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Rentals in Singapore

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malcontent
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Re: Rentals in Singapore

Post by malcontent » Mon, 12 Dec 2022 8:15 pm

As you pay down the principle you deleverage the investment, and depending on the cost of the leverage, it can actually be a bad thing.

Over the past 11 years, my mortgage rate has averaged less than 2% pa, while the rate of appreciation in property value has averaged a little over 3% pa. That delta is just gravy in my mind. Definitely not going to pre-pay a single cent. The big question is whether this phenomena will continue.
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Re: Rentals in Singapore

Post by NYY1 » Mon, 12 Dec 2022 9:20 pm

malcontent wrote:
Mon, 12 Dec 2022 8:15 pm
As you pay down the principle you deleverage the investment, and depending on the cost of the leverage, it can actually be a bad thing.

Over the past 11 years, my mortgage rate has averaged less than 2% pa, while the rate of appreciation in property value has averaged a little over 3% pa. That delta is just gravy in my mind. Definitely not going to pre-pay a single cent. The big question is whether this phenomena will continue.
Yes, deleveraging is why the "multiplier" on the initial move [over a short period](+10% --> 40%) is a bit misleading.

3.7% means $1.00 turns into $3.00 over 30 years. $3.00 / $0.25 for 30 years is 8.6% and that is before the add'l $0.75 over time (considering the add'l amortization payments the return will be somewhere between 3.7% and 8.6%).

On a shorter horizon, things can look better. Let's say the property doubles in a decade (probably possible under the right conditions). I get that that is about 7.2% unleveraged and mid-teens leveraged.

I guess one can also try to re-leverage the property if it goes up in value but this will also increase your monthly obligations (possibly by a lot if the loan tenor is also shrinking).

I'm not saying don't buy, there are many reasons to buy. I just thought the numbers above add more context about opportunity cost.

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Re: Rentals in Singapore

Post by Swn4 » Wed, 14 Dec 2022 12:56 am

It comes down very much to whether you manage to buy & sell property at the right time.
The illiquidity of property is also another part of opportunity cost - it is chunky by nature & it is not straight forward to partially convert to cash for an immediate need. Banks look at your ability to pay the instalments in addition to asset quality/quantum.


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Re: Rentals in Singapore

Post by NYY1 » Wed, 14 Dec 2022 2:20 pm

Swn4 wrote:
Wed, 14 Dec 2022 12:56 am
It comes down very much to whether you manage to buy & sell property at the right time.
The illiquidity of property is also another part of opportunity cost - it is chunky by nature & it is not straight forward to partially convert to cash for an immediate need. Banks look at your ability to pay the instalments in addition to asset quality/quantum.


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I think the timing can have a big impact on 5-10 yr returns (maybe up to 15 yrs). However, the longer one goes out, it (initial good or bad timing) is more likely to be offset by a corresponding good/bad period (absent other majors changes to the landscape here). For extended periods, even with leverage, the returns are OK but not mind blowing. But saving into anything that is compounding at a half decent rate is good (in that it grows) over time.

But for many, you often aren't free to time things anyways. You buy for the location, space, lifestyle, etc and if the returns are great, that is fortunate, if the returns are not so great you still had a place to live that met your needs.

The one area where timing may make a difference is if you don't buy and the market goes up a lot, you may be priced out of a certain size or area. Of course, the converse can happen if the market goes down (you can buy more).

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Re: Rentals in Singapore

Post by Lisafuller » Sat, 17 Dec 2022 3:36 am

Swn4 wrote:
Wed, 14 Dec 2022 12:56 am
It comes down very much to whether you manage to buy & sell property at the right time.
The illiquidity of property is also another part of opportunity cost - it is chunky by nature & it is not straight forward to partially convert to cash for an immediate need. Banks look at your ability to pay the instalments in addition to asset quality/quantum.


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Yup, a lot of luck and timing goes into it. You might be ready to buy or sell, but the market may not, and that's what counts.

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Re: Rentals in Singapore

Post by Lisafuller » Sat, 17 Dec 2022 3:37 am

NYY1 wrote:
Wed, 14 Dec 2022 2:20 pm
Swn4 wrote:
Wed, 14 Dec 2022 12:56 am
It comes down very much to whether you manage to buy & sell property at the right time.
The illiquidity of property is also another part of opportunity cost - it is chunky by nature & it is not straight forward to partially convert to cash for an immediate need. Banks look at your ability to pay the instalments in addition to asset quality/quantum.


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I think the timing can have a big impact on 5-10 yr returns (maybe up to 15 yrs). However, the longer one goes out, it (initial good or bad timing) is more likely to be offset by a corresponding good/bad period (absent other majors changes to the landscape here). For extended periods, even with leverage, the returns are OK but not mind blowing. But saving into anything that is compounding at a half decent rate is good (in that it grows) over time.

But for many, you often aren't free to time things anyways. You buy for the location, space, lifestyle, etc and if the returns are great, that is fortunate, if the returns are not so great you still had a place to live that met your needs.

The one area where timing may make a difference is if you don't buy and the market goes up a lot, you may be priced out of a certain size or area. Of course, the converse can happen if the market goes down (you can buy more).
Or if you do buy, when prices are low and the market goes way up, you can make a massive return on your investment.

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Re: Rentals in Singapore

Post by Lisafuller » Sat, 17 Dec 2022 3:39 am

NYY1 wrote:
Mon, 12 Dec 2022 9:20 pm
malcontent wrote:
Mon, 12 Dec 2022 8:15 pm
As you pay down the principle you deleverage the investment, and depending on the cost of the leverage, it can actually be a bad thing.

Over the past 11 years, my mortgage rate has averaged less than 2% pa, while the rate of appreciation in property value has averaged a little over 3% pa. That delta is just gravy in my mind. Definitely not going to pre-pay a single cent. The big question is whether this phenomena will continue.
Yes, deleveraging is why the "multiplier" on the initial move [over a short period](+10% --> 40%) is a bit misleading.

3.7% means $1.00 turns into $3.00 over 30 years. $3.00 / $0.25 for 30 years is 8.6% and that is before the add'l $0.75 over time (considering the add'l amortization payments the return will be somewhere between 3.7% and 8.6%).

On a shorter horizon, things can look better. Let's say the property doubles in a decade (probably possible under the right conditions). I get that that is about 7.2% unleveraged and mid-teens leveraged.

I guess one can also try to re-leverage the property if it goes up in value but this will also increase your monthly obligations (possibly by a lot if the loan tenor is also shrinking).

I'm not saying don't buy, there are many reasons to buy. I just thought the numbers above add more context about opportunity cost.
One of my biggest regrets is not buying a home in the US at the height of Covid. Prices were way down, I'm talking in the hundreds of thousands. Was hesitant as I didn't want to blind buy a home, and wanted to view the area in person to make sure it was suitable. Now prices are all the way up and then some.

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Re: Rentals in Singapore

Post by NYY1 » Sat, 17 Dec 2022 11:28 pm

For those who are interested, here are some return figures. property = SRX CCR Index, Stocks = S&P 500, Return are per annum (also, there is no adjustment for currency).

A) Buy in Oct 1998, low for properties, to Current: Property up 6.1%, Stocks up 7.3%. Hello Mr. Opportunity Cost!

With a 75% loan, I estimate the property would have returned ~9.x%. However, the CCR property index itself is up ~4.2x over this period (i.e. 6.1% for 24 years). I am not sure if many properties actually purchased in 1998 went up this much; my guess is that the index is biased upward by the inclusion of newer properties over time.

Anyways, pretty good for the property.

B) Buy in December 1999 to 2013: Property up 5.8%, Stocks up 3.6%.

With a loan, obviously a big win for property. This period likely includes a) unfavourable starting point for stocks (right before peak of tech bubble) and b) a good period for real estate here (period of higher population growth and immigrant inflows).

C) Buy in December 2008 to Current: Property up 6.1%, Stocks up 13.2%.

With a 75% loan, property could be up ~11%. Pretty good for both.

D) Buy in January 2013 to Current (last decade): Property up 2.5%, Stocks up 12.6%

Not much to say here. Starting point for property was unfortunately at a high (opposite of situation B) above). With a 75% loan, property could be up ~6.x%.

--> Obviously, there are other reasons to buy or rent, and the current market shows that if renting then the increase in rent can be substantial.

Moreover, what's done is done; what the next 5-10 years holds is probably more relevant for some. As some said, timing is everything.

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Re: Rentals in Singapore

Post by Swn4 » Sun, 25 Dec 2022 6:35 pm

Thought that some folks might be interested in this article.

https://www.99.co/singapore/insider/rev ... -nov-2022/


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Re: Rentals in Singapore

Post by Lisafuller » Mon, 26 Dec 2022 2:51 am

Swn4 wrote:
Sun, 25 Dec 2022 6:35 pm
Thought that some folks might be interested in this article.

https://www.99.co/singapore/insider/rev ... -nov-2022/


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Most condos were luxury condos in prime areas with 99 year lease terms. So shocked by the 2+ million dollar loss. Crazy!

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Re: Rentals in Singapore

Post by Lisafuller » Mon, 26 Dec 2022 2:52 am

NYY1 wrote:
Sat, 17 Dec 2022 11:28 pm
For those who are interested, here are some return figures. property = SRX CCR Index, Stocks = S&P 500, Return are per annum (also, there is no adjustment for currency).

A) Buy in Oct 1998, low for properties, to Current: Property up 6.1%, Stocks up 7.3%. Hello Mr. Opportunity Cost!

With a 75% loan, I estimate the property would have returned ~9.x%. However, the CCR property index itself is up ~4.2x over this period (i.e. 6.1% for 24 years). I am not sure if many properties actually purchased in 1998 went up this much; my guess is that the index is biased upward by the inclusion of newer properties over time.

Anyways, pretty good for the property.

B) Buy in December 1999 to 2013: Property up 5.8%, Stocks up 3.6%.

With a loan, obviously a big win for property. This period likely includes a) unfavourable starting point for stocks (right before peak of tech bubble) and b) a good period for real estate here (period of higher population growth and immigrant inflows).

C) Buy in December 2008 to Current: Property up 6.1%, Stocks up 13.2%.

With a 75% loan, property could be up ~11%. Pretty good for both.

D) Buy in January 2013 to Current (last decade): Property up 2.5%, Stocks up 12.6%

Not much to say here. Starting point for property was unfortunately at a high (opposite of situation B) above). With a 75% loan, property could be up ~6.x%.

--> Obviously, there are other reasons to buy or rent, and the current market shows that if renting then the increase in rent can be substantial.

Moreover, what's done is done; what the next 5-10 years holds is probably more relevant for some. As some said, timing is everything.
Impressively thorough - if anything my takeaway is that without the benefit of hindsight a lot of luck goes into making the "right" decision.

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Re: Rentals in Singapore

Post by PNGMK » Mon, 26 Dec 2022 8:46 am

Lots of friends on variable rate loans starting to complain about mortgage payments going up.

I'm on a fixed rate mortgage until April 2024 and we hope to have the wherewithal to pay down most of the principal when we reprice. (There is a1% penalty for early repayments).
I not lawyer/teacher/CPA.
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Re: Rentals in Singapore

Post by Swn4 » Mon, 26 Dec 2022 3:26 pm

Lisafuller wrote:
Swn4 wrote:
Sun, 25 Dec 2022 6:35 pm
Thought that some folks might be interested in this article.

https://www.99.co/singapore/insider/rev ... -nov-2022/


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Most condos were luxury condos in prime areas with 99 year lease terms. So shocked by the 2+ million dollar loss. Crazy!
I viewed a rental unit at CityVista mid last year and noticed that the landlord had put in a significantly smaller replacement fridge in the fridge cavity. Pretty obvious sign that the landlord would not be easy to deal with. Then I looked up the URA price data and realized that the landlord was sitting on a $2+ mln loss so no surprise why the landlord was unwilling to invest extra $ in the property!


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Re: Rentals in Singapore

Post by Swn4 » Mon, 26 Dec 2022 3:35 pm

PNGMK wrote:Lots of friends on variable rate loans starting to complain about mortgage payments going up.

I'm on a fixed rate mortgage until April 2024 and we hope to have the wherewithal to pay down most of the principal when we reprice. (There is a1% penalty for early repayments).
If you bought a home 2 yrs ago and had a 1+% pa housing loan, it will really bite because you will not have paid down much principal at all. Your monthly installment could increase potentially triple (or more) if the new interest rate is 4+% pa and you are not able to extend loan tenure.


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Re: Rentals in Singapore

Post by smoulder » Mon, 26 Dec 2022 4:57 pm

Lisafuller wrote:
Mon, 26 Dec 2022 2:51 am
Swn4 wrote:
Sun, 25 Dec 2022 6:35 pm
Thought that some folks might be interested in this article.

https://www.99.co/singapore/insider/rev ... -nov-2022/


Sent from my iPhone using Tapatalk
Most condos were luxury condos in prime areas with 99 year lease terms. So shocked by the 2+ million dollar loss. Crazy!
The biggest losses in recent years ARE on the most expensive condos. The data just proves it.

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