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View Full Version : Which is the best bank loan package for project under construction??



noblebaby
05-03-09, 00:20
Too many packages out there, 3- or 12-Months Sibor selection, very confusing, pls. advice.

Studying loan for project still under construction.

rusty28
05-03-09, 02:33
correct me if I'm wrong. Most of the newly launch projects have tie up with the bank and u dont have much option to choose.

isaaclim
05-03-09, 07:27
Too many packages out there, 3- or 12-Months Sibor selection, very confusing, pls. advice.

Studying loan for project still under construction.

Loan package for 3 months SIBOR means your interest rate change every 3 months. Same apply to 12 months SIBOR.

Some bank use SOR instead of SIBOR. In general, SOR is slightly higher then SIBOR. Of course, this is not always true.

The key selling of this package is "Transparency". It is only advisable to take this kind of package if the spread is low. Such as SIBOR+X. X is the spread.

Due to the losses in recent investment, banks have raised the spread to increase the costs of lending (generating more profit to cover previous losses). It was really a shame that our no.1 local giant, DBS is the first bank that raise the spread to 1.75%, which cause all the banks to follow. With this kind of spread, it have make this kind of package completely not interesting.

noblebaby
05-03-09, 07:47
Loan package for 3 months SIBOR means your interest rate change every 3 months. Same apply to 12 months SIBOR.

Some bank use SOR instead of SIBOR. In general, SOR is slightly higher then SIBOR. Of course, this is not always true.

The key selling of this package is "Transparency". It is only advisable to take this kind of package if the spread is low. Such as SIBOR+X. X is the spread.

Due to the losses in recent investment, banks have raised the spread to increase the costs of lending (generating more profit to cover previous losses). It was really a shame that our no.1 local giant, DBS is the first bank that raise the spread to 1.75%, which cause all the banks to follow. With this kind of spread, it have make this kind of package completely not interesting.

thanks for advice... then what is the better package? since most of the banks increased the spread... Knew a lot of people using Stand Chart package... but when I look at the package, no different from DBS package... :beats-me-man:

noblebaby
05-03-09, 07:48
correct me if I'm wrong. Most of the newly launch projects have tie up with the bank and u dont have much option to choose.

i think this is only applied to thos interest absorption scheme right? any guru can comment?

Some local banks already asked their client to top-up the loan... :banghead:

x11
05-03-09, 08:08
please do check with citibank - as i understand, their rates are sibor + 0.X only and this will be held at this level to the end of march 2009. don't quote me on this, better to give them a call to verify. :)

Bishan Kid
05-03-09, 08:37
Loan package for 3 months SIBOR means your interest rate change every 3 months. Same apply to 12 months SIBOR.

Some bank use SOR instead of SIBOR. In general, SOR is slightly higher then SIBOR. Of course, this is not always true.

The key selling of this package is "Transparency". It is only advisable to take this kind of package if the spread is low. Such as SIBOR+X. X is the spread.

Due to the losses in recent investment, banks have raised the spread to increase the costs of lending (generating more profit to cover previous losses). It was really a shame that our no.1 local giant, DBS is the first bank that raise the spread to 1.75%, which cause all the banks to follow. With this kind of spread, it have make this kind of package completely not interesting.

Sibor or SOR plus X is for the general public who has no prior banking records with the bank.
As for their regular customers , they easily trim 0.5 to 1% off the baord rate or spread and that's apply to me.

My banker always tell me : Mr. Kid , if other banks can do it , we can do better.

noblebaby
05-03-09, 09:01
Sibor or SOR plus X is for the general public who has no prior banking records with the bank.
As for their regular customers , they easily trim 0.5 to 1% off the baord rate or spread and that's apply to me.

My banker always tell me : Mr. Kid , if other banks can do it , we can do better.

what kind of banking records? A million dollar of high net worth account with the bank? :scared-4:

isaaclim
05-03-09, 09:57
what kind of banking records? A million dollar of high net worth account with the bank? :scared-4:

SIBOR + 1.75 is a rate that a normal banker can quote.

Their manager can have the authority to give slight lower rate.
To get special rate, you need to have good relationship with bank + approval from top management.

noblebaby
05-03-09, 10:26
SIBOR + 1.75 is a rate that a normal banker can quote.

Their manager can have the authority to give slight lower rate.
To get special rate, you need to have good relationship with bank + approval from top management.

1.75 is normal rate for completed project, right? for project under con, think normal spread is 1.8-1.95, depends on lock in period.

Bishan Kid
05-03-09, 10:51
what kind of banking records? A million dollar of high net worth account with the bank? :scared-4:

Check with your banker.

Any comments from banker here to justify my statements.

gfoo
05-03-09, 10:58
most privilege or private banking customers will get slightly better terms than common account holders. you just have to ask and nego with your pte banker

Bishan Kid
05-03-09, 11:16
Always has 2 sets of accounts, one for the tax department and another for the banker.......I am just joking.:2cents:

noblebaby
05-03-09, 12:50
most privilege or private banking customers will get slightly better terms than common account holders. you just have to ask and nego with your pte banker

gfoo, which one is better? 3-month or 12-month Sibor? Pls advice.

gfoo
05-03-09, 13:15
none. i wouldn't touch sibor with a barge pole. go for 3 - 5 year fixed rate and pay slightly more for that security. else, go for the traditional bank rate that is determined annually

Bishan Kid
05-03-09, 13:46
gfoo, which one is better? 3-month or 12-month Sibor? Pls advice.

To take a Sibor loan is to take advantage of the low prevailing housing rate.
Personally, I will choose 1year Sibor to flush out short term fluctuation of rates. Though u may pay higher for 1 year Sibor as compared to 3month
but u get to sleep well for one full year.
Anyway , expect rates to stay low for next 2 years but again insured yourself against rate change for 1 year and worry what happen next year.

isaaclim
05-03-09, 13:47
All my package is SIBOR pledged. Easy to negotiate the spread which is purely bank profit.

For fixed package, they usually have lesser room to negotiate. But if you are getting loan now, don't go for SIBOR pledged package unless you know how to negotiate.

Currently, most of the bank offer SIBOR+1.75%. Butter+kaya+honey+Jam?!! Not healthy leh.

noblebaby
05-03-09, 15:54
All my package is SIBOR pledged. Easy to negotiate the spread which is purely bank profit.

For fixed package, they usually have lesser room to negotiate. But if you are getting loan now, don't go for SIBOR pledged package unless you know how to negotiate.

Currently, most of the bank offer SIBOR+1.75%. Butter+kaya+honey+Jam?!! Not healthy leh.

Butter+kaya+honey+jam is for low income group mah... sigh... only rich people has the luxury to eat abalone at cheaper price. :mad:

teddybear
05-03-09, 16:17
By the way, can the bank change the value of "X" (i.e. the "spread") anytime unilaterally or once you take up a say 30 years loan and the "X" is fixed already for next 30 years?



Sibor or SOR plus X is for the general public who has no prior banking records with the bank.
As for their regular customers , they easily trim 0.5 to 1% off the baord rate or spread and that's apply to me.

My banker always tell me : Mr. Kid , if other banks can do it , we can do better.

isaaclim
05-03-09, 17:46
By the way, can the bank change the value of "X" (i.e. the "spread") anytime unilaterally or once you take up a say 30 years loan and the "X" is fixed already for next 30 years?

Yeap. X is fixed but SIBOR is the variable component. That mean, bank profit is always fixed at X throughout your loan.

Bishan Kid
06-03-09, 08:31
By the way, can the bank change the value of "X" (i.e. the "spread") anytime unilaterally or once you take up a say 30 years loan and the "X" is fixed already for next 30 years?

Once you have taken a loan regardless of tenure, the spread will only change after "X" period is expired.In other words , 1 year Sibor spread is fixed for 1 year and rate will be adjusted to a new spread"X", variable or fixed rates and that depends on the term and conditions with the bank prior to signing of the agreement.

Bishan Kid
06-03-09, 09:05
The bank will always ask the standard documents when one apply for housing loans.
Once u have fulfilled the basic requirements and approved, the bank will offer the standard types of board rate to the applicant.

Rates can be negotiated with the banker on the followings:

1) If the applicant is recommended by someone who has a good standing with the bank or banker (0.1 to 0.15%) off the board rate.

2)If the loan quantum is less than 60% of the valuation and the loan amount is sizeable e.g. more than 1 million (0.25 to 0.35%) off the board rate.

3)Show proof with very active transactions and healthy cash flow with other banks. (0.1 to 0.15 %) off the board rate.

4)Spouse and/or applicant proof of additional source of steady income(0.05 to 0.1 ) off the board rate.

If none of above , the applicant has little room to negotiate for rates.

teddybear
06-03-09, 12:02
Just to clarify, say I take up a housing loan with interest rate pegged to Y-mth SIBOR + X. So, the bank can change the spread "X" after the "Y" period expired (even if Y-mth SIBOR remains the same)?


Once you have taken a loan regardless of tenure, the spread will only change after "X" period is expired.In other words , 1 year Sibor spread is fixed for 1 year and rate will be adjusted to a new spread"X", variable or fixed rates and that depends on the term and conditions with the bank prior to signing of the agreement.

Bishan Kid
06-03-09, 12:15
Just to clarify, say I take up a housing loan with interest rate pegged to Y-mth SIBOR + X. So, the bank can change the spread "X" after the "Y" period expired (even if Y-mth SIBOR remains the same)?

Yes . X cannot be changed if Y month is pegged.

When expired , X will be determined by the prevailing rate at that time when new Y-month is re-pegged.

Sibor is a short term interest rate that normally do not extend more than 1 year.

gohll
06-03-09, 16:14
I'm intending to buy a new condo at its soft launch - a first time for me. Can someone please advise me what happens if I sign the purchase agreement at the soft launch and then later find out that the bank refuse to give me a home loan, or much lesser than required? Or will the bank reps be present at the soft launch to give an evaluation/pre-approval on the spot? What is the standard process?

isaaclim
06-03-09, 19:53
I'm intending to buy a new condo at its soft launch - a first time for me. Can someone please advise me what happens if I sign the purchase agreement at the soft launch and then later find out that the bank refuse to give me a home loan, or much lesser than required? Or will the bank reps be present at the soft launch to give an evaluation/pre-approval on the spot? What is the standard process?

Say bye bye to 25% of your 5% deposit!

noblebaby
06-03-09, 20:21
I'm intending to buy a new condo at its soft launch - a first time for me. Can someone please advise me what happens if I sign the purchase agreement at the soft launch and then later find out that the bank refuse to give me a home loan, or much lesser than required? Or will the bank reps be present at the soft launch to give an evaluation/pre-approval on the spot? What is the standard process?

Bro, atleast make sure you can afford the 20% down payment.... even you may want to lend 85%.... now a lot of young couple dare dare to buy condo even over commited... If really cant afford, go for HDB first... Life will then b so much easier...

gfoo
06-03-09, 20:32
It doesnt matter how large your loan % is as long as its 80% or below - some want the liquidity for safety or to make the cash work harder. In this environment, the very least you should have is 60 months in monthly repayments in either cpf or cash - if u do not, u camnot afford a condo

PN
06-03-09, 20:33
Yes . X cannot be changed if Y month is pegged.

When expired , X will be determined by the prevailing rate at that time when new Y-month is re-pegged.

Sibor is a short term interest rate that normally do not extend more than 1 year.

My bank loans are from Citibank. For Y mth Sibor + X, the X is always fixed within the year.

Example:
Yr 1 Interest rate : Sibor + 0.6
Yr 2 Interest rate : Sibor + 0.7
Yr 3 Interest rate : Sibor + 0.8
Yr 4 Interest rate : Sibor + 1

If you opt for 3mths Sibor. In year1, the Sibor portion will change every 3mths but 0.6% is fixed. The same computation applies for yr2 & yr3.

There are options for 1/3/6/12 mth SIBOR. The higher the number, the higher the X value. You can also change from 1mth to 6 mths by written in to the bank one month before the the expire of the interest period.

noblebaby
06-03-09, 20:40
It doesnt matter how large your loan % is as long as its 80% or below - some want the liquidity for safety or to make the cash work harder. In this environment, the very least you should have is 60 months in monthly repayments in either cpf or cash - if u do not, u camnot afford a condo

Gfoo, not every one know the risks of investment... Many young ppl take 90% loan with a 30++ years tenure... Dump large part of salary into installment every month.....

jsh
07-03-09, 04:09
My bank loans are from Citibank. For Y mth Sibor + X, the X is always fixed within the year.

Example:
Yr 1 Interest rate : Sibor + 0.6
Yr 2 Interest rate : Sibor + 0.7
Yr 3 Interest rate : Sibor + 0.8
Yr 4 Interest rate : Sibor + 1

If you opt for 3mths Sibor. In year1, the Sibor portion will change every 3mths but 0.6% is fixed. The same computation applies for yr2 & yr3.

There are options for 1/3/6/12 mth SIBOR. The higher the number, the higher the X value. You can also change from 1mth to 6 mths by written in to the bank one month before the the expire of the interest period.

This is fantastic. You probably got the lowest rate in town. Could you let us know when did you sign up for the loan?

PN
07-03-09, 08:46
This is fantastic. You probably got the lowest rate in town. Could you let us know when did you sign up for the loan?

No lah. Those are just examples.

Mine is 1st yr Sibor+0.9 & another one is Sibor+1.1.
I've a friend who signed up 2H last yr has Sibor+0.7. Also from CitiBank.

x11
07-03-09, 10:18
No lah. Those are just examples.

Mine is 1st yr Sibor+0.9 & another one is Sibor+1.1.
I've a friend who signed up 2H last yr has Sibor+0.7. Also from CitiBank.


friend just refinanced last week - citibank 6month sibor+0.75 1 yr lock-in

gfoo
08-03-09, 14:11
Gfoo, not every one know the risks of investment... Many young ppl take 90% loan with a 30++ years tenure... Dump large part of salary into installment every month.....

i dun understand singaporean psychology - aren't we supposed to be super kiasu and kiasee?

say a young couple avg age 30 earns $5k a month each. That means that they can only afford a $2k/mo mortgage entirely serviced from their CPF. That's a $600k home (prob a caspian 2 bedder or something). Based on my formula of 'cover one backside', one spouse must be covered for 5 years. That means cash or CPF reserves AFTER drawdowns of at least $60,000. add another $1k per month of expenses, that brings it up to $120,000.

Thus, 'How To Survive a Recession While Covering One Backside Formula':
- Husband & Wife earn $5k each for a total of $10k monthly
- Pay 10-20% deposit, borrow the rest: You can only afford a $600k home
- You must have at least $60k-$120k in cash and CPF Ordinary reserves to cover one backside for 5 years

If you dun have the above, as Suze Orman says: 'Girlfriend, You Have Been Denied!'

PN
08-03-09, 16:31
i dun understand singaporean psychology - aren't we supposed to be super kiasu and kiasee?

say a young couple avg age 30 earns $5k a month each. That means that they can only afford a $2k/mo mortgage entirely serviced from their CPF. That's a $600k home (prob a caspian 2 bedder or something). Based on my formula of 'cover one backside', one spouse must be covered for 5 years. That means cash or CPF reserves AFTER drawdowns of at least $60,000. add another $1k per month of expenses, that brings it up to $120,000.

Thus, 'How To Survive a Recession While Covering One Backside Formula':
- Husband & Wife earn $5k each for a total of $10k monthly
- Pay 10-20% deposit, borrow the rest: You can only afford a $600k home
- You must have at least $60k-$120k in cash and CPF Ordinary reserves to cover one backside for 5 years

If you dun have the above, as Suze Orman says: 'Girlfriend, You Have Been Denied!'

Gfoo, the kiasu and kiasi mentality applies to children education and queing up for freebies.

I don't dare to say I fully understand Singaporean mind although I'm also Singapore because not all think alike. What I can say is that not many has the habbit of keeping savings for 30yrs and below. There is no finiancial planning at all.

But from my observations, even youngster with low income of 1.5k to 2.5k, they can change handphone 2-3 times a year.

Some has nice sports car which does not match their income. Go for tour severals time a year using credit card or credit line w/o clearing them on time. There was a case of a manager who eark 8k/mth and accumulated 50-60k of credit debt. So where are the savings?

By the time they get married, they also need to spend on weddings. Let me post this question, how much loss you will incurred when you get married. Loss bet 10-20k is a norm & I've heard of as high as 30k just for the wedding dinner. I know it is once a lifetime thing but is this really necessary?

Now when come to housing, some may have enough to pay for the 1st 20% but not much left to service installments & buffering. So it's a case of struggling to cope with home, car & credit loan every month. Chinese has a saying "walk one step, count one step". This is as good as walking on a high rope. Falling down is not the question. The question is when?

That's the reason why I posted several threads on this topic. Hopefully, it will help those who plan to buy but don't know if they are in the right financial position.

http://forums.condosingapore.com/showthread.php?t=7014
http://forums.condosingapore.com/showthread.php?t=7040
http://forums.condosingapore.com/showthread.php?t=7086

DW
08-03-09, 17:29
Based on my formula of 'cover one backside', one spouse must be covered for 5 years. That means cash or CPF reserves AFTER drawdowns of at least $60,000. add another $1k per month of expenses, that brings it up to $120,000.

Thus, 'How To Survive a Recession While Covering One Backside Formula':
- Husband & Wife earn $5k each for a total of $10k monthly
- Pay 10-20% deposit, borrow the rest: You can only afford a $600k home
- You must have at least $60k-$120k in cash and CPF Ordinary reserves to cover one backside for 5 years

If you dun have the above, as Suze Orman says: 'Girlfriend, You Have Been Denied!'

This is quite interesting and perhaps insightful in its own ways; and in this regard, I ask for greater guidance and enlightenment. I am just wondering how was the 5 years' reserve in cash / CPF form derived?

Against the backdrop of the 5 years' reserve, I have the following questions:-

1. Assumes tenor of loan = 30 years (mostly)
2. Assumes worse ever recession in history was the Great Depression occuring in 1929. Figures indicate that the average joe (within 2 std deviations) managed to gained employment again within 6 years post 1930. OF course, there are those who remained completely unemployed for longer periods of time, I am using confidence interval of 95% (2 std deviations).
3. Assume cash to be a proxy to risk free instrument and assume further risk free rate now is 1.5% in Singapore context of SGD.

Having 5 years of reserve in cash form means a significant portion of one's investible capital being invested at risk free rate. From an investment point of view, assuming a balanced asset allocation, this will also mean you should at least have investments in other assets (i.e. equities and bonds) in amounts of about 20 years mortgage payment in reserve. (20% risk free, 80% risky assets). AT the same time, do note risk free rate is now assumed to 1.5% (not much). This about asset allocation.

Next, lets look at probability of downside scenario which will require the extent of reserves to be 5 years. We are assuming the great depression as the worse event so far, and for convenience, we are assuming this is a one in a 100 years event and the 2 SD unemployment period is 6 years (slightly longer than 5 years).

Putting the above together (and considering I have left out many other considerations and factors which do put in place the effect of risk pooling), which begs me the question of how does one derive the number 5 years of reserve is required.

I further draw references to other established financial planning norms which appears to purport the notion of recommended liquid reserves to be in the range of 6 months to a year.

One can clearly see, from an investment point of view, there is a cost of holding an excessive (only if 5 years is indeed excessive, which I cannot conclusively prove or disprove here) cash at the opportunity cost of market premium. If you keep 5 years if reserve in cash and do not attain the nominally asset allocation of the balance 80% in risky assets, you basically run into negative carry. Note: Cash in its own form is considered as cost of capital, if you are collaterally exposed to equities market. High cost I must say.

Next, is the lowered "risk" of holding 5 years cash reserve justified with the return ?? Assuming you do not have 5 years cash reserve. You default on loan payments, bank enforce security. You lose your 20% downpayment. 20% downpayment is approximately (as a very rough guide) = 30 years / 80% * 20% = 7.5 years. Assuming having 5 years of cash reserves will completely negate the scenario of banks' enforcement. What we have will be having 5 years of mortgage payment to secure against the case of loss in cash quantum approx. equivalent to 7.5 years of mortgage repayment. I am not sure what is your view on the risk-reward profile. To me, it does not look particularly attractive to me.

I like to base my assessment and opinions on numbers. Some may not like the way I paint or approach the problem, some might think the approach is a little too loose. Yes, I do agree, my analysis is quite broad brush but my intention really is to put forward the concept of quantifying one's view. I do not know if 5 years cash reserve is enough or excessive, neither can I opine on the norm that most fund managers (investments) allocation of 20% in risk free instruments as being too conservative. The end of it all is, its easy to throw up a number but getting people down to facts and support a view they offer, not everyone can do it easily.

There are a number in this forum who clearly think deep enough and make a case - a case worth arguing for, a case worth reading about. In this regard, I ask for guidance and enlightment if 5 years reserve is indeed sufficient, inadequate or excessive.

Any ideas?

noblebaby
08-03-09, 20:54
i dun understand singaporean psychology - aren't we supposed to be super kiasu and kiasee?

say a young couple avg age 30 earns $5k a month each. That means that they can only afford a $2k/mo mortgage entirely serviced from their CPF. That's a $600k home (prob a caspian 2 bedder or something). Based on my formula of 'cover one backside', one spouse must be covered for 5 years. That means cash or CPF reserves AFTER drawdowns of at least $60,000. add another $1k per month of expenses, that brings it up to $120,000.

Thus, 'How To Survive a Recession While Covering One Backside Formula':
- Husband & Wife earn $5k each for a total of $10k monthly
- Pay 10-20% deposit, borrow the rest: You can only afford a $600k home
- You must have at least $60k-$120k in cash and CPF Ordinary reserves to cover one backside for 5 years

If you dun have the above, as Suze Orman says: 'Girlfriend, You Have Been Denied!'

I like Suze Orman says... "You must be out of your mind, denied denied denied", lolz.

teddybear
08-03-09, 23:50
How you derive that they can only afford S$600k home? Assuming they pay $3k per month in cash + $2k per month from CPF for instalments from both CPF & Cash, they will still have $2k savings month per after deducting $3k pm of living expenses. For total of $5k instalments over a 30 years loan period, they can still afford at least a $1.2m home and still have reasonable amount of cash on hand!


i dun understand singaporean psychology - aren't we supposed to be super kiasu and kiasee?

say a young couple avg age 30 earns $5k a month each. That means that they can only afford a $2k/mo mortgage entirely serviced from their CPF. That's a $600k home (prob a caspian 2 bedder or something). Based on my formula of 'cover one backside', one spouse must be covered for 5 years. That means cash or CPF reserves AFTER drawdowns of at least $60,000. add another $1k per month of expenses, that brings it up to $120,000.

Thus, 'How To Survive a Recession While Covering One Backside Formula':
- Husband & Wife earn $5k each for a total of $10k monthly
- Pay 10-20% deposit, borrow the rest: You can only afford a $600k home
- You must have at least $60k-$120k in cash and CPF Ordinary reserves to cover one backside for 5 years

If you dun have the above, as Suze Orman says: 'Girlfriend, You Have Been Denied!'

noblebaby
09-03-09, 09:19
How you derive that they can only afford S$600k home? Assuming they pay $3k per month in cash + $2k per month from CPF for instalments from both CPF & Cash, they will still have $2k savings month per after deducting $3k pm of living expenses. For total of $5k instalments over a 30 years loan period, they can still afford at least a $1.2m home and still have reasonable amount of cash on hand!

In this difficult time, $2k saving a month is not sufficient... some more spending half of gross saving for monthly installment is not a wise thing to do... personally, I think the loan should be less than 30% of total income...

Some one need to factor in insurance, medical, and other investment with better return as well.

PN
09-03-09, 09:43
How you derive that they can only afford S$600k home? Assuming they pay $3k per month in cash + $2k per month from CPF for instalments from both CPF & Cash, they will still have $2k savings month per after deducting $3k pm of living expenses. For total of $5k instalments over a 30 years loan period, they can still afford at least a $1.2m home and still have reasonable amount of cash on hand!

Firstly, to buy a 1.2mill home you need to pay 20% downpayment. That is 240k & 30.6k of stamp fee. Total you need 270.6k of cash+cpf. Assuming you manage to save enough to handle this. Let's look at the the 2nd factor.

80% loan of 1.2mill is 960k. Tenor of 30yrs with 2.5% rate, your mthly installment is 3.8k. Each earn 5k/mth, minus cpf you have 4.1k each.
Assuming installment payment using CPF + cash is $1.8k & $2k respectively. After paying loan, you have 8.2k-2k=6.2k left.

You mentioned 3k living expense. Does it include car/transport, personal insurance, your parents allowance, children education, utility bill, phone bill, condo maintenance fee, maid salary? Assuming you manage to keep this within 3k which is extremely low. You left 3.2k

How about tv license, personal income tax & property tax? Maybe another 0.6k. You left 2.4k --> looks healthy. So what's the problem?

But do you think this is realistic? You must ask yourself if 3k living expenses is enough?

This is what a typical couple expense looks like:-
Car loan + road tax + petrol + parking $1.5k
Own expense for 2 pax $1.5k
personal Insurance $1k
children expenses $700
phone bill + internet $120
utility bill $150
condo maintenance $300

This is already $5270. $6.2k minus $5270, you have $930.
Minus the taxes of $600, only $330 left. This is as good as no savings.

Do you think it is wise to live a live like this? What happen if plan or accidentally have 2nd child?

teddybear
09-03-09, 11:48
Possible because based on my estimate and spending pattern:
Car loan + road tax + petrol + parking = $1k (not $1.5k)
Own expense for 2 pax = $1k (not $1.5k)
personal Insurance (+disability income!) = $120 (not $1k - Buy term insurance! - can even cover $1m for each)
children expenses = $200 (not $700)
phone bill + internet = $60 (not $120)
utility bill = $120 (not $150)
condo maintenance = $300 (ok)

Total < $3k! Every year, the couple will get about 3 months bonuses or $8.2k x 3 as savings = $24600. For 30 years they would have saved $738k! Why not enough?


Firstly, to buy a 1.2mill home you need to pay 20% downpayment. That is 240k & 30.6k of stamp fee. Total you need 270.6k of cash+cpf. Assuming you manage to save enough to handle this. Let's look at the the 2nd factor.

80% loan of 1.2mill is 960k. Tenor of 30yrs with 2.5% rate, your mthly installment is 3.8k. Each earn 5k/mth, minus cpf you have 4.1k each.
Assuming installment payment using CPF + cash is $1.8k & $2k respectively. After paying loan, you have 8.2k-2k=6.2k left.

You mentioned 3k living expense. Does it include car/transport, personal insurance, your parents allowance, children education, utility bill, phone bill, condo maintenance fee, maid salary? Assuming you manage to keep this within 3k which is extremely low. You left 3.2k

How about tv license, personal income tax & property tax? Maybe another 0.6k. You left 2.4k --> looks healthy. So what's the problem?

But do you think this is realistic? You must ask yourself if 3k living expenses is enough?

This is what a typical couple expense looks like:-
Car loan + road tax + petrol + parking $1.5k
Own expense for 2 pax $1.5k
personal Insurance $1k
children expenses $700
phone bill + internet $120
utility bill $150
condo maintenance $300

This is already $5270. $6.2k minus $5270, you have $930.
Minus the taxes of $600, only $330 left. This is as good as no savings.

Do you think it is wise to live a live like this? What happen if plan or accidentally have 2nd child?

teddybear
09-03-09, 11:57
Property is also a kind of investment. If a person is not investing in other form of investments, then it is OK to invest in his own home and using half of savings as long as he still has some cash on hand for emergency. People should instead focus on trying to spend less on un-necessary things like LV handbag, branded clothes, branded cars, eating in restaurants etc! Insurance is cheap if one choose the correct one (buy term! - don't buy ILPs and whole-life because it do no good to one's limited finances and insurance-linked products are never about investment, just insurance!). With $2k savings a month, the couple would have saved $720k in 30 years (not factoring in returns from compounding effect yet!). Also, the couple will get about 3 months bonuses or $8.2k x 3 as savings = $24600. For 30 years they would have saved $738k! The total will be $1458k (even before factoring in returns from compounding effect!). As a rule of thumb, the total after factoring in compounding effect for 30 years would be something like $3m!

Also, 30 years later, the property would have appreciated many times over (just look at the historic property prices)! By then, the couple can downgrade to a studio property from a 3 Bedroom condo and still pocket the difference for even better and more comfortable retirement. :cheers4:


In this difficult time, $2k saving a month is not sufficient... some more spending half of gross saving for monthly installment is not a wise thing to do... personally, I think the loan should be less than 30% of total income...

Some one need to factor in insurance, medical, and other investment with better return as well.

gfoo
09-03-09, 12:18
This is quite interesting and perhaps insightful in its own ways; and in this regard, I ask for greater guidance and enlightenment. I am just wondering how was the 5 years' reserve in cash / CPF form derived?

There are a number in this forum who clearly think deep enough and make a case - a case worth arguing for, a case worth reading about. In this regard, I ask for guidance and enlightment if 5 years reserve is indeed sufficient, inadequate or excessive.

Any ideas?

5 years of reserves is actually a very very optimistic forecast - i bought the Sail remember? this makes me by default overtly optimistic hence my provision of just 5 years of reserves.

this crisis of ours is unprecedented - it will stretch on for a long long time. this is what i have done:

- put half of my assets in to precious metals. this sits aside and is never touched. This forms our SHTF Reserves that shall not be drawn down. i do not count this as part of my liquid assets.

- Of my liquid assets - 90% is cash, and must at least cater for over 10 years or more buffer at current living standards. This forms our Emergency Reserves which can be drawn down in times of extreme need.

- the 10% balance of my liquid assets is spent shorting the market in an ETF and in cash. This caters for at least 12 months in immediate drawdowns, and is our spending and transactional account.

- we have cut expenses to within a single spouse's income, benchmarked at the national median. ie if the national median earns $3k per month, we live within that, even if we earn much more. If a single employed malay family of 5 can live on $1500 a month, so can we. I'm trying hard to reach that level, hopefully in a few months.

In such an environment, i do not consider property as an asset. right now, it's a lifestyle liability, just like a car.

Again, i have no methodology or mathematical formula to derive this. i'm an uneducated 'farmer' who failed A-Maths during JC. i am plucking stuff from my arse really, but it matches what i personally think will happen down the road.

PN
09-03-09, 16:10
Possible because based on my estimate and spending pattern:
Car loan + road tax + petrol + parking = $1k (not $1.5k)
Own expense for 2 pax = $1k (not $1.5k)
personal Insurance (+disability income!) = $120 (not $1k - Buy term insurance! - can even cover $1m for each)
children expenses = $200 (not $700)
phone bill + internet = $60 (not $120)
utility bill = $120 (not $150)
condo maintenance = $300 (ok)

Total < $3k! Every year, the couple will get about 3 months bonuses or $8.2k x 3 as savings = $24600. For 30 years they would have saved $738k! Why not enough?

Wow - within $3k. I guess this is your lifestyle. Nothing wrong with that. But for how long?


I can see that you are making many ideal assumptions. This is scary.
Personal expenses is 1k for 2 pax? Don't forget that you need to factor in clothing, shoes, toiletories, occasional restuarant meals, festive, birthday celebrations, Angbao, etc. No hobbies? No sports?
You don't go for tour? Not even once a year? All these need $$$.

Children expenses is only $200? Your child will grow up. He/she will need to attend nursary, kindergarden, primary & secondary school? No tuition, enrichment program or extra curriculum? Children learn best going outdoors sight seeing, visit zoo, science center, etc. No toys, games or sports activities? After sec sch, they attend poly/Pre-U & University. Check with your friends & find out how much their children needs for education & other expenses. You sure can keep it to $200 constant for 30yrs?

What about medical expenses? Human do fall sick. I fall sick as well.
Medical expenses for 2 adults + one child is easily 1k per year. When you grow older, it's even higher. I know of many old folks with monthly medical expenses of $500-800 just to maintain their health conditions.
Not to mention those with more serious illness. That's why there are so many sad stories of children abondaning their parents when they aged. It's because of the heavy medical expenses.

Bonus of 3mths per pax? How I wish I'm living in a perfect world. Many companies are not giving or reducing bonuses. Of course when the economy recovers few years later, the bonus will comes back.
There is no such thing as constant 3mths bonuses in this world.

Is your job secured? I don't dare to say mine is. If one of them is jobless. What happen to the savings? I never do financial planning with ideal situation. It will give you a false picture of what you will need.

Of course, it's your own life. If you still think it's possible to keep within 3k with constant savings every month, I salute you & shall not comment further.

However, I do agree with you that by downgrading from a large to smaller unit, you will have more cash on hand for old age retirement.

coburn
09-03-09, 16:52
Wow - within $3k. I guess this is your lifestyle. Nothing wrong with that. But for how long?


I can see that you are making many ideal assumptions. This is scary.
Personal expenses is 1k for 2 pax? Don't forget that you need to factor in clothing, shoes, toiletories, occasional restuarant meals, festive, birthday celebrations, Angbao, etc. No hobbies? No sports?
You don't go for tour? Not even once a year? All these need $$$.

.

I agree with PN on this.

Just meals alone, assume that you and your wife each spends $3 (BF), $5 (lunch), $5 (dinner) everyday. That works out to $780 for a 30 days month. To me, that is not realistic but still possible if you are determined to save.

No movies? Gathering with friends / family where you have to spend more on each meal? Allowance for parents? Shopping?

We are DINKs, staying in a 2 BR suburban condo. Using me as an example, our monthly personal expenses (excluding car and insurance becos I dont buy term so not fair comparison) easily exceed $3k!

I have always wondered how a combined income of $10k can afford private property of more than $1 million when we are not even sure we can even thou we earn more than that.

And Gfoo is correct, you have to set aside savings and buffer. I dont agree with the 5 years buffer he believes in but but I make sure even if me and my wife lose our jobs at the same time, we can maintain existing lifestyle for at least 2 years, more if we are prudent in spending.

That gives us the assurance and freedom to do what we are comfortable with, not slaves to our jobs.

teddybear
09-03-09, 21:31
I suppose it is a matter of life-style, and spending $3k per month is not too little and don't have to try hard to save really if you look at the poorer family who can go buy with a single income of $1500 per month for a family of 5, then $3k pm is no great feat. ;)
Don't know why you need to spend so much on meals, we cook & eat at home most of the time - healthier (no MSG)! We spend more time with our kids at gardens and beaches (mostly for free). Time for us to teach our kids about simplicity in life and not revolving around movies, eating out in restaurants, branded goods etc. For example, we don't use air-con not because we can't afford but because we prefer natural air and also because we choose our house such that it is always breezy and occasionally turning on the fan will do. So many ways to save with little efforts but nowsadays people always complain money not enough but have no idea where they leaked to.


I agree with PN on this.

Just meals alone, assume that you and your wife each spends $3 (BF), $5 (lunch), $5 (dinner) everyday. That works out to $780 for a 30 days month. To me, that is not realistic but still possible if you are determined to save.

No movies? Gathering with friends / family where you have to spend more on each meal? Allowance for parents? Shopping?

We are DINKs, staying in a 2 BR suburban condo. Using me as an example, our monthly personal expenses (excluding car and insurance becos I dont buy term so not fair comparison) easily exceed $3k!

I have always wondered how a combined income of $10k can afford private property of more than $1 million when we are not even sure we can even thou we earn more than that.

And Gfoo is correct, you have to set aside savings and buffer. I dont agree with the 5 years buffer he believes in but but I make sure even if me and my wife lose our jobs at the same time, we can maintain existing lifestyle for at least 2 years, more if we are prudent in spending.

That gives us the assurance and freedom to do what we are comfortable with, not slaves to our jobs.

coburn
10-03-09, 10:06
I agree it is up to each individual family to decide how they want to lead their lives - simple vs more luxurious manner.

This whole discussion came about becos of some earlier post on how much a 10k household income can afford on a house. With reference to your earlier comments that they can afford a $1.2m property, I am just concerned it is not realistic.

According to your habits and calculations, it is do-able, but according to my experience and calculations, it is impossible.

Anyway, we are off topic already.
Even if nothing conclusion comes out of it, at least I hope it has given others some food for thought on what is affordable.

PN
10-03-09, 10:37
Anyway, we are off topic already.
Even if nothing conclusion comes out of it, at least I hope it has given others some food for thought on what is affordable.

It's important that potential buyers out there are not mislead into thinking that with a $10k household income, they can enjoy 1mil home, drive a nice car, enjoy restuarant food, pamper themselves with luxury items.

Teddybear's lifestyle is simple & I respect that. But as I mentioned earlier, a lot of factors are not considered. It's a risk one has to take & adjust with it later on.

It's a forum & discussion like this does make people think what kind of life you want to enjoy with your family.

teddybear
10-03-09, 10:54
Well, obviously S$10k household income cannot be driving nice branded car, restaurant food, branded goods and luxury holidays and yet afford a $1.2m home. However, if you go for value-for-money car, food, goods, simple holidays, then you can have all and yet afford a $1.2m home and still have Cash for retirement. It is a matter of life-style, perception they want to project etc.

I don't see much risks as in the hypothetical case, the couple can save $2.6k pm (not including the bonuses). Increases in future expenditure can be offset by increases in income and from savings. Property is a good investment for long-term for people who don't know or does not invest in anything else and they could still downgrade later to cash-out.


It's important that potential buyers out there are not mislead into thinking that with a $10k household income, they can enjoy 1mil home, drive a nice car, enjoy restuarant food, pamper themselves with luxury items.

Teddybear's lifestyle is simple & I respect that. But as I mentioned earlier, a lot of factors are not considered. It's a risk one has to take & adjust with it later on.

It's a forum & discussion like this does make people think what kind of life you want to enjoy with your family.

gfoo
10-03-09, 12:13
i don't get it. why splurge on a $1.2m home when one has to tighten everything else so much that to make ends meet, one leads a meagre existence?

life is short, and some say the world's gonna end in 2012 according to the mayans - live life to the fullest within your means.

The root of all evil is the lack of money

teddybear
10-03-09, 12:31
Firstly, the $1.2m home is an investment as well as a roof over the head with facilities for the family to have better and more healthy life-style (easy access to swimming pool, tennis court, fitness area, gym, playground etc).

Secondly, don't think one has to tighten everything to afford the private property as in the hypothetical case, the family still can afford a car too! If spending $3k a month is having to tighten everything, I don't know what the family spends on - may be branded goods (LV bags?), Mercedes, eating in restaurants, endless tuition & enrichment classes for the kids? Yes, Life is short and yet can be lived to the fullest with little money! To me, it is the spiritual and mental rather than the material in order to live life to the fullest. I don't see why having all the branded goods etc make one's life more full? Otherwise, more than 80% of family probably cannot have meaningful life (because their household income is below $10k per month).

May be it is difficult for me to understand why people cannot afford so many things within $3k per month expenditure (just like I don't understand how the poor family can survive on $1500 per month income).


i don't get it. why splurge on a $1.2m home when one has to tighten everything else so much that to make ends meet, one leads a meagre existence?

life is short, and some say the world's gonna end in 2012 according to the mayans - live life to the fullest within your means.

The root of all evil is the lack of money

gfoo
10-03-09, 12:44
Firstly, the $1.2m home is an investment as well as a roof over the head with facilities for the family to have better and more healthy life-style (easy access to swimming pool, tennis court, fitness area, gym, playground etc).

Secondly, don't think one has to tighten everything to afford the private property as in the hypothetical case, the family still can afford a car too! If spending $3k a month is having to tighten everything, I don't know what the family spends on - may be branded goods (LV bags?), Mercedes, eating in restaurants, endless tuition & enrichment classes for the kids? Yes, Life is short and yet can be lived to the fullest with little money! To me, it is the spiritual and mental rather than the material in order to live life to the fullest. I don't see why having all the branded goods etc make one's life more full? Otherwise, more than 80% of family probably cannot have meaningful life (because their household income is below $10k per month).

May be it is difficult for me to understand why people cannot afford so many things within $3k per month expenditure (just like I don't understand how the poor family can survive on $1500 per month income).

actually my post was in general and not directed at you. but i do get your point which is very valid.

what i was trying to communicate is that in general, it's always money tightness and problems that lead to family disharmony, quarrels etc etc.

thus a general call out to pple to be more prudent.

e.g. buy a 450k 5 room flat, you can take the $800k savings to buy a country club closeby, get a chauffer-driven Toyota Crown, and live like a king without wants. This is exactly what 2 senior staffers of two of the world's largest tech firms did, just to shore up for the crisis - they are in the early 30s, late 20s, huge monthly income, but prev little savings DINKs.

noblebaby
10-03-09, 23:09
Firstly, the $1.2m home is an investment as well as a roof over the head with facilities for the family to have better and more healthy life-style (easy access to swimming pool, tennis court, fitness area, gym, playground etc).

Secondly, don't think one has to tighten everything to afford the private property as in the hypothetical case, the family still can afford a car too! If spending $3k a month is having to tighten everything, I don't know what the family spends on - may be branded goods (LV bags?), Mercedes, eating in restaurants, endless tuition & enrichment classes for the kids? Yes, Life is short and yet can be lived to the fullest with little money! To me, it is the spiritual and mental rather than the material in order to live life to the fullest. I don't see why having all the branded goods etc make one's life more full? Otherwise, more than 80% of family probably cannot have meaningful life (because their household income is below $10k per month).

May be it is difficult for me to understand why people cannot afford so many things within $3k per month expenditure (just like I don't understand how the poor family can survive on $1500 per month income).

With 10k income per month, why you need a $1.2mil property? For me, $1.2mil worth of property is another form of luxury item. Since you can spend $750k on condo and it can still be a good investment.

Some time we need more buffer to prepare for the rainy day... on paper is always easy... we can't always assume we get increament every year, promotion or bonuses... what if kenal axed especially in the time like this?

teddybear
10-03-09, 23:15
There are 2 possible scenarios here:

(1) As you mentioned:
Buy a $450k 5 room flat, you can take the $800k savings to buy a country club closeby, get a chauffer-driven Toyota Crown, and live like a king without wants.
(You mentioned: This is exactly what 2 senior staffers of two of the world's largest tech firms did, just to shore up for the crisis - they are in the early 30s, late 20s, huge monthly income, but prev little savings DINKs.)

Problem with (1) is that almost all money got spent, little savings, huge monthly income cannot be guaranteed until you retire.l When these people retire (ops, they can never retire because they don't have enough savings to retire and yet fund their extravagent life-style!).

(2) As I encouraged:
Buy a $1.2m home with facilities, forget about country club memberships, self-drive a Toyota Vios/Axio (you don't need Crown), live a simple life. 30 years later, your property would have appreciated at least 2x and sell the property to downgrade to a studio unit and you can then retire like a king without worry for your old age!

I would easily choose (2) - To be able to retire at 60 years old without any monetary worry when I really need to retire.


actually my post was in general and not directed at you. but i do get your point which is very valid.

what i was trying to communicate is that in general, it's always money tightness and problems that lead to family disharmony, quarrels etc etc.

thus a general call out to pple to be more prudent.

e.g. buy a 450k 5 room flat, you can take the $800k savings to buy a country club closeby, get a chauffer-driven Toyota Crown, and live like a king without wants. This is exactly what 2 senior staffers of two of the world's largest tech firms did, just to shore up for the crisis - they are in the early 30s, late 20s, huge monthly income, but prev little savings DINKs.

noblebaby
10-03-09, 23:24
There are 2 possible scenarios here:

(1) As you mentioned:
Buy a $450k 5 room flat, you can take the $800k savings to buy a country club closeby, get a chauffer-driven Toyota Crown, and live like a king without wants.
(You mentioned: This is exactly what 2 senior staffers of two of the world's largest tech firms did, just to shore up for the crisis - they are in the early 30s, late 20s, huge monthly income, but prev little savings DINKs.)

Problem with (1) is that almost all money got spent, little savings, huge monthly income cannot be guaranteed until you retire.l When these people retire (ops, they can never retire because they don't have enough savings to retire and yet fund their extravagent life-style!).

(2) As I encouraged:
Buy a $1.2m home with facilities, forget about country club memberships, self-drive a Toyota Vios/Axio (you don't need Crown), live a simple life. 30 years later, your property would have appreciated at least 2x and sell the property to downgrade to a studio unit and you can then retire like a king without worry for your old age!

I would easily choose (2) - To be able to retire at 60 years old without any monetary worry when I really need to retire.

You know how much interest you need to pay to the bank for a $1.2m property with 30 years tenure, at an average interest rate of 3.5%?

You know what is called inflation? $3k can be spent on the same item for 30 years?

You think you can downgrade from a $1.2Mil luxury home to a small tiny studio after 30 years?

august
11-03-09, 00:24
wat is DINKs ?? :confused:

Autonomy
11-03-09, 06:08
wat is DINKs ?? :confused:

Double Income No Kids

teddybear
11-03-09, 09:24
When there is inflation, property prices has historically shown to grow much faster than inflation. Paying interest is inmaterial when there is bigger capital gain to be obtained and also is better to spend the money on interest than splurging on branded cars, country club membership and annual fees, branded goods (when cheaper alternative suffices).

With a projected savings of $3m in Cash for the hypothetical case for that couple when they are 65 years old and further cash from downgrading, the couple can now afford >$10k per month of future monthly spending (not $3k).

Why not? As long as you are willing to sell cheaper (because you have made a big capital gain anyway), there will always be takers.


You know how much interest you need to pay to the bank for a $1.2m property with 30 years tenure, at an average interest rate of 3.5%?

You know what is called inflation? $3k can be spent on the same item for 30 years?

You think you can downgrade from a $1.2Mil luxury home to a small tiny studio after 30 years?

PN
11-03-09, 10:21
Just for general discussion not directing at anyone. (Looks familiar - I steal this from Gfoo sentence)


A typical couple with a single child. Couple are both 30yrs old & plan to retire when reach 60. Forget about the monthly expenses, it's already a given.

For the next 30yrs, below are how the spendings look like besides the $3-5k monthly living expenses

1. Child education (2yrs nursary, 2yrs kindergarden, 6yrs primary, 4yrs secondary, 2yrs Pre-U, 4yrs local University education) ===> $350k

2. Medical expenses for 2 adults + 1child $1000x30yrs = $30k

3. When you reach 40yrs old, you need to go for yearly checkup (unless you're super confident you will never get serious illness) $500 ea. $1000x20 = $20k

4. Home appliances incl TV, DVD/BlueRay, Fridge, washer, dryer, hood & hob, cooker, vaccum, etc (unless yours is unbreakable). For the next 30yrs say you change every 4yrs spend 5k for the purchase. 5k x 7.5 = $37.5k

5. Furniture purchase (unless it's super long lasting & lifetime warranty). Say you buy new furniture once every 8yrs & spend 5k ea time. 5k x 3.75 = $18.75k

6. When you move in new condo, you do renovation. For >1mil property, I guess the renovation is at least $30k

7. Living in Condo >5yrs, you will notice that things start to break down. You window/door latch, handle, water chock, shower head damage, etc. So for the next 25yrs you send $500 yearly. 500x25 = $12.5k

8. Local + Oversea tours. On average, I believe most will go for tour once a year at least for those people I know. Each trip cost 5k for 2adults + 1 child. 5k x 30 = $150k. If you don't travel, take this out.

9. Computer + Internet + handphone. Children will request for computer & you have no choice as their school work requires one. Need to do research, go to internet. Want to know where you child is & communicate with them, buy handphone for him/her. Say 3k and refresh every 3yrs (sounds like corporate std). 3k x 10 = $30k

10. Shoppings (clothings, shoes, bags, etc) for 2adults + 1child is 1.2k/yr. Again, unless you wear the same thing day in day out. Otherwise, 1.2k x 30 = $36k

11. Festive celebration (at least Christmas & CNY for chinese). $700 yearly. Some may say too low. No choice, must be prudent. Economy very bad. 700 x 30 = $21k

12 .. There are many other misc but don't want to list all of them

Add up all of the above, it's $735,750.

This is part one. To be continue ...

PN
11-03-09, 11:07
After 30yrs of hardwork, both are now 60. Congratulation. :cheers5:
It's time to retire & enjoy life. Your child is married & has started their own family. You don't have to support him/her anymore. It's the best you can ever imagine in life.

No wories anymore. Are you sure? We shall see. Did I say retired? Yes I did. But still must eat & continue living. Life don't stop here. Assuming both live until 85. That's another 25yrs.

Can live like king now? Will shall see

1. Since both are retired so that means no work no income. Monthly expenses say 3k taking into don't need to support child anymore but $ become smaller. That is 36k per yr. 36k*25 = $900k

2. When you grow old, you will have some old folks illness. Yearly checkup + monthly medical expense for 2 say $19.2k yearly. For next 25yrs, you need $480k.

Add these 2 up, it's $1.38mil. Savings enough???????

Never mind, they still have a child who can look after them. You must be kidding. When you are young, you didn't give your parents allowance. Children learnt fast & retain this in the brain memory. Difficult to erase from the memory plus he has his own family to take care of.

They will follow your style especially for the newer generations. I don't have high hope that my child will give me allowance either. You are on your own. Remember, plan for the worst not the best.

Wait, it's not finish yet. Do you mean that for the next 25yrs, you don't need to buy things. That is item 3

3. Refresh home appliances, furniture, home maintenance, no more oversea tour (too old to travel) but still can go local tour.
Don't forget you still need to do shopping & celebrate festive seasons. For simplicity, lets put this at around $110k for the next 25yrs.

So its $1.38mil + $110k =====> 1.49mil.


OK. Times up. End of story.

What? Are you kidding? If you don't think so, do your own computation.

teddybear
11-03-09, 13:05
As I mentioned before, it is again a matter of life style. Your quoted figures is not inline with my experience over all these years. In my hypothetical case, the couple would have accumulated more than $3m at 65 years old (and with the roof already fully paid off). The $3m is already more than double of your $1.49m calculations and we have not even included compounded returns of the $3m over the next 25 years. As such, the retirement is for sure comfortable and enjoyable (no monetary worries). If some people prefer to spend their money on changing furniture, TVs, fridges, renovation etc every frequently rather than waiting till they gone dead (usually of 10 years life span for electrical appliances and 15-20 years for furniture), then for sure they can't retire (and definitely they can't afford to invest in a $1.2m home).


After 30yrs of hardwork, both are now 60. Congratulation. :cheers5:
It's time to retire & enjoy life. Your child is married & has started their own family. You don't have to support him/her anymore. It's the best you can ever imagine in life.

No wories anymore. Are you sure? We shall see. Did I say retired? Yes I did. But still must eat & continue living. Life don't stop here. Assuming both live until 85. That's another 25yrs.

Can live like king now? Will shall see

1. Since both are retired so that means no work no income. Monthly expenses say 3k taking into don't need to support child anymore but $ become smaller. That is 36k per yr. 36k*25 = $900k

2. When you grow old, you will have some old folks illness. Yearly checkup + monthly medical expense for 2 say $19.2k yearly. For next 25yrs, you need $480k.

Add these 2 up, it's $1.38mil. Savings enough???????

Never mind, they still have a child who can look after them. You must be kidding. When you are young, you didn't give your parents allowance. Children learnt fast & retain this in the brain memory. Difficult to erase from the memory plus he has his own family to take care of.

They will follow your style especially for the newer generations. I don't have high hope that my child will give me allowance either. You are on your own. Remember, plan for the worst not the best.

Wait, it's not finish yet. Do you mean that for the next 25yrs, you don't need to buy things. That is item 3

3. Refresh home appliances, furniture, home maintenance, no more oversea tour (too old to travel) but still can go local tour.
Don't forget you still need to do shopping & celebrate festive seasons. For simplicity, lets put this at around $110k for the next 25yrs.

So its $1.38mil + $110k =====> 1.49mil.


OK. Times up. End of story.

What? Are you kidding? If you don't think so, do your own computation.

PN
11-03-09, 21:04
As I mentioned before, it is again a matter of life style. Your quoted figures is not inline with my experience over all these years. In my hypothetical case, the couple would have accumulated more than $3m at 65 years old (and with the roof already fully paid off). The $3m is already more than double of your $1.49m calculations and we have not even included compounded returns of the $3m over the next 25 years. As such, the retirement is for sure comfortable and enjoyable (no monetary worries). If some people prefer to spend their money on changing furniture, TVs, fridges, renovation etc every frequently rather than waiting till they gone dead (usually of 10 years life span for electrical appliances and 15-20 years for furniture), then for sure they can't retire (and definitely they can't afford to invest in a $1.2m home).

I like this discussion. Not sure how you compute the $3mil. This is what I understood from your earlier posts. I tried to work out something that is more close to real life (from my own observations). I'm not looking at extreme case.

You feel that the couples can save $3k/mth or $24k/yr ==> 30 yrs is $720k. (excl bonuses)
But my computation (refer to part 1) shows that to lead a normal life, you need $735k.75k besides the living expenses. (note that this is for single child). It's still short of $15.75k. No savings at all. If has 2 or more children, probably need to sell away car & use the same sofa set even if there are holes in it.

The bonus/yr of 3mths is too optimistic. I put that as 2mths on the average ==> $16.4k. Economy do has cycle (sometimes good, sometimes bad) with economy/financial crisis every 10yrs.
With compound interest rate of 1.5% for 30yrs, that is ==> $615.6k.

From yr 31 onwards (both age 60), zero income but $55.2k expenses (36k expenses + 19.2k medical). Even if the compound interest continue to run, by yr 41 (ie when both are 71 yrs old), the balance in bank is only $42k.

But if they downgrade to a smaller condo, that'll definitely help them to lead a good retirement life. I do agree with Teddybear on this. Can get additional cash (It's consistent with my earlier post) and help to last until both fall asleep forever.

But the above discussion is based on many assumptions. It's more for discussion purposes. Nothing is absolute. I still maintain my stand that a family earning $10k/mth with 2 or childrens, maid & need to support parents will not be able to afford a 1.2mil house. If you have one/no child and lead a life similar to Teddybear. You're probably in good shape if you downgrade to smaller unit when you retire.

And again, we are assuming you'll never get retrench before your retirement & expenses stays constant thruout (inflation, depreciation not considered). Risk is not considered here. There is also no mention what will happen if one/both has critical illness which will increase the medical expenses drastically. You will need to judge based on your own family situations.

teddybear
11-03-09, 23:26
Seems like you don't know what is compounding effect and investment. If you have savings of $24k per year + bonus of $24.6k a year, even if your salary does not increase a single cent over the next 30 years (which is totally unlikely), you would have netted almost $2.8m if you invest the money with average compounded return of just 4%! (and 4% is just for balanced investment, not a high risk investment). Of course, if there are adverse situations, you will not be able to save $2.8m. However, the person's investment in $1.2m property will net him another big sum of capital gain and chances are great the couple will be able to retire comfortably (vs spending the money on branded stuffs).


I like this discussion. Not sure how you compute the $3mil. This is what I understood from your earlier posts. I tried to work out something that is more close to real life (from my own observations). I'm not looking at extreme case.

You feel that the couples can save $3k/mth or $24k/yr ==> 30 yrs is $720k. (excl bonuses)
But my computation (refer to part 1) shows that to lead a normal life, you need $735k.75k besides the living expenses. (note that this is for single child). It's still short of $15.75k. No savings at all. If has 2 or more children, probably need to sell away car & use the same sofa set even if there are holes in it.

The bonus/yr of 3mths is too optimistic. I put that as 2mths on the average ==> $16.4k. Economy do has cycle (sometimes good, sometimes bad) with economy/financial crisis every 10yrs.
With compound interest rate of 1.5% for 30yrs, that is ==> $615.6k.

From yr 31 onwards (both age 60), zero income but $55.2k expenses (36k expenses + 19.2k medical). Even if the compound interest continue to run, by yr 41 (ie when both are 71 yrs old), the balance in bank is only $42k.

But if they downgrade to a smaller condo, that'll definitely help them to lead a good retirement life. I do agree with Teddybear on this. Can get additional cash (It's consistent with my earlier post) and help to last until both fall asleep forever.

But the above discussion is based on many assumptions. It's more for discussion purposes. Nothing is absolute. I still maintain my stand that a family earning $10k/mth with 2 or childrens, maid & need to support parents will not be able to afford a 1.2mil house. If you have one/no child and lead a life similar to Teddybear. You're probably in good shape if you downgrade to smaller unit when you retire.

And again, we are assuming you'll never get retrench before your retirement & expenses stays constant thruout (inflation, depreciation not considered). Risk is not considered here. There is also no mention what will happen if one/both has critical illness which will increase the medical expenses drastically. You will need to judge based on your own family situations.

jonleelk
19-03-09, 17:42
Wow, as a newbie who is on the verge of buying my first condo, saw the thread title, came in hoping to get tips to shortlist which banks to borrow, but ended up with bonus info on computing life savings. :)

Back to my topic. Me and wife coming close to 40. Combined monthly income of $12k. Current hdn 5-room is fully paid. Planing to upgrade to a $800k LH condo. Have enough cash and cpf to settle the 20% deposit for the new unit which will TOP 3-4 yrs later. As will only sell the hdb after TOP, what type of loan should I be getting, assuming I can get $300k from the sale of the hdb?

Also, I should have a "more than comfortable" payment and retirement days waiting for me, correct?

Tks in advance for any advise. :)

gfoo
19-03-09, 18:37
Wow, as a newbie who is on the verge of buying my first condo, saw the thread title, came in hoping to get tips to shortlist which banks to borrow, but ended up with bonus info on computing life savings. :)

Back to my topic. Me and wife coming close to 40. Combined monthly income of $12k. Current hdn 5-room is fully paid. Planing to upgrade to a $800k LH condo. Have enough cash and cpf to settle the 20% deposit for the new unit which will TOP 3-4 yrs later. As will only sell the hdb after TOP, what type of loan should I be getting, assuming I can get $300k from the sale of the hdb?

Also, I should have a "more than comfortable" payment and retirement days waiting for me, correct?

Tks in advance for any advise. :)

Any of you in the civil service?

IMHO, have at least 5 years of cash buffer for your monthly operating/living costs. If your monthly cash costs is say $3000 (over and above CPF monthly repayment of mortgage), then you will need S$180,000 in cash as a buffer which should never be touched unless extreme emergency.

If one of you is a civil servant in an economic ministry, assuming both earn the same quantum, then you can halve this need - i.e. $90k. A non economic ministry is as good as the pte sector in dire times.

If you are buying LH, ensure you are only getting super-prime areas - i.e. CCR on top of MRTs, and the govt pet projects of marina & one-north only. All other govt announced projects - lakeside, punggol, kallang, paya lebar - they are still mere plans without substantial money sunk in, mere promises. Otherwise, go for FH.

PN
19-03-09, 20:22
Wow, as a newbie who is on the verge of buying my first condo, saw the thread title, came in hoping to get tips to shortlist which banks to borrow, but ended up with bonus info on computing life savings. :)

Back to my topic. Me and wife coming close to 40. Combined monthly income of $12k. Current hdn 5-room is fully paid. Planing to upgrade to a $800k LH condo. Have enough cash and cpf to settle the 20% deposit for the new unit which will TOP 3-4 yrs later. As will only sell the hdb after TOP, what type of loan should I be getting, assuming I can get $300k from the sale of the hdb?

Also, I should have a "more than comfortable" payment and retirement days waiting for me, correct?

Tks in advance for any advise. :)

Remember you also need $18.6k for the stamp duty besides the 20% downpayment.

When you sell away your hdb at 300k, I believe you'll make some profit if you bought it when you married 10yrs ago. Assuming after deducting the CPF principal amount used and accrued interest of $200k, you have 100k cash. Actual amount can be check from CPF online. Keep the 100k in bank for emergency use.

Initially, I wanted to suggest taking 15yrs loan. But after 2nd thoughts, I think 20yrs loan should be more appropriate for you. By the time you reach 60, you'd be at retirement or earning less. Talk to your banker before you make the purchase.

Pay the installment ($3.4k) partly in cpf (you'll will have 200k after selling hdb) & cash. With a stable income of 12k mthly, you will have some extra cash per month after deducting all expenses & loan payment. How much extra you have, you'll know better. If both get 2mths bonus on average, don't overspend or over-invest them. Think of the retirement plan.

There are many other things already mentioned by other forumers in this thread, have a good look at them.

jonleelk
19-03-09, 20:53
Thanks PN. Yup, have sufficient cpf for the $18.6k stamp fees.

From your recommendation, does it means I cannot use the $200k cpf which I will get from the sale of my hdb to do a one-off payment to the loan of my condo so that the loan amount will be less? Or is it possible (via a bridging loan) , but not recommended?

PN
19-03-09, 21:38
Thanks PN. Yup, have sufficient cpf for the $18.6k stamp fees.

From your recommendation, does it means I cannot use the $200k cpf which I will get from the sale of my hdb to do a one-off payment to the loan of my condo so that the loan amount will be less? Or is it possible (via a bridging loan) , but not recommended?

I'd suggest not to use more than 80k from the 200k cpf if you want to reduce the bank loan. When to do the partial payment? If the loan interest goes too high for your comfort. This will ensure you have about 120k left in cpf to continue serving the loan if one is affected by retrenchment. Otherwise it can be very stressful if this does happens.

Banks also have some limit on partial repayment you can made. Typically this is 30% of the loan amount. The difference in paying 200k and 80k partial payment with 20yrs tenur is not really significant. The mthly loan is 2.3k vs 3k. I'd rather pay 3k/mth & have 120k in CPF than to drain it near zero & pay the loan in cash.

Another thread has some discussions on loan repayment strategies. There is no fix rule on this. You've to decide which is best for yourself & family. Different people has different preference. Good luck.
http://forums.condosingapore.com/showthread.php?t=7086

kalumder
19-03-09, 21:45
There are 2 possible scenarios here:
(2) As I encouraged:
Buy a $1.2m home with facilities, forget about country club memberships, self-drive a Toyota Vios/Axio (you don't need Crown), live a simple life. 30 years later, your property would have appreciated at least 2x and sell the property...
I would easily choose (2) - To be able to retire at 60 years old without any monetary worry when I really need to retire.

you sir are wrong! What you fail to regonize is that there is no guarantee that property will appreciate 2x in 30 years. If you buy in a bull market fuelled by speculation, than your property may never recover. Ask the Japanese who bought property in around 1990 before the bust. Right now, condo property is overpriced by a factor of nearly 100% in Singapore, you only have to check rental to see that this is true, and rentals are decreasing.
You have to buy at the right time, and not overpay for your property inorder to reach your appreciation of 2x in 30 years.

1 more thing, if your property is worth double after 30 years, than that means your compound interast rate is 2.37% on average. You better hope annual inflation is lower than that on average. Oh and btw, dont forget that you will have a morage which also eats at your rate. So your real gain after 30 years is less than 1% unless your morage rate is too high. The only reason why most people should invest in property, is because it forces them to put money aside and not waste it on trivial spending.

jonleelk
19-03-09, 23:30
I'd suggest not to use more than 80k from the 200k cpf if you want to reduce the bank loan. When to do the partial payment? If the loan interest goes too high for your comfort. This will ensure you have about 120k left in cpf to continue serving the loan if one is affected by retrenchment. Otherwise it can be very stressful if this does happens.

Banks also have some limit on partial repayment you can made. Typically this is 30% of the loan amount. The difference in paying 200k and 80k partial payment with 20yrs tenur is not really significant. The mthly loan is 2.3k vs 3k. I'd rather pay 3k/mth & have 120k in CPF than to drain it near zero & pay the loan in cash.

Another thread has some discussions on loan repayment strategies. There is no fix rule on this. You've to decide which is best for yourself & family. Different people has different preference. Good luck.
http://forums.condosingapore.com/showthread.php?t=7086

Tks again PN. Will read up more on the suggested thread. But in the meantime, one last question to confirm I understand your recommendation correct.

Take 80% loan, monthly repayment of about $3.7k. Keep the 200k in CPF. Use a combination of CPF+cash for monthly repayment. The 200k in cpf as a backup in case kenna retrench and cannot come up with cash for monthly installment? If my monthly CPF OA contribution is $1.7k, can I use more than $1.7k from CPF for monthly installment?

Or keep the $200k in cpf and use CPF to pay the full $3.7k monthly installment, and only use cash later on if funds in CPF is less?

noblebaby
20-03-09, 09:19
How to calculate the property tax?

I heard the water/electriciti tariffs is higher for private, is that true?

What other expenses to pay for staying in private?

PN
20-03-09, 10:18
Tks again PN. Will read up more on the suggested thread. But in the meantime, one last question to confirm I understand your recommendation correct.

Take 80% loan, monthly repayment of about $3.7k. Keep the 200k in CPF. Use a combination of CPF+cash for monthly repayment. The 200k in cpf as a backup in case kenna retrench and cannot come up with cash for monthly installment? If my monthly CPF OA contribution is $1.7k, can I use more than $1.7k from CPF for monthly installment?

Or keep the $200k in cpf and use CPF to pay the full $3.7k monthly installment, and only use cash later on if funds in CPF is less?

You can use more than $1.7k for the installment. Don't forget you already have $200k in cpf accounts combined. You can pay the installment using CPF.

My personal preference is to use CPF whenever possible. Accumulate more cash & use some for other investment after you set aside a fix portion as reserve. Do a partial repayment when the loan interest is too high. How high is high depends on individual. For me, if it goes beyond 3.5%, I'll try & cut down the outstanding loan by doing a refinancing & prepayment once every 2-3yrs.

If CPF runs out, pay by cash. Based on your 200k as base, mthly & bonus contribution, interest earned, it will run out after year 9. By then, your outstanding loan is <300k and you should have >400k in cash + investments. You should be able to afford to pay partly in cash as you're still working & there is mthly contribution to cpf.

The above is for your own reference only as I do not know your personal commitments towards child & parents, spending & saving habbits. I made a lot of assumptions here. You still need to make your own decision.

Note: the CPF AHWL (Available housing withdrawal limit) is 120% starting from 2008.

noblebaby
20-03-09, 10:41
You can use more than $1.7k for the installment. Don't forget you already have $200k in cpf accounts combined. You can pay the installment using CPF.

My personal preference is to use CPF whenever possible. Accumulate more cash & use some for other investment after you set aside a fix portion as reserve. Do a partial repayment when the loan interest is too high. How high is high depends on individual. For me, if it goes beyond 3.5%, I'll try & cut down the outstanding loan by doing a refinancing & prepayment once every 2-3yrs.

If CPF runs out, pay by cash. Based on your 200k as base, mthly & bonus contribution, interest earned, it will run out after year 9. By then, your outstanding loan is <300k and you should have >400k in cash + investments. You should be able to afford to pay partly in cash as you're still working & there is mthly contribution to cpf.

The above is for your own reference only as I do not know your personal commitments towards child & parents, spending & saving habbits. I made a lot of assumptions here. You still need to make your own decision.

Note: the CPF AHWL (Available housing withdrawal limit) is 120% starting from 2008.

PN, please educate me on the CPF AHWL (Available housing withdrawal limit) is 120%. What's mean by 120%? thanks

PN
20-03-09, 10:49
How to calculate the property tax?

I heard the water/electriciti tariffs is higher for private, is that true?

What other expenses to pay for staying in private?

Property tax is based on AV & depends whether you living in it or renting out.

The Annual Value (AV) of your property is the estimated annual rent of your property, excluding the rent for furniture, fittings and service charge. The basis is the same for let-out, owner-occupied or vacant properties.
IRAS determines the AV of your property by analysing rents of comparable properties.

Example taken from IRAS: Rental/mth of the property can fetch is $2k.
AV of your house is $24,000, Property Tax payable is: 10% x $24,000 = $2,400 per year
If you are living in your house, Property Tax payable is: 4% x $24,000 = $960 per year

If you cook very often at home & have larger family size, the bill will be higher. So depends on usage. Some use aircon every night during sleep, and because most family need clothes dryer (can't use bamboo stick to hang cloths outside like in hdb), bill will be higher than living in hdb.

Condo maintainance is the additional cost you need to take note. The larger the size of your unit, the higher the share value & higher maintainance fee. But this already include your parking slot which most condo will provide at least one.

noblebaby
20-03-09, 11:02
Property tax is based on AV & depends whether you living in it or renting out.

The Annual Value (AV) of your property is the estimated annual rent of your property, excluding the rent for furniture, fittings and service charge. The basis is the same for let-out, owner-occupied or vacant properties.
IRAS determines the AV of your property by analysing rents of comparable properties.

Example taken from IRAS: Rental/mth of the property can fetch is $2k.
AV of your house is $24,000, Property Tax payable is: 10% x $24,000 = $2,400 per year
If you are living in your house, Property Tax payable is: 4% x $24,000 = $960 per year

If you cook very often at home & have larger family size, the bill will be higher. So depends on usage. Some use aircon every night during sleep, and because most family need clothes dryer (can't use bamboo stick to hang cloths outside like in hdb), bill will be higher than living in hdb.

Condo maintainance is the additional cost you need to take note. The larger the size of your unit, the higher the share value & higher maintainance fee. But this already include your parking slot which most condo will provide at least one.

Thanks PN. but I hav 2 questions:

1 - Is the tariff/unit for private is higher than HDB? HDB get bill rebate...
2 - If the property is owned and under 2 persons name, then the $960 yearly tax is per person or evenly divided by 2? $450 for each?!?

PN
20-03-09, 11:05
PN, please educate me on the CPF AHWL (Available housing withdrawal limit) is 120%. What's mean by 120%? thanks

If you use CPF for downpayment & installment for new housing loan, you can use up to 120% of the property cost. This is how its being computed.

Property cost: 700K
Assume you pay 5% in cash & 15% in cpf for 20% downpayment. 15% of 700k is 105k.
120% limit means 1.2 * 700k = 840K
You already use 105k from the 840K, you can still use 735k from your cpf for installment

If your mthly installment is 3k, in one year is 36k. In 20yrs and 5mths, you'll hit 735k. You'll need to service the rest of the remaining installment by cash when you hit this limit.

PN
20-03-09, 18:25
Thanks PN. but I hav 2 questions:

1 - Is the tariff/unit for private is higher than HDB? HDB get bill rebate...
2 - If the property is owned and under 2 persons name, then the $960 yearly tax is per person or evenly divided by 2? $450 for each?!?

The tariff is the same whether condo/hdb.
Yes. There is utility bill rebate for those in staying in HDB.

IRAS will send you the property tax at least once a year (sometimes twice a year if the rental market went up). There is only one property tax reference No for your house even if there are 2 owner names. Can pay by Giro/eNets/Cheque/Post Offc/AXS/SAM

duckweed
20-03-09, 23:41
just a note... for those who pay their property tax in full, can pay using diners card and earn some points.

teddybear
21-03-09, 23:42
While nobody can guarantee, fact is property has shown to appreciate not just 2x but even 3x or 4x or more in 30 years (as long as you can hold for 30 years)! I am not the only one to say that, please also see Dr Money's article about this.

Please do not quote about Japan's property experience as that is a run-away case where loan instalments needs to be paid by 2 generations whereas in Singapore the Govt has done an excellent job to curb such run-away property prices and loan tenure is usually max of 35 years. When economy is bad, rental will drop for sure and that is normal. You are blaming the Singapore Govt for causing the 100% over-price of Singapore property and the dropping rental?

Regarding your '1 more thing', even if the compound interest rate is 2.37%, the person who owns a house is already staying in for free + the capital appreciation! (better than paying out CASH for rental and he doesn't own anything!). What other investment can give you at least 2.37% compounded return over 30 years? Not stocks, not fixed deposits! Regardless of whatever you invest in, they are all subjected to inflation. In this respect, Singapore govt has curb inflation very well as well.

I don't agree with your statement that "The only reason why most people should invest in property, is because it forces them to put money aside and not waste it on trivial spending". There are many more reasons and benefits for investing in property! That is for you to find out.


you sir are wrong! What you fail to regonize is that there is no guarantee that property will appreciate 2x in 30 years. If you buy in a bull market fuelled by speculation, than your property may never recover. Ask the Japanese who bought property in around 1990 before the bust. Right now, condo property is overpriced by a factor of nearly 100% in Singapore, you only have to check rental to see that this is true, and rentals are decreasing.
You have to buy at the right time, and not overpay for your property inorder to reach your appreciation of 2x in 30 years.

1 more thing, if your property is worth double after 30 years, than that means your compound interast rate is 2.37% on average. You better hope annual inflation is lower than that on average. Oh and btw, dont forget that you will have a morage which also eats at your rate. So your real gain after 30 years is less than 1% unless your morage rate is too high. The only reason why most people should invest in property, is because it forces them to put money aside and not waste it on trivial spending.

kalumder
22-03-09, 08:21
While nobody can guarantee, fact is property has shown to appreciate not just 2x but even 3x or 4x or more in 30 years (as long as you can hold for 30 years)! I am not the only one to say that, please also see Dr Money's article about this.

Please do not quote about Japan's property experience as that is a run-away case where loan instalments needs to be paid by 2 generations whereas in Singapore the Govt has done an excellent job to curb such run-away property prices and loan tenure is usually max of 35 years. When economy is bad, rental will drop for sure and that is normal. You are blaming the Singapore Govt for causing the 100% over-price of Singapore property and the dropping rental?

Regarding your '1 more thing', even if the compound interest rate is 2.37%, the person who owns a house is already staying in for free + the capital appreciation! (better than paying out CASH for rental and he doesn't own anything!). What other investment can give you at least 2.37% compounded return over 30 years? Not stocks, not fixed deposits! Regardless of whatever you invest in, they are all subjected to inflation. In this respect, Singapore govt has curb inflation very well as well.

I don't agree with your statement that "The only reason why most people should invest in property, is because it forces them to put money aside and not waste it on trivial spending". There are many more reasons and benefits for investing in property! That is for you to find out.


Property use to be a non speculative asset growing with the economy, but ever since the 90ies it has become an instrument of speculation (See graph) (http://4.bp.blogspot.com/_ePwCmg71B3o/SHq-YakWuSI/AAAAAAAAANI/FXFfY68eZuc/s1600-h/Property+Price+Index+Graph+1960-2007.gif). So you have to be careful when DrMoney uses historical data. Statistics can be used either way.

Fine lets use singapore, In 1995 people paid a premium price in singapore for their condo, it took 10+ years (2006-2007) for prices to regain those levels. had they only rented and waited 2 years. Now prices are dropping again below 1995 levels. So in 14 years the property value (psf) has increased by 0% if you bought at peak. In fact they lost money in real terms (interest payment), capital destruction at its finest.

way to cherry pick, and dance around my point. Why pay 1.2 million for a condo now, when you can buy it for 700k-840k in 6-18 months? Now a days, timing is everything with property, to bad you dont seem to understand that. That is why you have to look at rental to see when property is priced fairly. It takes a while before people will bring down the selling price, since people will only sell when they have to. A lot of people who bought new and subsale property (condo´s) in 2006/2007/2008 to rent out, will see that the rent wont cover the morgage payments by a long shot. With fewer renters, more unemployed and lower salaries, and lots of new condo´s coming on the market the next 18 months, the only way for valuations is down.

Buy a condo for own stay or to rent out now, and you are a fool.

teddybear
22-03-09, 22:55
As I mentioned, property is for long-term investment. Who knows? Maybe another 10 years down the road, that property which whoever bought at the 1997 peak would probably have gone up by 100% of their purchased price! The fact is that nobody knows (unless he is God)! As such, why are you so sure that a property worth $1.2m now will surely be worth only $700k-800k in 6-18 months? Will what you said about "Buy a condo for own stay or to rent out now, and you are a fool" becomes true? Even the top brains in GIC and Temasek also may made wrong bets (e.g. Citigroup, UBS, etc). Are you saying you are even smarter than them to be so damn-absolutely sure that property prices will surely drop? Can you declare whether you are GOD otherwise how can we trust what you said despite your absolute confidence? :scared-1: (If so, you should be replacing the head of GIC/Temasek and get their millions dollars salary instead :tongue3:).



Property use to be a non speculative asset growing with the economy, but ever since the 90ies it has become an instrument of speculation (See graph) (http://4.bp.blogspot.com/_ePwCmg71B3o/SHq-YakWuSI/AAAAAAAAANI/FXFfY68eZuc/s1600-h/Property+Price+Index+Graph+1960-2007.gif). So you have to be careful when DrMoney uses historical data. Statistics can be used either way.

Fine lets use singapore, In 1995 people paid a premium price in singapore for their condo, it took 10+ years (2006-2007) for prices to regain those levels. had they only rented and waited 2 years. Now prices are dropping again below 1995 levels. So in 14 years the property value (psf) has increased by 0% if you bought at peak. In fact they lost money in real terms (interest payment), capital destruction at its finest.

way to cherry pick, and dance around my point. Why pay 1.2 million for a condo now, when you can buy it for 700k-840k in 6-18 months? Now a days, timing is everything with property, to bad you dont seem to understand that. That is why you have to look at rental to see when property is priced fairly. It takes a while before people will bring down the selling price, since people will only sell when they have to. A lot of people who bought new and subsale property (condo´s) in 2006/2007/2008 to rent out, will see that the rent wont cover the morgage payments by a long shot. With fewer renters, more unemployed and lower salaries, and lots of new condo´s coming on the market the next 18 months, the only way for valuations is down.

Buy a condo for own stay or to rent out now, and you are a fool.

jonleelk
22-03-09, 23:34
Back to topic...for an unit that is still under construction, better to pay a 3% premium and go for interest absorbtion scheme, or go for the traditional progressive payment loan?

gfoo
23-03-09, 08:56
As I mentioned, property is for long-term investment. Who knows? Maybe another 10 years down the road, that property which whoever bought at the 1997 peak would probably have gone up by 100% of their purchased price! The fact is that nobody knows (unless he is God)! As such, why are you so sure that a property worth $1.2m now will surely be worth only $700k-800k in 6-18 months? Will what you said about "Buy a condo for own stay or to rent out now, and you are a fool" becomes true? Even the top brains in GIC and Temasek also may made wrong bets (e.g. Citigroup, UBS, etc). Are you saying you are even smarter than them to be so damn-absolutely sure that property prices will surely drop? Can you declare whether you are GOD otherwise how can we trust what you said despite your absolute confidence? :scared-1: (If so, you should be replacing the head of GIC/Temasek and get their millions dollars salary instead :tongue3:).
although i doubt he's good looking enough to be seen as a god, kalumdur is right. the only thing that will counteract global deleveraging and the fall in asset prices is mass inflation. The Fed and global central banks are trying to print their way out of this mess. How successful they will be is anyone's guess. either way, nobody wins.

chances of a deflationary spiral right now is much better than mass inflation - as long as banks hoard whatever money is printed and not lend out. check out the Fed's money multiplier - it's dropped horrendously.

PN
23-03-09, 11:39
Back to topic...for an unit that is still under construction, better to pay a 3% premium and go for interest absorbtion scheme, or go for the traditional progressive payment loan?

You pay 3% more for the 800k property, say 824k. This is additional 24k. The amount of interest you'd need to pay to bank if you're doing progressive is about 19k in a 2yrs period. The 24k is more than enough for the developer to pay for your interest. The only savings here is delaying the 23k principal payment which you need not fork out within these 2yrs. But in the long run you pay more interest to the bank ~20-25k more for a 20yrs loan.

Hope the above helps to clear some of your doubts.

jonleelk
23-03-09, 15:06
You pay 3% more for the 800k property, say 824k. This is additional 24k. The amount of interest you'd need to pay to bank if you're doing progressive is about 19k in a 2yrs period. The 24k is more than enough for the developer to pay for your interest. The only savings here is delaying the 23k principal payment which you need not fork out within these 2yrs. But in the long run you pay more interest to the bank ~20-25k more for a 20yrs loan.

Hope the above helps to clear some of your doubts.

Understand this portion. There is no free lunch in this world. :)

Does anyone knows how to compute the typical progressive payment schedule after the 20% till TOP, which will in turn translate to when and how much I need to start paying the bank.

I find Citibank's loan with the cash management account quite attractive, especially when I will have some cash on hand after selling my existing flat after TOP. However, Citibank only has the progressive payment loan.

Acer
23-03-09, 15:40
Understand this portion. There is no free lunch in this world. :)

Does anyone knows how to compute the typical progressive payment schedule after the 20% till TOP, which will in turn translate to when and how much I need to start paying the bank.

I find Citibank's loan with the cash management account quite attractive, especially when I will have some cash on hand after selling my existing flat after TOP. However, Citibank only has the progressive payment loan.

Hi jonleelk,

can share with me, what is citi progressive payment loan?
How it work?

PN
23-03-09, 16:23
Understand this portion. There is no free lunch in this world. :)

Does anyone knows how to compute the typical progressive payment schedule after the 20% till TOP, which will in turn translate to when and how much I need to start paying the bank.

I find Citibank's loan with the cash management account quite attractive, especially when I will have some cash on hand after selling my existing flat after TOP. However, Citibank only has the progressive payment loan.

Typically this is how it looks like (estimates only base on 3% interest rate)
The estimated schedule can be check with the developer.

Events (Mthly installment)
Fundation work 10% --- ($355)
Concrete framework 10% ---- ($715)
Brickwalls 5% - ($900)
Ceiling 5% - ($1100)
Doors, windows, electrical wiring, plastering, plumbing 5% --- ($1200)
carpark, roads & drains 5% --- ($1450)
TOP 25% ---- ($2400)
CSC 15% ---- ($3400)

Citibank Checking acount is very useful. It earns you 70% of the loan interest & goes towards clearing your principal. If your loan interest is 3%, the money you put into the checking account earns you 2.1% of interest & this is a normal saving account. It gives you the flexibility of taking out or putting in your money any time. This means that if you can withdraw any amount to spend/investment anytime, without penalty imposed & it's based on daily interest. Better than fix deposit account.

StandChart also has something similar call Mortgage One. BTW, I don't work for either one of them. :)

Acer
23-03-09, 16:27
Thanks PN (http://forums.condosingapore.com/member.php?u=12313),

I call SCB.
The lady told me for non-completed project, SCB only had 1 package SOR+1.75%
She didn't mention abt the Mortgage One.

PN
23-03-09, 16:37
Thanks PN (http://forums.condosingapore.com/member.php?u=12313),

I call SCB.
The lady told me for non-completed project, SCB only had 1 package SOR+1.75%
She didn't mention abt the Mortgage One.

I used to have mortgage loan from SCB. Problem is they are very inflexible and services are very bad. You know what I mean since you call them but they are not interested. After my lock in period expired with SCB, I switched to Citi as I heard from friends that their service is much much better.

Service is an important factor in deciding which bank I go with from then onwards. When you need to do refinancing or partial repayment, you'll need to call/write in to the bank. If they don't know this don't know that, you'll get very frustrated & waste a lot of your time.

Call Citi then. Don't waste your time talking to SCB.

jonleelk
23-03-09, 20:52
Typically this is how it looks like (estimates only base on 3% interest rate)
The estimated schedule can be check with the developer.

Events (Mthly installment)
Fundation work 10% --- ($355)
Concrete framework 10% ---- ($715)
Brickwalls 5% - ($900)
Ceiling 5% - ($1100)
Doors, windows, electrical wiring, plastering, plumbing 5% --- ($1200)
carpark, roads & drains 5% --- ($1450)
TOP 25% ---- ($2400)
CSC 15% ---- ($3400)

Citibank Checking acount is very useful. It earns you 70% of the loan interest & goes towards clearing your principal. If your loan interest is 3%, the money you put into the checking account earns you 2.1% of interest & this is a normal saving account. It gives you the flexibility of taking out or putting in your money any time. This means that if you can withdraw any amount to spend/investment anytime, without penalty imposed & it's based on daily interest. Better than fix deposit account.

StandChart also has something similar call Mortgage One. BTW, I don't work for either one of them. :)

Tks PN. The estimate your gave is a blessing for newbies like me. :not-worthy:

As me+wifey monthly CPF OA is about $1.7k combined, that will be sufficient to cover all the monthly progressive payment until TOP...which means a progressive payment from CITI will be best for us.

For those interested, CITI current package with a 3-yr lock in is SIBOR+0.8% for the first 3 yrs. After that is SIBOR+1.25%.

Acer
23-03-09, 21:18
Tks PN. The estimate your gave is a blessing for newbies like me. :not-worthy:

As me+wifey monthly CPF OA is about $1.7k combined, that will be sufficient to cover all the monthly progressive payment until TOP...which means a progressive payment from CITI will be best for us.

For those interested, CITI current package with a 3-yr lock in is SIBOR+0.8% for the first 3 yrs. After that is SIBOR+1.25%.

Hi jonleelk,
the citi package that u had mention is for completed project or still construction project.

jonleelk
24-03-09, 13:41
Hi jonleelk,
the citi package that u had mention is for completed project or still construction project.

It is for under-construction. For completed, they are having another special 1 year lock in package.

isaaclim
24-03-09, 19:33
Tks PN. The estimate your gave is a blessing for newbies like me. :not-worthy:

As me+wifey monthly CPF OA is about $1.7k combined, that will be sufficient to cover all the monthly progressive payment until TOP...which means a progressive payment from CITI will be best for us.

For those interested, CITI current package with a 3-yr lock in is SIBOR+0.8% for the first 3 yrs. After that is SIBOR+1.25%.

It is not so advisable to take SIBOR link package with 3yrs lock-in. 3yrs is way to long. SIBOR may turn into a monster in 3 yrs.

jonleelk
25-03-09, 10:12
It is not so advisable to take SIBOR link package with 3yrs lock-in. 3yrs is way to long. SIBOR may turn into a monster in 3 yrs.

True that SIBOR can become a monster in the future. However, when that happens, can the bank loan interest be lower than SIBOR?

isaaclim
25-03-09, 10:31
True that SIBOR can become a monster in the future. However, when that happens, can the bank loan interest be lower than SIBOR?

Of course possible. But 0.8% is still a reasonable spread.

My prediction is SIBOR may go beyond 3% in 2/3 year times. 3+%+0.8% > 3.8% still lower then board rate of many banks.

But if you can get fix rate package for 3 yrs, that is not more then 2.5% in average. Isn't it would be better?

new2mondrian
25-03-09, 18:51
This thread is so interesting! And thanks for the candid exchange of views. There are certain points brought up here that I definitely agree with.

1) It is idealistic to assume that the combined household income will remain the way it is or even higher all the way till age 62. In this economic environment (just look at how many downturns SGP went thru over the past 10 years), one can never be sure even whether one remains employed/employable in 10 years, let alone right up till retirement.

2) Property can be a great destruction of wealth, especially when one factors in the interest payments compounded over the course of a typical 30-year loan taken over a property.

In the first place, the owner occupied property can never be deemed as an investment; or rather it is for self consumption. To me, should I stay in a $800K property that has been fully paid up, the opportunity cost of that property is easily $64K per annum, based on 8% returns should I invest that $800K cash used in paying for that property (or I would have received if I sell that property) in fixed income instruments. Should my investment returns is higher than 8%, the opportunity cost is easily much much higher.

Therefore for owner-occupied properties, one has to be comfortable with that level of consumption.

3) The rate of growth in property prices over the PAST 30 years cannot be extrapolated to the next 30 years. Singapore moved from 3rd world to 1st world over these 30 years. In the early 70s, a HDB 5-room flat is less than 20k. The value went up by 20-30 times over the past 30 years. Will it go up by the same amount? The clear answer is no. Over the short to medium term, I agree that we might run the risk of mass inflation. But over a much longer term, I believe we might be looking at prolonged periods of stagflation.

Then where does that put us? I think at the end of the day, it is still key to live within our means, and continue to set aside savings (be it in cash/gold/mixed basket of equities/commodities) for the future. Property wise, personally I do not see the need to own more than 1 property at any point in time. Leverage can be a double-edged sword.

Bishan Kid
26-03-09, 10:32
[quote=new2mondrian]This thread is so interesting! And thanks for the candid exchange of views. There are certain points brought up here that I definitely agree with.

1) It is idealistic to assume that the combined household income will remain the way it is or even higher all the way till age 62. In this economic environment (just look at how many downturns SGP went thru over the past 10 years), one can never be sure even whether one remains employed/employable in 10 years, let alone right up till retirement.

2) Property can be a great destruction of wealth, especially when one factors in the interest payments compounded over the course of a typical 30-year loan taken over a property.

In the first place, the owner occupied property can never be deemed as an investment; or rather it is for self consumption. To me, should I stay in a $800K property that has been fully paid up, the opportunity cost of that property is easily $64K per annum, based on 8% returns should I invest that $800K cash used in paying for that property (or I would have received if I sell that property) in fixed income instruments. Should my investment returns is higher than 8%, the opportunity cost is easily much much higher.

Therefore for owner-occupied properties, one has to be comfortable with that level of consumption.

3) The rate of growth in property prices over the PAST 30 years cannot be extrapolated to the next 30 years. Singapore moved from 3rd world to 1st world over these 30 years. In the early 70s, a HDB 5-room flat is less than 20k. The value went up by 20-30 times over the past 30 years. Will it go up by the same amount? The clear answer is no. Over the short to medium term, I agree that we might run the risk of mass inflation. But over a much longer term, I believe we might be looking at prolonged periods of stagflation.

Why is HDB 5 room flat is less than 20K in the early 70s as what u claimed after Singapore has only less than 10years of independance without natural resources?
Why is Ford Cortina(E/GT) sell about 9K in 1969 in the former showroom opposite Istana though without COE ?
Why land is so cheap then as comparatively to a car?
A property is immovable, the price is highly dependable on infrastructure of the country, location,employment, income, design ,ammenties and etc.

david8387
01-04-09, 23:58
hi all, advise needed comparing btw 2 banks loan package 80% loan amt and 3yrs
lock-in

MBank (fixed rated)
1st-1.6%
2nd-2.6%
3rd-2.9%
thereafter- 3.75% bank internal board rate
(subject to change by bank discretion)

CBank - for 1st ~ 3rd yrs
(X-mths sibor + 0.8%)
thereafter sibor + 1.25%
BUT, Citi has a clause to adjust the "spread" value at their discretion.

Is Citi T&C a risker one?
:banghead: head cracking btw tis 2 banks:beats-me-man:

david8387
02-04-09, 00:01
hi all, advise needed comparing btw 2 banks loan package 80% loan amt and 3yrs
lock-in

MBank (fixed rated)
1st-1.6%
2nd-2.6%
3rd-2.9%
thereafter- 3.75% bank internal board rate
(subject to change by bank discretion)

CBank - for 1st ~ 3rd yrs
(X-mths sibor + 0.8%)
thereafter sibor + 1.25%
BUT, Citi has a clause to adjust the "spread" value at their discretion.

Is Citi T&C a risker one?
:banghead: head cracking btw tis 2 banks:beats-me-man:

rayray
04-04-09, 18:46
Hi,
First post for me.
I have been reading the whole thread and found it very informative.

I just purchased my first new private property and foundation work may start next year. I was looking around for a good BUC bank loan.

I visited Maybank on their current promotion, but, too bad, I cannot fully utilize the first year interest due to foundation work may start next year.

UOB had offered me the following :

Floating Rate (Lock-in period 3 years)
1st year = 1.68%
2nd year = 2.48%
3rd year = 2.88%
4th year = 3.75%

The above is based on Board Rate minus a fixed percentage discount.
hence, would like to know :
1) Is the above UOB Floating rate package have any advantage over other banks SIBOR + X?
2) Is there any better loan package than the one offer by UOB?

Any advice is appreciated.:)

teddybear
04-04-09, 19:16
Forget about board rate loan as you won't know how you are charged in the future (no transparency vs SIBOR rate).


Hi,
First post for me.
I have been reading the whole thread and found it very informative.

I just purchased my first new private property and foundation work may start next year. I was looking around for a good BUC bank loan.

I visited Maybank on their current promotion, but, too bad, I cannot fully utilize the first year interest due to foundation work may start next year.

UOB had offered me the following :

Floating Rate (Lock-in period 3 years)
1st year = 1.68%
2nd year = 2.48%
3rd year = 2.88%
4th year = 3.75%

The above is based on Board Rate minus a fixed percentage discount.
hence, would like to know :
1) Is the above UOB Floating rate package have any advantage over other banks SIBOR + X?
2) Is there any better loan package than the one offer by UOB?

Any advice is appreciated.:)

rayray
04-04-09, 22:10
thanks.
One thing about UOB, they offer one free conversion 3 month from TOP, wonder this is an advantage for me to switch to a lower interest rate at that time:)

Acer
04-04-09, 23:21
thanks.
One thing about UOB, they offer one free conversion 3 month from TOP, wonder this is an advantage for me to switch to a lower interest rate at that time:)

If happen that time UOB has special promotion for a fix rate and you wish to take the opportunity.
UOB will tell you. Your plan only can convert to this rate (which is higher than the promotion rate). cannot take the special rate.

Encounter that before.
:banghead:

rayray
05-04-09, 10:10
If happen that time UOB has special promotion for a fix rate and you wish to take the opportunity.
UOB will tell you. Your plan only can convert to this rate (which is higher than the promotion rate). cannot take the special rate.

Encounter that before.
:banghead:

Thanks for the tip.
With the current economy situation, banks need fund since we witness their share market performance. The UOB guy told me the BR was not adjusted since 2006, this worried me more as UOB may adjust the BR anytime to recover some losses.

I may go for the Maybank package which I will not utilize the first year interest (3 years lock-in and foundation work start next year), 2nd year=2.6% and 3rd year=2.9% but by then at around TOP time, I will have to hunt around for another new loan package. At this time, can I call it a Re-Financing completed project loan or still a loan for BUC project?:confused:

PN
05-04-09, 17:21
When I took up my first bank loan, it's based on board rate. Initially, the interest rate is still bearable. After a while, the bank send notices to inform that the board rate has increases & I notice my interest going to bank is getting ridiculous. I contacted another bank and refinance eventually as the package (also board rate) offered by another bank is much much attractive.

Two & a half year into the loan with this 2nd bank, I asked for refinancing & this same bank offer me Sibor rate package. After much consideration, I decided to take it up & has no regret so far. Reason being that it is transparent & I know why I was paying X% every month.

Below are more details on Board rate & Sibor rate from various sources.

What is board rate?
This is actually derived from overall bank funding costs (including business costs) from different sources. Some bank's home loan board rate is benchmarked against interbank rates, market conditions, as well as business costs. There is no standard practise & varies from one bank to another bank.

No accountability is required of bank to explain how they arrive at any particular rate. A bank Board rates are guided by and not determined by SIBOR. Banks are free to vary the board rate and discount that they would offer without having to give any prior notice. As such, Banks may move their board rate either way regardless of where SIBOR is headed for. For packages offered on the board rate, Banks would normally offer a fixed discounted rate for the initial years, after which the effective interest rate charged would be based purely on the board rate at that point of time.

What about Sibor rate?
This is Singapore Interbank Offered Rate (Sibor) and you can know the latest rate easily from newspapers or Internet. Bank loan base on Sibor is more transparent. Instead of the traditional practice of giving a discount off their respective board rate, FIs offering such reference / pegged rate packages would add a premium above the reference rate.

The advantage of such reference rate is that when SIBOR moves down, your interest rate would be adjusted accordingly. Which ever direction the rate goes, you are assured that you are paying based on transparent market rates although transparency does not necessarily mean the lowest rate available. What reference rates present is the peace of mind knowing that you are not paying excessive rates due to any Bank’s drive to increase their bottom line.

The Sibor rate chart for the last 20yrs are as below. You may use it as a reference to gauge or predict how the trend will be for the next few years. But don't blame me if you got it wrong. ;)

http://img27.imageshack.us/img27/1884/sibor.jpg

rayray
05-04-09, 22:32
Thanks.
It's better to go for SIBOR Loan package (no lock-in or 1 year lock-in) or maybe the citibank cash management account provided we have lots of spare cash to put into the account.

Now, it's either HSBC for SIBOR pegged or citibank cash management account for me.

sqmin3
06-04-09, 15:12
Do not accept UOB floating offer. I have learned a lession from them. They will not offer your best package before 1 year after TOP. They will charge a lot if you want to refinance in another bank. IMO, SIBOR is the best package for UC project.

rayray
06-04-09, 15:26
Thanks for the advice.

On hand, Citibank offer as mentioned before in previous post, SIBOR + 1% (Lock-in 3 year, 3 years lock-in maybe a big risk if market pick up) but they do offer a cash management account which pay an interest at 70% of the effective interest rate.
Come to think a bit, if SIBOR rate + X rate goes up, the saving interest rate goes up too, but I think you really save on the offset interest by having a big fund in the cash management account. Where to get so much cash when majority of the fund in CPF? SIGH

PN
06-04-09, 22:50
I was looking at the poll result & noticed that 4 persons voted for ">5k & <10k". I guess you are sharing your personal experience.

I'm just curious if anyone has gotten a bank approval for 1.2mil property loan with this household income?
How much does the bank allow you to take 80% loan? 70% or lower?
Just want to learn more. Thanks.

noblebaby
06-04-09, 23:33
I was looking at the poll result & noticed that 4 persons voted for ">5k & <10k". I guess you are sharing your personal experience.

I'm just curious if anyone has gotten a bank approval for 1.2mil property loan with this household income?
How much does the bank allow you to take 80% loan? 70% or lower?
Just want to learn more. Thanks.

I'm curious too... Frankly, if combined monthly income is less than 10k, really don't consider to stay in private property... even it's just a 700k mass market condo. Really hard to imagine some young couples spend huge part of their salary (>30-40%) into monthly installment or with a tenure of more than 30 years. really no need to retire. :tsk-tsk:

The $$$ can be better spend on good investments... Should start to invest since young...

teddybear
07-04-09, 09:54
If believe you are wrong. The government represented by HDB prohibits any household which earns more than $8k per month from buying new HDBs. What does this mean? It means they believe any household earning more than $8k per month will be able to afford private property. Based on statistics, more than $8k per month household are already in the top 25% bracket of earners. The government encourages Singaporeans to invest in their house too (as evidenced by allowing CPF to buy properties). So far, investment in their own properties has proven to be profitable over long term, and it helps people to save by having to set aside a fixed sum of money every month (particularly the young, who are mostly used to spending than saving).


I'm curious too... Frankly, if combined monthly income is less than 10k, really don't consider to stay in private property... even it's just a 700k mass market condo. Really hard to imagine some young couples spend huge part of their salary (>30-40%) into monthly installment or with a tenure of more than 30 years. really no need to retire. :tsk-tsk:

The $$$ can be better spend on good investments... Should start to invest since young...

noblebaby
07-04-09, 11:08
Earning more than $8k canot stay in resale HDB??? Why must die die stay in private property that is outside the comfort zone of a $8k earner?

Why must a couple with $8k monthly income to take up huge loan of more than 75% with the bank, and with a tenure as long as 35 years?? And then spend a huge part of salary for the monthly installment? What is the point of doing this? Do you think staying in private is the greatest thing in life?

I heard from many couples... "ooo, no saving, very poor", "need to save hard", bla bla... you know what, these people are mortgage slave to the bank.

of course the garment want the people to stay in private and expensive DBSS... for them to collect fat stamp duty and property tax every year. I'm not wrong, just that the garment is smarter than us. :D



If believe you are wrong. The government represented by HDB prohibits any household which earns more than $8k per month from buying new HDBs. What does this mean? It means they believe any household earning more than $8k per month will be able to afford private property. Based on statistics, more than $8k per month household are already in the top 25% bracket of earners. The government encourages Singaporeans to invest in their house too (as evidenced by allowing CPF to buy properties). So far, investment in their own properties has proven to be profitable over long term, and it helps people to save by having to set aside a fixed sum of money every month (particularly the young, who are mostly used to spending than saving).

teddybear
07-04-09, 12:47
If people can afford the more comfortable life in a private condo, paying the property taxes is just like a contribution to the society (so that these money can be used to help the poor and the needy). If everybody saves and nobody spends, then the govt will still have to find other sources of revenues & taxes to get the money to run the country (which is even worse because they will still save and save and still have to pay similar among of taxes anyway through other means vs they spend and enjoy and pay same taxes).

The fact that HDB prices are now so close to the mass market private condos that this make private property so much more worth the money paid (which is why so many flocked to buy Caspian, Mi Casa, or even the The Quartz). Do you really think so many people are "idiots"? From the way you wrote, I suppose you do believe so but that is Ok for them. At the end of the day, can afford or cannot afford comfortably is for the individuals to decide. Everybody is entitled to different opinions and we have even saw newspaper reporting a couple complaining not enough money with $15k household incomes.

What is the problem with taking a loan to buy property and paying interest? If they did so on private property (e.g. 20 years ago), they would have been laughing all the way to the bank now despite paying the interests.


Earning more than $8k canot stay in resale HDB??? Why must die die stay in private property that is outside the comfort zone of a $8k earner?

Why must a couple with $8k monthly income to take up huge loan of more than 75% with the bank, and with a tenure as long as 35 years?? And then spend a huge part of salary for the monthly installment? What is the point of doing this? Do you think staying in private is the greatest thing in life?

I heard from many couples... "ooo, no saving, very poor", "need to save hard", bla bla... you know what, these people are mortgage slave to the bank.

of course the garment want the people to stay in private and expensive DBSS... for them to collect fat stamp duty and property tax every year. I'm not wrong, just that the garment is smarter than us. :D

sqmin3
07-04-09, 15:08
What does monthly household income mean?

Does it mean the average monthly income of one year total as shown IRAS tax accessment notice, which includes bonus, investments and rental? Or only the basic salary? They are much different. The Average monthly income is about 10-40% higher than basic salary usually. For HDB new flat application, it seems they mean basic salary. For Loan application from banks, the banks mean the average monthly income, isn't it?

teddybear
07-04-09, 17:26
Yes, you are right, HDB only considers basic. The government household income survey takes the average. Banks usually consider the average.


What does monthly household income mean?

Does it mean the average monthly income of one year total as shown IRAS tax accessment notice, which includes bonus, investments and rental? Or only the basic salary? They are much different. The Average monthly income is about 10-40% higher than basic salary usually. For HDB new flat application, it seems they mean basic salary. For Loan application from banks, the banks mean the average monthly income, isn't it?

PN
28-04-09, 15:38
Some interesting statistics from Salary.sg. & Singapore Statistics. For ease of reference, I classified them as category 1, 2 & 3.

Singapore Average Monthly Household Income
75.9% of households earn <10k (Category 1)
16.1% of households earn between 10k & <20k (Category 2)
5% of households earn above 20k (Category 3)

HDB vs Condo/Private Percentage Ratio
77.8% lives in HDB (Category 1)
14.3% lives in Condo (Category 2)
6.2% lives in landed private property (Category 3)

Statistics don't lie. It doesn't requires rocket science to tell you where the majority earning <10k stay.
Households earning <10k a month live mainly in HDB. Otherwise, the 8k basics income limit is not working right?
Majority of those in category 2 (10k to <20k) & category3 (>20k) live in condo or landed private property.
Of course there are some who hold multiple properties (both condo & HDB at the same time OR multiple condo/private).

Note: The above is meant for those people who appreciates statistics only. Those who don't please ignore & skip over. ;)

cheerful
28-04-09, 18:07
Some interesting statistics from Salary.sg. & Singapore Statistics. For ease of reference, I classified them as category 1, 2 & 3.

Singapore Average Monthly Household Income
75.9% of households earn <10k (Category 1)
16.1% of households earn between 10k & <20k (Category 2)
5% of households earn above 20k (Category 3)

HDB vs Condo/Private Percentage Ratio
77.8% lives in HDB (Category 1)
14.3% lives in Condo (Category 2)
6.2% lives in landed private property (Category 3)

Statistics don't lie. It doesn't requires rocket science to tell you where the majority earning <10k stay.
Households earning <10k a month live mainly in HDB. Otherwise, the 8k basics income limit is not working right?
Majority of those in category 2 (10k to <20k) & category3 (>20k) live in condo or landed private property.
Of course there are some who hold multiple properties (both condo & HDB at the same time OR multiple condo/private).

Note: The above is meant for those people who appreciates statistics only. Those who don't please ignore & skip over. ;)

Wow .. thanks for sharing ... how to locate that source?? :ashamed1:
U sound like an expert (:D more like a banker or ministry high-flyer) ....

Yup seems like the stats don't lie & the pattern showing correlation between the two sets of numbers (if that's spelt correctly)!

wreckwrx
28-04-09, 20:26
Btw, what is the date of this data set?


Some interesting statistics from Salary.sg. & Singapore Statistics. For ease of reference, I classified them as category 1, 2 & 3.

Singapore Average Monthly Household Income
75.9% of households earn <10k (Category 1)
16.1% of households earn between 10k & <20k (Category 2)
5% of households earn above 20k (Category 3)

HDB vs Condo/Private Percentage Ratio
77.8% lives in HDB (Category 1)
14.3% lives in Condo (Category 2)
6.2% lives in landed private property (Category 3)

Statistics don't lie. It doesn't requires rocket science to tell you where the majority earning <10k stay.
Households earning <10k a month live mainly in HDB. Otherwise, the 8k basics income limit is not working right?
Majority of those in category 2 (10k to <20k) & category3 (>20k) live in condo or landed private property.
Of course there are some who hold multiple properties (both condo & HDB at the same time OR multiple condo/private).

Note: The above is meant for those people who appreciates statistics only. Those who don't please ignore & skip over. ;)

PN
28-04-09, 21:03
You can get all the detail statistics from www.salary.sg (http://www.salary.sg) and http://www.singstat.gov.sg/pubn/reference.html#sh (http://www.singstat.gov.sg/pubn/reference.html#sh)

cheerful
29-04-09, 10:03
You can get all the detail statistics from www.salary.sg (http://www.salary.sg) and http://www.singstat.gov.sg/pubn/reference.html#sh (http://www.singstat.gov.sg/pubn/reference.html#sh)

R those figures extracted from 'key household income trends,2008' from the 2nd URL?

Don't seem to find the two sets of data which u've provided (but read that 39% of employed household earned a monthly income of at least $7K) ...

PN
29-04-09, 13:16
R those figures extracted from 'key household income trends,2008' from the 2nd URL?

Don't seem to find the two sets of data which u've provided (but read that 39% of employed household earned a monthly income of at least $7K) ...

You can't get the data you need just by looking at the report. It still requires some data processing.
But you can use the tool in this http://www.salary.sg/2009/compare-your-household-income-2009/ to get the household income distribution.
The admin has done a good job getting the Income report statistics entered into the tool.
I've also included the houshold income chart FYR.

http://img207.imageshack.us/img207/8034/householdincomeg.jpg


BTW, I just discovered a typo in my post earlier. It should be 8% for catergory3
8% of households earn above 20k (Category 3)

The other info comes from here http://www.salary.sg/2007/hdb-condo-ratio. Althought there is a time gap between these 2 reports, it shouldn't be too significant to affect the result of comparison. The close correlation between the various categories speak for itself.

cheerful
29-04-09, 14:15
thanks ...