was at 6.5%, that means that their money is depreciating.

In fact they are losing money doing that. This is a very rare event in History.

http://propertybuyer.com.sg/userfiles/image/Sibor%20versus%20CPI/Sibor%203%20month%20versus%20Inflation%20(CPI).png


SO DOES INFLATION (CPI) AFFECT INTEREST RATES?

Absolutely YES!!! Inflation is the base line. If Inflation rises, everything rises along with it. Due to Inflation rises, Sibor or SOR will have to rise along side.


If SIBOR or SOR rises, there is NO DOUBT that the bank’s floating rates will also have to rise. How fast they raise rates will depend on how benevolent the banks are.



So what do you think the banks do? Are they benevolent?

I think you know the answer.

Great Chart!

[JohnTan]

You point out a very important point: Nobody is going to let you earn 8% return for your money by letting you put in the bank with no risk of losing capital, no worry about no rental income, no tax tax on profits, no property tax, no miscel fees, agent fees, maintenance fees, repair costs etc and earn 8% net! :mad:

The govts all over the world understand this now and will never let this happen again! You want to earn 8%, can, please take risks with your money! In the process, you can lose everything!

I fully agree that is the current world goverments thinking. However there is a risk that due to austerity and high inflation, the population will vote out these goverments, or goverments have to become populist and stop supporting the big banks or lose power. The naked truth is if the printing presses get taken away, govt treasury yeilds will rocket sky high for there to be instituitional takers. Never say never, no matter how small the probability is. In the past few years, black swans have been sighted with increasing frequency.:scared-4:

[ysyap]

In light of the title of this thread, I observe that asking for rental is still going strong and has not really fallen. In fact observed the boldness of some places actually had increased asking for rental... Not sure if any takers but prices are still high high lah... :rolleyes:

[avo7007]

I observe that asking for rental is still going strong and has not really fallen.

You are talking about HDB or private?