Should we sell?

[Juniper]

Thank you guys for the valuable input.

We reckon if we sell both our investment properties right now, we should be able to pocket around $1.8-$2.0m. In return we will have to forgo around $140k of rental income per year.

At the moment, our rental income is more than enough to pay for the mortgage payment for all 3 properties, without even using our CPF.

So if we sell, we could pay off our mortgage of our own stay property and still have around $1m of cash for investment. And if we reinvest to buy a $2m property with $1m loan, we could possibly get a positive income of around $3k per month at most, which is really not that great because by doing so, we will have to pay around $200,000 of stamp duties (3+7% ABSD) and other cost such as reno and agent commission etc

I am not sure if my calculation is correct, but assuming it is, then it doesnt really make much sense for us to cash out.

[Londonproperty123]

Well, once you have decided, move on.

All the best!

[Wolverine23]

Thank you guys for the valuable input.

We reckon if we sell both our investment properties right now, we should be able to pocket around $1.8-$2.0m. In return we will have to forgo around $140k of rental income per year.

At the moment, our rental income is more than enough to pay for the mortgage payment for all 3 properties, without even using our CPF.

So if we sell, we could pay off our mortgage of our own stay property and still have around $1m of cash for investment. And if we reinvest to buy a $2m property with $1m loan, we could possibly get a positive income of around $3k per month at most, which is really not that great because by doing so, we will have to pay around $200,000 of stamp duties (3+7% ABSD) and other cost such as reno and agent commission etc

I am not sure if my calculation is correct, but assuming it is, then it doesnt really make much sense for us to cash out.

Buy commercial!!!

[Juniper]

Buy commercial!!!

I am not very familiar with commercial properties. From my observation, I do foresee retail, F&B sectors heading for headwind in the years ahead because of high rental overhead, lack of manpower, consolidation on the industry, as well as online shopping. And the success of commercial properties also depends a lot on location and anchor tenants.

Unless you can use it to make money, I think buying strata titled commercial property are only good for short to medium term. ie. hoping to flip to make money instead of holding

[phantom_opera]

well u can buy a huge PUT option

[minority]

I am not very familiar with commercial properties. From my observation, I do foresee retail, F&B sectors heading for headwind in the years ahead because of high rental overhead, lack of manpower, consolidation on the industry, as well as online shopping. And the success of commercial properties also depends a lot on location and anchor tenants.

Unless you can use it to make money, I think buying strata titled commercial property are only good for short to medium term. ie. hoping to flip to make money instead of holding

frankly now its time to put the $ in US. not so much Asia

[invigorated]

Thank you guys for the valuable input.

We reckon if we sell both our investment properties right now, we should be able to pocket around $1.8-$2.0m. In return we will have to forgo around $140k of rental income per year.

At the moment, our rental income is more than enough to pay for the mortgage payment for all 3 properties, without even using our CPF.

So if we sell, we could pay off our mortgage of our own stay property and still have around $1m of cash for investment. And if we reinvest to buy a $2m property with $1m loan, we could possibly get a positive income of around $3k per month at most, which is really not that great because by doing so, we will have to pay around $200,000 of stamp duties (3+7% ABSD) and other cost such as reno and agent commission etc

I am not sure if my calculation is correct, but assuming it is, then it doesnt really make much sense for us to cash out.

Mho, the objective of cashing out has to be clear. Cash out if you feel that in the next year, prices will fall with the excess supply and you'll be able to pick up some durains. Perhaps that is what some of the rich like lks and warren are famous for doing.

If your objective is to sell now and buy now, the obvious answer is no with tdsr n absd. Just be resolute that if prices do fall 15-20%, you wouldn't regret it as u have made an informed choice based on your circumstances.

Good luck anyway!

[Londonproperty123]

frankly now its time to put the $ in US. not so much Asia

Can you start a series of investing in the USA?

Don't know enough so dare not go in.

[walkthetiger]

Perhaps that is what some of the rich like lks and warren are famous for doing.

They are just the 2 most famous iconic figures. Only 2 in the world know how to do it?.....there are much much more hidden predators in the sea..

[Juniper]

frankly now its time to put the $ in US. not so much Asia

Like where and why?

[Londonproperty123]

Check this out.

Sharp drop in new home loans. TDSR taking effect.

http://londonproperty123.blogspot.sg...5x-income.html

[Juniper]

Mho, the objective of cashing out has to be clear. Cash out if you feel that in the next year, prices will fall with the excess supply and you'll be able to pick up some durains. Perhaps that is what some of the rich like lks and warren are famous for doing.

If your objective is to sell now and buy now, the obvious answer is no with tdsr n absd. Just be resolute that if prices do fall 15-20%, you wouldn't regret it as u have made an informed choice based on your circumstances.

Good luck anyway!

What you are suggesting is actually a very dangerous and risky game of timing and predicting how the market will move.

Assuming my investment property is worth $4m today, if I sell, i get to cash out $2m, but at the expense of forgoing my rental income of say $140k per year.

So if price do fall by 20%, in 1 year, my $4m assets would then be worth $3.2m and for me to buy back the same property (assuming still available), I would need to fork out, $1.6m + $320K (ABSD + STAMP DUTIES) + MISC cost, that will work out to about $2.0m.

If I decided to do nothing, my asset could be worth $3.2m in 1 years time, but I still get to collect $140,000 of rental for 1 year. And assuming if 1 years time is the bottom of the cycle, it will also mean the value of my $3.2m property will also appreciate just a fast as if I sell and then buy back at $3.2m

Actually I always have the impression that Warren Buffet is an investor that buy good companies and hold for long term, instead of selling and buying between economic cycle.

[Wolverine23]

Can you start a series of investing in the USA?

Don't know enough so dare not go in.

Just buy US stocks? Easier...

KO, MCD, GLW, DIS

[teddybear]

Your statement below (highlighted is wrong):
"In a previous blog post, I said that TDSR was here to stay. Just in case people are wondering when Government will lift TDSR, my view is that it is very likely to be a permanent feature in our banking system. I had observed that even under TDSR requirements, credit is still very cheap and plentiful in Singapore compared to the UK. We can get more than 10X combined income in housing loans, while the British only get 3.5X. What gives?"

This is because you are taking before-tax income and not after-tax income and you don't consider long-term property loan interest rate (and hence instalment amount)!

After tax (something about 50%), the British has very much less money on hand to pay for property instalments etc, hence obviously their ratio must be lower!

Also, British long-term property loan rate is very much higher than Singapore!

Consider the above 2 factors, it is not that credit given in Singapore is higher! In fact, credit in Singapore may be lower than British (you can go calcuate to confirm)?

Check this out.

Sharp drop in new home loans. TDSR taking effect.

http://londonproperty123.blogspot.sg...5x-income.html

[Allthepies]

Isnt it now the best time to buy if you can detect the elevated amount of fear in singapore property market : )

1. FEAR of rising interest rate.
2. Fear of over supply.
3. Fear of reducing foreigners
4. Fear of cooling measures

People thought it is easy to time the market but in real life it is very difficult and the indications are very subtle and confusing...

[invigorated]

What you are suggesting is actually a very dangerous and risky game of timing and predicting how the market will move.

Assuming my investment property is worth $4m today, if I sell, i get to cash out $2m, but at the expense of forgoing my rental income of say $140k per year.

So if price do fall by 20%, in 1 year, my $4m assets would then be worth $3.2m and for me to buy back the same property (assuming still available), I would need to fork out, $1.6m + $320K (ABSD + STAMP DUTIES) + MISC cost, that will work out to about $2.0m.

If I decided to do nothing, my asset could be worth $3.2m in 1 years time, but I still get to collect $140,000 of rental for 1 year. And assuming if 1 years time is the bottom of the cycle, it will also mean the value of my $3.2m property will also appreciate just a fast as if I sell and then buy back at $3.2m

Actually I always have the impression that Warren Buffet is an investor that buy good companies and hold for long term, instead of selling and buying between economic cycle.

You misunderstood my point. My point is that your objective must be clear.

From your reply, I'm not too sure if you were even considering selling in the first place or trying to imply that we shouldn't be selling our properties.

If I were to hold more than two properties, which I am not, I will seriously consider selling 1 or 2 to diversify my risks. If the market drops and CMs are eventually relaxed, e.g. absd or tdsr changes, I can pick up some good buys as I possess Firepower. Now if u keep all of them, you've basically locked all options.

You are also making a lot of assumptions here and it is still uncertain how things will map out. No one knows for sure what measures will be changed, how interest rates will go up and how rental will be affected, how much prices will fall or rise.

You may already be speculating by making assumptions on these and that may be dangerous by itself. Do map out other possible scenarios.

[AAAP]

My 2 cents here. Rental had been a good option for the past 7-8 years. But consider that there had been a surge in expat population in the same period, the numbers of which are unlikely to recur. Expat growth has slowed down considerably and rental in CCR/RCR are increasingly difficult (talking from personal experience). Add to that significant supply of new housing units that will be added to the supply over the next few years in all CCR/RCR/OCR and you cannot expect the current rental yields to stay where they are.

So if rental yields have topped out, interest rates have bottomed out (and slowly creeping up), capital values have only one way to go......down. Besides, it is so difficult to sell a property these days. Not only you have to drop price, but also taking awfully lot of time to close deals.

[Londonproperty123]

Your statement below (highlighted is wrong):
"In a previous blog post, I said that TDSR was here to stay. Just in case people are wondering when Government will lift TDSR, my view is that it is very likely to be a permanent feature in our banking system. I had observed that even under TDSR requirements, credit is still very cheap and plentiful in Singapore compared to the UK. We can get more than 10X combined income in housing loans, while the British only get 3.5X. What gives?"

This is because you are taking before-tax income and not after-tax income and you don't consider long-term property loan interest rate (and hence instalment amount)!

After tax (something about 50%), the British has very much less money on hand to pay for property instalments etc, hence obviously their ratio must be lower!

Also, British long-term property loan rate is very much higher than Singapore!

Consider the above 2 factors, it is not that credit given in Singapore is higher! In fact, credit in Singapore may be lower than British (you can go calcuate to confirm)?

First factor - Interest rates

You should be aware that in Singapore's TDSR calculations, the assumed interest rate is 3.5% and not the existing (artificially low) interest rates. I have loans with UK banks in pounds, and the interest rate I am getting on those is less than 3.5%.

Right now, Brits can get funding from their Building Societies with fixed interest rates for 2-3 years, fixed at less than 2%.

Therefore, rather than being wrong, your argument on interest rates actually helps rather than hurts my case.

Second factor - Post-tax Income
It is true that British Income taxes are high, but the cases I know of, the couple are not earning at the 50% rate. The Brits also have a progressive tax system, something like first 10K pounds no tax, next 30K pounds at 20%, then goes up to 40%.

The 3.5X people I am talking about are earning incomes of less than 60K per annum. Combined income about 100K to 120K per annum.

Yes, their after tax income is probably about 80K per annum.

Taking both factors into account, the gap between Singapore and Britain credit market is still very far apart. I stand by my statement that credit is far easier to get in Singapore, compared to Britain.

[walkthetiger]

If I were to hold more than two properties, which I am not, I will seriously consider selling 1 or 2 to diversify my risks.
.

This is right. Be practical about it, diversify the risk if you are only trying to seek a gradual growth....move around, and explore other field, never try to get yourself stuck in an single area..

[invigorated]

Isnt it now the best time to buy if you can detect the elevated amount of fear in singapore property market : )

1. FEAR of rising interest rate.
2. Fear of over supply.
3. Fear of reducing foreigners
4. Fear of cooling measures

People thought it is easy to time the market but in real life it is very difficult and the indications are very subtle and confusing...

We are just starting to see some fear in the developers, e.g. capitaland. Wait till u see fear from other developers like keppel for glades (<25% sold for glades), mcc (poor sales at Santorini) etc, will the time be ripe.

What are they to do if unit are not moving and others are cutting prices, you think?

[chestnut]

I think market (already has) will drop but a crash????

Those saying it will crash, by at least how many % constitute a crash????

[invigorated]

I think market (already has) will drop but a crash????

Those saying it will crash, by at least how many % constitute a crash????

I guess most agree a crash wouldn't happen as the foundation is there. But a further drop is likely. Only the Govt knows what percentage is a comfortable correction.

[walkthetiger]

I guess most agree a crash wouldn't happen as the foundation is there. But a further drop is likely. Only the Govt knows what percentage is a comfortable correction.

Look at now, most (agents, developers, bankers, buyers and etc...) are in a deadlock, nothing is moving, most are suffering....and if the tension goes on higher and thing continue to get worsen.... a crash may appear a good solution to move forward... Don’t think this is totally impossible, it is just not yet happen as thing has just not yet progress to that stage only

[Londonproperty123]

Look at the charts published by the URA - Residential Index by property type.

http://londonproperty123.blogspot.sg...ming-down.html

From 2002 to 2008, the index was hovering below 120. (4Q98 = 100)

So, why can't we go back to 120?

[chestnut]

Look at the charts published by the URA - Residential Index by property type.

http://londonproperty123.blogspot.sg...ming-down.html

From 2002 to 2008, the index was hovering below 120. (4Q98 = 100)

So, why can't we go back to 120?

So u looking at 40% drop as crash...

[Arcachon]

Can you start a series of investing in the USA?

Don't know enough so dare not go in.

http://www.ovginvest.com/usa-propert...rs-guide-ngps/

You can get something here.

http://www.zillow.com/homes/85718_rb...zm%2F0_mmm%2F=

https://www.youtube.com/watch?v=fC93DpIG1IA

[Maxim1]

Surely whether one should sell depends on the location of the properties.

If you are having a good property in CCR, DO NOT SELL at the bottom now. Price gap between CCR and RCR is at historic low. You will never be able to get a replacement in CCR.

If you are having a property somewhere in Jurong on the other hand... time to get out of the market.

[chestnut]

Surely whether one should sell depends on the location of the properties.

If you are having a good property in CCR, DO NOT SELL at the bottom now. Price gap between CCR and RCR is at historic low. You will never be able to get a replacement in CCR.

If you are having a property somewhere in Jurong on the other hand... time to get out of the market.

Can share which development in CCR vs development in RCR?

When you compare new launch in CCR vs new launch in RCR??? Where got narrow gap????

When compare old with old??? Where got narrow gap???

It's like comparing the most expensive OCR withe the cheapest RCR and saying narrow gap.

[Werther]

Look at now, most (agents, developers, bankers, buyers and etc...) are in a deadlock, nothing is moving, most are suffering....and if the tension goes on higher and thing continue to get worsen.... a crash may appear a good solution to move forward... Don’t think this is totally impossible, it is just not yet happen as thing has just not yet progress to that stage only

Crash will not happen. 80% of the people I know are waiting to jump in... How to crash?

Don't think it will happen this round... We are only facing a technical pullback.. Once TDRS and ABSD are taken away, buyers will jump in like no tomorrow.

I am also waiting ... Seriously, don't think it will come.

[Maxim1]

Can share which development in CCR vs development in RCR?

When you compare new launch in CCR vs new launch in RCR??? Where got narrow gap????

When compare old with old??? Where got narrow gap???

It's like comparing the most expensive OCR withe the cheapest RCR and saying narrow gap.

I should have said price gap between CCR and OCR. Yes gap is narrow.
Look at appreciation rate of many average (10 years old) resale OCRs v average CCRs since 2005.