SINGAPORE EXPATS FORUM
Singapore Expat Forum and Message Board for Expats in Singapore & Expatriates Relocating to Singapore
Rentals in Singapore
- malcontent
- Manager
- Posts: 2357
- Joined: Sat, 22 Dec 2007 11:52 am
- Location: Pulau Ujong
Re: Rentals in Singapore
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.
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.
Every great and deep difficulty bears in itself its own solution. It forces us to change our thinking in order to find it - Niels Bohr
Re: Rentals in Singapore
Yes, deleveraging is why the "multiplier" on the initial move [over a short period](+10% --> 40%) is a bit misleading.malcontent wrote: ↑Mon, 12 Dec 2022 8:15 pmAs 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.
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.
Re: Rentals in Singapore
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.
Sent from my iPhone using Tapatalk
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.
Sent from my iPhone using Tapatalk
Re: Rentals in Singapore
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.Swn4 wrote: ↑Wed, 14 Dec 2022 12:56 amIt 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.
Sent from my iPhone using Tapatalk
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).
-
- Governor
- Posts: 5877
- Joined: Sat, 07 Nov 2020 11:45 pm
Re: Rentals in Singapore
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.Swn4 wrote: ↑Wed, 14 Dec 2022 12:56 amIt 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.
Sent from my iPhone using Tapatalk
-
- Governor
- Posts: 5877
- Joined: Sat, 07 Nov 2020 11:45 pm
Re: Rentals in Singapore
Or if you do buy, when prices are low and the market goes way up, you can make a massive return on your investment.NYY1 wrote: ↑Wed, 14 Dec 2022 2:20 pmI 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.Swn4 wrote: ↑Wed, 14 Dec 2022 12:56 amIt 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.
Sent from my iPhone using Tapatalk
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).
-
- Governor
- Posts: 5877
- Joined: Sat, 07 Nov 2020 11:45 pm
Re: Rentals in Singapore
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.NYY1 wrote: ↑Mon, 12 Dec 2022 9:20 pmYes, deleveraging is why the "multiplier" on the initial move [over a short period](+10% --> 40%) is a bit misleading.malcontent wrote: ↑Mon, 12 Dec 2022 8:15 pmAs 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.
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.
Re: Rentals in Singapore
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.
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.
Re: Rentals in Singapore
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
https://www.99.co/singapore/insider/rev ... -nov-2022/
Sent from my iPhone using Tapatalk
-
- Governor
- Posts: 5877
- Joined: Sat, 07 Nov 2020 11:45 pm
Re: Rentals in Singapore
Most condos were luxury condos in prime areas with 99 year lease terms. So shocked by the 2+ million dollar loss. Crazy!Swn4 wrote: ↑Sun, 25 Dec 2022 6:35 pmThought that some folks might be interested in this article.
https://www.99.co/singapore/insider/rev ... -nov-2022/
Sent from my iPhone using Tapatalk
-
- Governor
- Posts: 5877
- Joined: Sat, 07 Nov 2020 11:45 pm
Re: Rentals in Singapore
Impressively thorough - if anything my takeaway is that without the benefit of hindsight a lot of luck goes into making the "right" decision.NYY1 wrote: ↑Sat, 17 Dec 2022 11:28 pmFor 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.
Re: Rentals in Singapore
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'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.
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!
You've been arrested? Law Society of Singapore can provide referrals.
You want an International School job? School website or http://www.ISS.edu
Your rugrat needs a School? Avoid for profit schools
You need Tax advice? Ask a CPA
You ran away without doing NS? Shame on you!
Re: Rentals in Singapore
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!Lisafuller wrote:Most condos were luxury condos in prime areas with 99 year lease terms. So shocked by the 2+ million dollar loss. Crazy!Swn4 wrote: ↑Sun, 25 Dec 2022 6:35 pmThought that some folks might be interested in this article.
https://www.99.co/singapore/insider/rev ... -nov-2022/
Sent from my iPhone using Tapatalk
Sent from my iPad using Tapatalk
Re: Rentals in Singapore
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.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).
Sent from my iPad using Tapatalk
Re: Rentals in Singapore
The biggest losses in recent years ARE on the most expensive condos. The data just proves it.Lisafuller wrote: ↑Mon, 26 Dec 2022 2:51 amMost condos were luxury condos in prime areas with 99 year lease terms. So shocked by the 2+ million dollar loss. Crazy!Swn4 wrote: ↑Sun, 25 Dec 2022 6:35 pmThought that some folks might be interested in this article.
https://www.99.co/singapore/insider/rev ... -nov-2022/
Sent from my iPhone using Tapatalk
-
- Similar Topics
- Replies
- Views
- Last post
-
-
Malaysians working in Singapore will be allowed into Singapore soon?
by abbby » Wed, 10 Jun 2020 9:31 am » in Business in Singapore - 0 Replies
- 4304 Views
-
Last post by abbby
Wed, 10 Jun 2020 9:31 am
-
-
-
Can Singapore citizens work in International Schools in Singapore?
by doitenah » Thu, 23 Jul 2020 1:06 pm » in Careers & Jobs in Singapore - 5 Replies
- 5019 Views
-
Last post by PNGMK
Sat, 25 Jul 2020 3:48 pm
-
-
-
Singapore EP or Australia PR or Singapore PR
by anujhbaggha » Wed, 10 Mar 2021 12:00 pm » in Staying, Living in Singapore - 8 Replies
- 4925 Views
-
Last post by PNGMK
Thu, 11 Mar 2021 2:07 pm
-
-
- 0 Replies
- 1407 Views
-
Last post by Zakaria
Sun, 23 Jul 2023 1:15 am
-
-
Query: Good startup events to attend in Singapore
by Aitonomeinyme » Sun, 30 Sep 2018 10:43 pm » in Business in Singapore - 2 Replies
- 3424 Views
-
Last post by Aitonomeinyme
Wed, 03 Oct 2018 11:37 am
-
Who is online
Users browsing this forum: No registered users and 16 guests