View Full Version : Who should jump into the private property market right now?
Intuitively, it may not make sense for most of us to buy a private residential property right now. Given the uncertain market outlook, there is a high risk that property prices would come down in the months ahead. Nonetheless, there could still be selected groups of people or investors who should consider entering into the property market right now. So who are they?
Group 1: Those who want to make their CPF monies work harder for them.
At present, the interest rates given by the CPF board for monies in the ordinary account is only 2.5% (http://mycpf.cpf.gov.sg/Members/Gen-Info/Int-Rates/Int-Rates.htm). In comparison, the rental returns as well as capital appreciations from buying a property right now could potentially be higher. Hence individuals who want to make their CPF monies work harder may want to invest in a property instead of simply leaving it in the ordinary account.
However, it is important to note that this does not apply to non-residential properties (i.e. commercial and industrial units). CPF phased out the CPF Non-Residential Properties Scheme on 1 Jul 2006; hence CPF monies can only be used to buy residential properties.
Group 2: Individuals who are buying a property for their own use.
Another group of buyers who could consider buying a residential property right now are individuals who are purchasing a unit for accommodation. The alternative to buying a property is renting, however according to data from URA, the median rental for non-landed properties is about S$40.08psm per month (about $3.72psf per month). Assuming a household rents a 1,000sq ft unit (instead of owning the unit), his monthly rental would work out to be $3,720 per month and about $44,640 annually. If the household entered into a 2-years rental contract, almost $90,000 would be incurred as expense. On the other hand, if the household bought the unit that they are staying in, the $90,000 could have been used to repay the mortgage loan on the property that would eventually be theirs.
Group 3: Individuals who are holding onto a sizable amount of cash
There is a popular saying, “Cash is king”; this is especially true when markets are on the decline and when assets are being sold for a huge discount. Many individuals who profited from the property boom of the late 2000s could be sitting on the sidelines and waiting for the market to crash before entering the market again. However, the main challenge they face is to identify when the crash would happen. These individuals who are currently holding onto their cash and waiting for the crash to occur would hardly be earning any returns by putting their monies with the banks due to the low interest rates. Apart from that, the individuals’ purchasing power is also steadily being eroded away by the high inflation rate. Should a crash occur, the Western governments could respond by launching another round of quantitative easing (i.e. printing money to boost economy and spending) just like what they did in the aftermath of the Global Financial Crisis, which in turn could cause property prices to start climbing again and make it even more expensive.
Hence, even at a rental yield of 3%, buying a property could be more worthwhile in comparison to the putting their monies in the bank and simply earning interest rates of around 1% or less.
Conclusion
At this point, I must emphasize that I am not trying to encourage people to buy a property now. However, I am of the view that if you were to belong to at least one the three groups listed above, there could be some basis for you to consider purchasing a property despite of the high prices.
To conclude, when I was conducting research for my second book, Buy RIGHT Property: The Right Approach to Property Investing in Singapore, I found that the median holding period of unprofitable property deals was about 1¾ year. In comparison, profitable property deals were held for about 2½ years. I recognize that this does not mean that all units sold in 1¾ years or less were unprofitable or that all units sold after a holding period of 2½ or longer were profitable; nonetheless, this data suggests that owners of profitable transactions took a longer time to sell their units as they could have been waiting for the best possible offer. Conversely, owners of unprofitable deals had to quickly liquidate their properties as they could already be in some form of financial difficulty and were not able to hold out for a more favourable offer to come along.
The main point I am trying to make is that many investors cannot tell when the property market would suddenly crash. Hence the best strategy is to invest with a long-term view and only buy what you can afford. Quoting Franklin Roosevelt, the 32nd President of the United States, “Purchased with common sense, paid for in full, and managed with reasonable care, (properties are) about the safest investment in the world.”
To offer a balanced view, my next article would be “Who should avoid the property market right now?” Keep a look out for it.
By Getty Goh, Director of Ascendant Assets (http://www.ascendantassets.com/), a real estate research and investment consultancy firm
Deep in recession is usually the best time to invest in properties. Maybe I should post past articles during the previous global recession in 08/09 to show how bad the property market was just 4 years ago. Some people I know seem to have forgotten. The same things could happen in a new global recession.
Deep in recession is usually the best time to invest in properties. Maybe I should post past articles during the previous global recession in 08/09 to show how bad the property market was just 4 years ago. Some people I know seem to have forgotten. The same things could happen in a new global recession.
08/09 was useless. The recession was quickly undone by QE. I was searching like crazy to get a good bargain. Couldn't find.... Finally gave up and bot clover in 09. Even then the developer up price when I bot.
97 seems like what u should look at. But if you ask me, the market was stagnant for so long and the current prices factored in inflation.
One of my tenant(local family) have been renting from me for 5 years waiting for the prices to drop. Rental at 50k per year. You do your sums, what do you suggest them to do? Wait some more and rent or just buy?
For those buying for own stay that's a different a story, your tenant should have bought in early 09, shouldn't wait.
But for those thinking of investing their 4th / 5th property, maybe buying during recession can get a better deal.
Own stay - just buy. Within means.
Regulators
25-08-12, 12:34
What if now to recession the price increases by 100% and when recession comes, price correction is only 30-40%, so when is the best time to buy you think ?
Deep in recession is usually the best time to invest in properties. Maybe I should post past articles during the previous global recession in 08/09 to show how bad the property market was just 4 years ago. Some people I know seem to have forgotten. The same things could happen in a new global recession.
Own stay - just buy. Within means.
They sold, thinking prices will drop. They have been shopping around... Prices did not drop. They are still searching.
Prices don't drop is ok. As long as don't jump so high..
Prices don't drop is ok. As long as don't jump so high..
Problem was the price shot up!
Problem was the price shot up!
but question is will it shoot up some more...:confused:
but question is will it shoot up some more...:confused:
This is for own stay. Not investment. Either way, u are paying rental - right?
If for investment, honestly, this is time to let go if you have many units. If you have 1 for stay, 1 for investment. I would rather keep both if the prices are already up. If you have 3 or more, can consider selling 1 to cash out. The balance allows you to be still vested. No right or wrong. Just my own strategy.
They are also losing out putting money in the bank due to the low interest and high inflation. They would have leverage on the low mortgage rate if they have bought in 2009. QUOTE=chestnut]08/09 was useless. The recession was quickly undone by QE. I was searching like crazy to get a good bargain. Couldn't find.... Finally gave up and bot clover in 09. Even then the developer up price when I bot.
97 seems like what u should look at. But if you ask me, the market was stagnant for so long and the current prices factored in inflation.
One of my tenant(local family) have been renting from me for 5 years waiting for the prices to drop. Rental at 50k per year. You do your sums, what do you suggest them to do? Wait some more and rent or just buy?[/QUOTE]
They are also losing out putting money in the bank due to the low interest and high inflation. They would have leverage on the low mortgage rate if they have bought in 2009. QUOTE=chestnut]08/09 was useless. The recession was quickly undone by QE. I was searching like crazy to get a good bargain. Couldn't find.... Finally gave up and bot clover in 09. Even then the developer up price when I bot.
97 seems like what u should look at. But if you ask me, the market was stagnant for so long and the current prices factored in inflation.
One of my tenant(local family) have been renting from me for 5 years waiting for the prices to drop. Rental at 50k per year. You do your sums, what do you suggest them to do? Wait some more and rent or just buy?[/QUOTE]
And guess what? I did national service! They asked me to rent cheaper and shared with me their situation. I felt so bad, rent out to them at 10 % below market rate. I felt so sad for them.
What if one has 5 units investment units and all of them has capital gain of more than 50%. They are in CCR and city fringe with rental yield of at least 5% as they are in good location and view, and next to existing and future mrt stns. Jod is recession proof and with emergency fund to last for 6 years to make capital repayment when interest rate goes north. Should one sell some of them away, like what you say.:confused:
This is for own stay. Not investment. Either way, u are paying rental - right?
If for investment, honestly, this is time to let go if you have many units. If you have 1 for stay, 1 for investment. I would rather keep both if the prices are already up. If you have 3 or more, can consider selling 1 to cash out. The balance allows you to be still vested. No right or wrong. Just my own strategy.
Chillyred888
25-08-12, 13:51
They sold, thinking prices will drop. They have been shopping around... Prices did not drop. They are still searching.
Will this same group of buyers still take the plunge when recession at full blast & Even if the property they eyeing start to correct?
or when interest rate goes up/ high unemployment happens?
What if one has 5 units investment units and all of them has capital gain of more than 50%. They are in CCR and city fringe with rental yield of at least 5% as they are in good location and view, and next to existing and future mrt stns. Jod is recession proof and with emergency fund to last for 6 years to make capital repayment when interest rate goes north. Should one sell some of them away, like what you say.:confused:
Take property like shares.... If you bot 5 lots of Keppel land at say $2 and today it is $3. Ask yourself a few questions:
1. Do you need the money?
2. Do you want to cash out say 1 lot? Remember, you are still vested.
3. If you think the units have upside potential, then hold.
If you have a long term view, it is ok. It really depends on your goal. I am still holding 6 units in Singapore. Don't intend to sell anymore as replacement cost is very high. Just sold my gardens recently(held for 2 years and made >300k capital gain). I expect gardens to still go up as I expect the train to be very near there. But what the hack, leave some meat for others.
If I were you, just keep and happily enjoy the tenant paying for you.... Remember to take max loan and long tenure for rental. You can use interest to offset earned income. Remember time value of money.
Will this same group of buyers still take the plunge when recession at full blast & Even if the property they eyeing start to correct?
or when interest rate goes up/ high unemployment happens?
This group sold and are hoarding cash... So when it drops, they will swoop in. If not they have no house.
Have similar thoughts. Money in the bank is depreciating. Properties are bought to be kept in particular already paid up and enjoy the passive income. Still a long way from retirement but may go part time if want to and do something else.
Take property like shares.... If you bot 5 lots of Keppel land at say $2 and today it is $3. Ask yourself a few questions:
1. Do you need the money?
2. Do you want to cash out say 1 lot? Remember, you are still vested.
3. If you think the units have upside potential, then hold.
If you have a long term view, it is ok. It really depends on your goal. I am still holding 6 units in Singapore. Don't intend to sell anymore as replacement cost is very high. Just sold my gardens recently(held for 2 years and made >300k capital gain). I expect gardens to still go up as I expect the train to be very near there. But what the hack, leave some meat for others.
If I were you, just keep and happily enjoy the tenant paying for you.... Remember to take max loan and long tenure for rental. You can use interest to offset earned income. Remember time value of money.
Have similar thoughts. Money in the bank is depreciating. Properties are bought to be kept and enjoy the passive income. Still a long way from retirement but may go part time if want to and do something else.
Working towards financial freedom is critical. When you work, you are not so stressed!!!!
I now just work for fun....
Just waiting for the passive income to replace my active income. Can consider to retire then.
Working towards financial freedom is critical. When you work, you are not so stressed!!!!
I now just work for fun....
They are in CCR and city fringe with rental yield of at least 5% as they are in good location and view, and next to existing and future mrt stns.
5% return in CCR or fringe, Where, Where? I want!:D
5% based on price you bought or current price?
Sounds like you're close to your retirement dreams.... :cheers4:
5% return in CCR or fringe, Where, Where? I want!:D
5% based on price you bought or current price?
Sounds like you're close to your retirement dreams.... :cheers4:
should be price he bought...:D
Most HDB units are having a yield of 10% or more pa. Say duxton 5rm bought at $400k in 2004. Rental is about $4 to 4.5k pm now.
Those who own such high yield units, should they plunge in and get a condo if they are to move in condo? Since, they will always have the high yield to support condo loan instalments.
Do you mean owners at Duxton has already reached 5 years MOP? I thought it was TOP only in December 2009. HDB is checking for illegal leasing and URA are checking on PC on illegal subleasing too.
Most HDB units are having a yield of 10% or more pa. Say duxton 5rm bought at $400k in 2004. Rental is about $4 to 4.5k pm now.
Those who own such high yield units, should they plunge in and get a condo if they are to move in condo? Since, they will always have the high yield to support condo loan instalments.
Chillyred888
26-08-12, 10:23
This group sold and are hoarding cash... So when it drops, they will swoop in. If not they have no house.
if market didnt correct, they might have to wait forever with their cash eroding away by inflation :banghead:
4% yield based on latest caveat for the City fringe.
5% return in CCR or fringe, Where, Where? I want!:D
5% based on price you bought or current price?
Sounds like you're close to your retirement dreams.... :cheers4:
flagship74
26-08-12, 10:29
I think property will crash..what goes up will come down..that;s newton's law..but the billion question is WHEN??!!!:D
Not just when but by correct by how much?
I think property will crash..what goes up will come down..that;s newton's law..but the billion question is WHEN??!!!:D
Chillyred888
26-08-12, 10:34
Not just when but by correct by how much?
and how Long you able to tide through when correction happens
Do you mean owners at Duxton has already reached 5 years MOP? I thought it was TOP only in December 2009. HDB is checking for illegal leasing and URA are checking on PC on illegal subleasing too.
Those who are eligible can appeal to rent out before MOP. Where to find 10% yield pa these days?
Question is how many? What kind of reasons to give? Children need to go to school?
Those who are eligible can appeal to rent out before MOP. Where to find 10% yield pa these days?
Question is how many? What kind of reasons to give? Children need to go to school?
Alamak, lets not dwell into the criteria. This is abit off topic. Just saying that those days are gone.
It is not a small problem. This is a big problem when garment change the policy on HDB leasing. The recent policy of max lease of 5 years for PRs owning HDBs have and will affect a lot of them.
Alamak, lets not dwell into the criteria. This is abit off topic. Just saying that those days are gone.
Alamak, lets not dwell into the criteria. This is abit off topic. Just saying that those days are gone.
U speak as though everyone can just buy a hdb and move out to lease. This can only happen if within 5 years the owner is drawing a lot more salary in order to buy a new private condo and not forgetting the 60% ltv now.
U speak as though everyone can just buy a hdb and move out to lease. This can only happen if within 5 years the owner is drawing a lot more salary in order to buy a new private condo and not forgetting the 60% ltv now.
Trust me, ppl who bot in those years would have their hdb almost paid up. Most would paid up by end of MOP. After that, 20% down just for pte apt.
phantom_opera
26-08-12, 14:21
Trust me, ppl who bot in those years would have their hdb almost paid up. Most would paid up by end of MOP. After that, 20% down just for pte apt.
Ah gong gives those ppl 30y loan cheap cheap 2.6 pc they dun want but want to pay up in 5y clap clap clap lol
Those who are eligible can appeal to rent out before MOP. Where to find 10% yield pa these days?
What do u mean by eligible and yet before the 5 yr mop? :confused:
Ah gong gives those ppl 30y loan cheap cheap 2.6 pc they dun want but want to pay up in 5y clap clap clap lol
I guess its more for peace of mInd with ealr settlement.
Most HDB units are having a yield of 10% or more pa. Say duxton 5rm bought at $400k in 2004. Rental is about $4 to 4.5k pm now.
Those who own such high yield units, should they plunge in and get a condo if they are to move in condo? Since, they will always have the high yield to support condo loan instalments.
I prefer to measure yield against current value. Assuming if this unit can be sold for $800k, and amount is fully invested (including amount return to CPF), then the yield of 6% will give you the same absolute dollar return.
Trust me, ppl who bot in those years would have their hdb almost paid up. Most would paid up by end of MOP. After that, 20% down just for pte apt.
:D:D:D:D:D...who ahhhhh
4% yield based on latest caveat for the City fringe.
freehold or leasehold.... expect yield to be lower for LH. Probably 1 bedroom units right?
yeah... 4% gross return is a criteria for my selection too, but I want FH....
CCR or CCR fringe, near amenity + MRT station... looks like we've got same taste in properties....:cheers4:
Two bedder unit and high floor.
freehold or leasehold.... expect yield to be lower for LH. Probably 1 bedroom units right?
yeah... 4% gross return is a criteria for my selection too, but I want FH....
CCR or CCR fringe, near amenity + MRT station... looks like we've got same taste in properties....:cheers4:
Ah gong gives those ppl 30y loan cheap cheap 2.6 pc they dun want but want to pay up in 5y clap clap clap lol
hmm.. take for example my case..
I left with only $90k odds for my HDB flat, 1 year more to MOP finish..
I would really pay up and secure 80% loan for my next property.. no point dragging it and get 60% loan only..
I think depends on how much is the remaining mortgage before one will choose to pay finish the loan or not.. mine is small quantum HDB flat only
This is the group of people buying PCs.:cheers4:
phantom_opera
26-08-12, 19:52
hmm.. take for example my case..
I left with only $90k odds for my HDB flat, 1 year more to MOP finish..
I would really pay up and secure 80% loan for my next property.. no point dragging it and get 60% loan only..
I think depends on how much is the remaining mortgage before one will choose to pay finish the loan or not.. mine is small quantum HDB flat only
He he he, I cannot comment as I do not know what is your gearing ratio ... but to me it is probably more prudent to borrow only 60% especially it is a Far East or CAPL project :p
Trust me, ppl who bot in those years would have their hdb almost paid up. Most would paid up by end of MOP. After that, 20% down just for pte apt.
Wow! good for you then! kinda impressive i must say. HDB in those years had a cap of 8k household income? but yea. a housing loan is the cheapest loan in your life. no point paying it off so quickly. cash could be used for many other investments.
Ah gong gives those ppl 30y loan cheap cheap 2.6 pc they dun want but want to pay up in 5y clap clap clap lol Why you pay ah gong 2.6% when you can get about 1% from banks?
Wow! good for you then! kinda impressive i must say. HDB in those years had a cap of 8k household income? but yea. a housing loan is the cheapest loan in your life. no point paying it off so quickly. cash could be used for many other investments.
hdb loan is 2.5% right?
phantom_opera
27-08-12, 10:10
Why you pay ah gong 2.6% when you can get about 1% from banks?
which bank will give you 30y 2.6% FIXED (almost)? which bank will allow you to miss a few payments and can negotiate to pay less monthly?
ikan bilis
27-08-12, 11:30
which bank will give you 30y 2.6% FIXED (almost)? which bank will allow you to miss a few payments and can negotiate to pay less monthly?
some stupid bank that forced me to have 3 life long fixed deposit a/c with them... :simmering:
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